The accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.
The accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.
The accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.
The accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2021
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
10X Capital Venture Acquisition Corp.
(the “Company”) was incorporated in Delaware on August 10, 2020. The Company was formed for the purpose of effecting
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or
more businesses (the “Business Combination”).
The Company is not limited to a particular
industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company
and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
The Company has one subsidiary, Spark
Merger Sub Inc., a direct, wholly-owned subsidiary of the Company incorporated in Delaware on January 27, 2021 (“Merger
Sub”) (see Note 10).
As of March 31, 2021, the Company had
not commenced any operations. All activity for the period from August 10, 2020 (inception) through March 31, 2021 relates to the
Company’s formation and the initial public offering (“Initial Public Offering”), which is described below, subsequent
to the Initial Public Offering, identifying a target company for a Business Combination, and activities in connection with the
proposed acquisition of REE Automotive Ltd, a corporation organized under the laws of Israel (“REE”) (see Note 10).
The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The
Company generates non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s
Initial Public Offering was declared effective on November 23, 2020. On November 27, 2020 the Company consummated the Initial
Public Offering of 17,500,000 units (the “Units” and, with respect to the shares of Class A common stock included
in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $175,000,000 which is described
in Note 3.
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the sale of 5,500,000 warrants (the “Private Placement Warrants”)
at a price of $1.00 per Private Placement Warrant in a private placement to 10X Capital SPAC Sponsor I LLC (the “Sponsor”),
generating gross proceeds of $5,500,000, which is described in Note 4.
Following the closing of the Initial Public
Offering on November 27, 2020, an amount of $175,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the
Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”)
located in the United States and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days
or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain
conditions under Rule 2a-7 under the Investment Company Act, as determined by the Company, until the earlier of: (i) the
completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.
On December 18, 2020, the underwriters
fully exercised their over-allotment option, resulting in an additional 2,625,000 Units issued for an aggregate amount of $26,250,000,
which was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to $201,250,000, before
underwriting fees.
Transaction costs amounted to $11,576,380,
consisting of $3,500,000 in cash underwriting fees, $7,568,750 of deferred underwriting fees and $507,630 of other offering costs.
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private
Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a
Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The
Company must complete a Business Combination with one or more operating businesses or assets that together have an aggregate fair
market value equal to at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working
capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time of the Company’s
signing a definitive agreement in connection with its initial Business Combination. The Company will only complete a Business
Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or
otherwise acquires an interest in the target business or assets sufficient for it not to be required to register as an investment
company under the Investment Company Act.
10X CAPITAL VENTURE ACQUISITION CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2021
(Unaudited)
The Company will provide its holders of
the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their
Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to
approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder
approval of a Business Combination or conduct a tender offer will be made by the Company. The public stockholders will be entitled
to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00
per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and
not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of
a Business Combination with respect to the Company’s warrants.
The Company will only proceed with a Business
Combination if the Company has net tangible assets of at least $5,000,001 either prior to or upon such consummation of a Business
Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business
Combination. If a stockholder vote is not required by applicable law or stock exchange rules and the Company does not decide to
hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation
(the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules
of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing
a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange rules,
or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in
conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks
stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined
in Note 5), and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination.
Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against
the proposed transaction or do not vote at all.
Notwithstanding the above, if the Company
seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the
Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder
or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares
with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive
its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business
Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) to modify
the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business
Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect
to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless the Company
provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The Company will have until May 27, 2022
to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination
within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held
in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest to
pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish
public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any),
and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining
stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations
under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption
rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails
to complete a Business Combination within the Combination Period.
10X CAPITAL VENTURE ACQUISITION CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2021
(Unaudited)
The Sponsor has agreed to waive its liquidation
rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period.
However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to
liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination
Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the
Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event,
such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of
the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available
for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts held in
the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services
rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into
a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $10.00 per Public Share
and (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account
due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to claims
by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account
nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against
certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover,
in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible
to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will
have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the
Company’s independent registered public accounting firm), prospective target businesses and other entities with which the
Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies
held in the Trust Account.
Liquidity and Going Concern
As of March 31, 2021, the Company had $1,135,730 in its operating bank accounts, $201,256,576 in marketable securities held in the Trust
Account to be used for a Business Combination or to repurchase or redeem stock in connection therewith and a working capital deficit of
$68,493.
The Company may need to raise additional capital through loans or additional investments from the Sponsor or its stockholders,
officers, directors, or third parties. The Company's officers and directors and the Sponsor may but are not obligated to, loan the Company
funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the Company's working capital needs.
In connection with the Company’s
assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards
Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” the Company has until May 27, 2022 to consummate a Business Combination. It is uncertain that the Company will be
able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a
mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and
mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about
the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or
liabilities should the Company be required to liquidate after May 27, 2022. Management plans to continue efforts to close a Business
Combination within the prescribed time frame.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation
S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with
GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly,
they do not include all the information and footnotes necessary for a complete presentation of financial position, results of
operations, or cash flows. In the opinion of management, the accompanying condensed consolidated financial statements include
all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position,
operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K/A for the period ended
December 31, 2020, as filed with the SEC on May 14, 2021. The interim results for the three months ended March 31, 2021 are not
necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future periods.
10X CAPITAL VENTURE ACQUISITION CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2021
(Unaudited)
Principles of Consolidation
The accompanying condensed consolidated
financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances
and transactions have been eliminated in consolidation.
Emerging Growth Company
The Company is an “emerging growth
company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with
the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced
disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the
requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved.
Further, Section 102(b)(1) of the JOBS
Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that
apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out
of such extended transition period which means that when a standard is issued or revised and it has different application dates
for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time
private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with
another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using
the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of the condensed consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated
financial statements and the reported amounts of revenues and expenses during the reporting periods.
Making estimates requires management to
exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or
set of circumstances that existed at the date of the condensed consolidated financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the
warrant liability. Accordingly, the actual
results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents
as of March 31, 2021 and December 31, 2020.
Marketable Securities Held in Trust
Account
At March 31, 2021 and December 31, 2020,
substantially all of the assets held in the Trust Account were held in a money market fund invested in U.S. Treasury Bills.
Offering Costs
Offering costs consist of underwriting,
legal, accounting and other expenses incurred through the Initial Public Offering that are directly related to the Initial Public
Offering. Offering costs amounted to $11,576,380, of which $10,497,830 were charged to stockholders’ equity upon the completion
of the Initial Public Offering and $1,078,550 were charged as transaction costs to the condensed consolidated statement of operations.
10X CAPITAL VENTURE ACQUISITION CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2021
(Unaudited)
Class A Common Stock Subject to
Possible Redemption
The Company accounts for its Class A common
stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption
is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common
stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common
stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights
that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly,
at March 31, 2021 and December 31, 2020, Class A common stock subject to possible redemption is presented as temporary equity,
outside of the stockholders’ equity section of the Company’s condensed consolidated balance sheets.
Warrant Liabilities
The Company accounts for the Warrants
in accordance with the guidance contained in ASC 815-40under which the Warrants do not meet the criteria for equity treatment
and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjust
the Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of operations. The Private Warrants and the Public Warrants
for periods where no observable traded price was available are valued using a Monte Carlo simulation. For periods subsequent to
the detachment of the Public Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of
each relevant date.
Income Taxes
The Company follows the asset and liability
method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included
the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized. As of March 31 ,2021 and December 31, 2020, the Company had a deferred tax asset of approximately $326,000 and
$32,000, respectively, which had a full valuation allowance recorded against it of approximately $326,000 and $32,000, respectively.
The Company’s current taxable income
primarily consists of interest earned on the Trust Account. The Company’s general and administrative costs are generally
considered start-up costs and are not currently deductible. During the three months ended March 31, 2021, the Company recorded
no income tax expense. The Company’s effective tax rate for three months ended March 31, 2021 was approximately 0%, which
differs from the expected income tax rate due to the start-up costs (discussed above), which are not currently deductible, and
to permanent differences.
ASC 740 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination
by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax
expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2021 and December
31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or
material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
10X CAPITAL VENTURE ACQUISITION CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2021
(Unaudited)
Net Income (Loss) per Common Share
Net income (loss) per common share
is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The
Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase
15,562,500 shares of Class A common stock in the calculation of diluted income per share, since the exercise of the
warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The Company’s statements of operations
includes a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar to the
two-class method of income (loss) per share. Net income per common share, basic and diluted, for Class A redeemable common stock
is calculated by dividing the interest income earned on the Trust Account, by the weighted average number of Class A redeemable
common stock outstanding since original issuance. Net loss per share, basic and diluted, for Class B non-redeemable common stock
is calculated by dividing the net loss, adjusted for income attributable to Class A redeemable common stock, net of applicable
franchise and income taxes, by the weighted average number of Class B non-redeemable common stock outstanding for the period.
Class B non-redeemable common stock includes the Founder Shares as these shares do not have any redemption features and do not
participate in the income earned on the Trust Account.
The following table reflects the calculation
of basic and diluted net loss per common share (in dollars, except per share amounts):
|
|
Three Months
Ended
March 31,
|
|
|
|
2021
|
|
Redeemable Class A Common Stock
|
|
|
|
Numerator: Earnings allocable to Redeemable Class A Common Stock
|
|
|
|
|
Interest Income
|
|
$
|
4,962
|
|
Income and Franchise Tax
|
|
|
(4,962
|
)
|
Net Earnings
|
|
$
|
—
|
|
Denominator: Weighted Average Redeemable Class A Common Stock
|
|
|
|
|
Redeemable Class A Common Stock, Basic and Diluted
|
|
|
20,125,000
|
|
Earnings/Basic and Diluted Redeemable Class A Common Stock
|
|
$
|
0.00
|
|
|
|
|
|
|
Non-Redeemable Class B Common Stock
|
|
|
|
|
Numerator: Net Loss minus Redeemable Net Earnings
|
|
|
|
|
Net Loss
|
|
$
|
(4,646,239
|
)
|
Redeemable Net Earnings
|
|
|
—
|
|
Non-Redeemable Net Loss
|
|
$
|
(4,646,239
|
)
|
Denominator: Weighted Average Non-Redeemable Class B Common Stock
|
|
|
|
|
Non-Redeemable Class B Common Stock, Basic and Diluted
|
|
|
5,031,250
|
|
Loss/Basic and Diluted Non-Redeemable Class B Common Stock
|
|
$
|
(0.92
|
)
|
Note: As of March 31, 2021, basic and
diluted shares are the same as there are no non-redeemable securities that are dilutive to the Company’s stockholders.
Concentration of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may
exceed the Federal Depository Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on these
accounts and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates
the carrying amounts represented in the accompanying condensed consolidated balance sheets, primarily due to their short-term
nature.
10X CAPITAL VENTURE ACQUISITION CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2021
(Unaudited)
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standard Update No.
2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own
Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation
models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to
qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas.
ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years,
with early adoption permitted. The Company adopted ASU 2020-06 effective as of January 1, 2021. The adoption of ASU 2020-06
did not have an impact on the Company’s financial statements.
Management does not believe that any other
recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s
condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering,
the Company sold 20,125,000 Units, which includes a full exercise by the underwriters of their over-allotment option on December
18, 2020 in the amount of 2,625,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of common stock and
one-half of one warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of
common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the
Initial Public Offering, the Sponsor purchased an aggregate of 5,500,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant, for an aggregate purchase price of $5,500,000. Each Private Placement Warrant is exercisable to purchase one
Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 8). A portion of the proceeds from the
Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company
does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants
will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement
Warrants will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On August 10, 2020, the Sponsor paid
$25,000 to cover certain offering costs of the Company in consideration of 6,325,000 shares of the Company’s Class B
common stock (the “Founder Shares”). On November 16, 2020, the Sponsor forfeited 1,293,750 Founder Shares to the Company
for no consideration, resulting in an aggregate of 5,031,250 Founder Shares outstanding. All share and per-share amounts have
been retroactively restated to reflect the share cancellation. The Founder Shares included an aggregate of up to 656,250 shares
subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment was not exercised in full or in
part, so that the number of Founder Shares would collectively represent approximately 20% of the Company’s issued and outstanding
shares after the Initial Public Offering. As a result of the underwriters’ election to fully exercise their over-allotment
option on December 18, 2020, the 656,250 Founder Shares are no longer subject to forfeiture.
The Sponsor has agreed, subject to certain
limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (i) (w) with
respect to 25% of such shares, until consummation of the Company’s initial Business Combination, (x) with respect to
25% of such shares, until the closing price of the Company’s Class A common stock exceeds $12.00 for any 20 trading
days within a 30-trading day period following the consummation of the Company’s initial Business Combination, (y) with
respect to 25% of such shares, until the closing price of the Company’s Class A common stock exceeds $13.50 for any
20 trading days within a 30-trading day period following the consummation of the Company’s initial Business Combination
and (z) with respect to 25% of such shares, until the closing price of the Company’s Class A common stock exceeds
$17.00 for any 20 trading days within a 30-trading day period following the consummation of the Company’s initial Business
Combination and (ii) the date on which we complete a liquidation.
10X CAPITAL VENTURE ACQUISITION CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2021
(Unaudited)
Administrative Services Agreement
The Company entered into an agreement,
commencing on November 24, 2020 through the earlier of the Company’s consummation of a Business Combination and its liquidation,
to pay the Sponsor a total of $20,000 per month for office space, secretarial, and administrative services. For the three months
ended March 31, 2021, the Company incurred and paid $60,000 in fees for these services,
Related Party Loans
In order to finance transaction costs
in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers
and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).
Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination,
without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon completion of a Business
Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Placement Warrants.
In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account
to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
As of March 31, 2021 and December 31, 2020, the Company had no outstanding borrowings under the Working Capital Loans.
NOTE 6. COMMITMENTS
Risks and Uncertainties
Management continues to evaluate the impact
of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on
the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not
readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Registration Rights
Pursuant to a registration rights agreement
entered into on November 24, 2020, the holders of the Founder Shares, Private Placement Warrants, and warrants that may be issued
upon conversion of Working Capital Loans (and any shares of common stock issuable upon the exercise of the Private Placement Warrants
or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to
registration rights requiring the Company to register a sale of any of the Company’s securities held by them. The holders
of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company
register such securities. In addition, the holders will have certain “piggy-back” registration rights with respect
to registration statements filed subsequent to the completion of a Business Combination. The registration rights agreement does
not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities.
The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriters are entitled to a deferred
fee of (i) 3.5% of the gross proceeds of the Initial Public Offering, or $6,125,000, and (ii) 5.5% of the gross proceeds from
the Units sold pursuant to the over-allotment option, or $1,443,750. The deferred fee will become payable to the underwriters
from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the
terms of the underwriting agreement.
Merger Agreement
On February 3, 2021, the Company entered
into an Agreement and Plan of Merger (the “Merger Agreement”) with REE and Merger Sub, which provides for, among other
things, the merger (the “Merger”) of Merger Sub with and into the Company, with the Company surviving as a wholly
owned subsidiary of REE (the Merger and the other transactions contemplated by the Merger Agreement, the “Business Combination”).
10X CAPITAL VENTURE ACQUISITION CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2021
(Unaudited)
Immediately prior to the effective time
of the Business Combination (the “Effective Time”), (i) each preferred share, par value NIS 0.01 each, of REE (each,
a “REE Preferred Share”) will be converted into ordinary shares, par value NIS 0.01 each, of REE (each, a “REE
Class A Ordinary Share”) in accordance with REE’s organizational documents and (ii) immediately following such conversion
but prior to the Effective Time, REE will effect a stock split of each REE Class A Ordinary Share into such number of REE Class
A Ordinary Shares calculated in accordance with the terms of the Merger Agreement such that each REE Class A Ordinary Share will
have a value of $10.00 per share after giving effect to such stock split (the “Stock Split” and, together with the
conversion of REE Preferred Shares, the “Capital Restructuring”).
The Stock Split will be calculated based
upon an enterprise valuation of REE of $3.0 billion on a cash-free and debt-free basis, estimated at the time of the signing of
the Merger Agreement. No purchase price adjustments will be made in connection with the closing of the transactions contemplated
by the Merger Agreement.
Pursuant to the Merger Agreement, immediately
prior to the Effective Time, (i) each issued and outstanding unit of the Company comprising one share of Company Common Stock
and one-half of one warrant to purchase one share of Company Common Stock, shall be automatically separated and the holder thereof
shall be deemed to hold one share of Company Common Stock and one-half of one Company warrant; and (ii) each outstanding share
of Class B common stock, par value $0.0001 per share, of the Company (“Company Class B Common Stock”) shall convert
into 1.5763975 (the “Class B Share Conversion Ratio”) shares of Company Common Stock. Immediately thereafter, each
outstanding share of Company Common Stock will be converted into the right to receive one newly issued REE Class A Ordinary Share.
Upon conversion of the Company Class B Common Stock into Company Common Stock, the holders of Company Class B Common Stock shall
be entitled to receive a number of additional shares (the “Anti-Dilution Shares”) of Company Common Stock equal to
25% of the number of shares of Company Common Stock issued to the PIPE Investors. Pursuant to the Letter Agreement (as defined
in the Merger Agreement), the holders of the shares of the Company Class B Common Stock have agreed to waive their right to receive
any Anti-Dilution Shares in excess of 2,900,000 (the “Conversion Ratio Adjustment”), with such waiver resulting in
the Class B Share Conversion Ratio. In addition, up to 1,500,000 of the 2,900,000 Anti-Dilution Shares to be received upon the
conversion of the Company Class B Common Stock will be subject to subsequent forfeiture without consideration if trading prices
of REE Class A Ordinary Shares specified below are not achieved following the Business Combination. The Company’s outstanding
warrants to purchase one share of Company Common Stock shall be converted into the right to receive an equal number of warrants
to purchase one REE Class A Ordinary Share (the “REE Warrants”).
The Merger Agreement contains customary
representations, warranties and covenants by the parties thereto and the closing is subject to certain conditions as further described
in the Merger Agreement.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock
— The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with
such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. At
March 31, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
Class A Common Stock
— The Company is authorized to issue 280,000,000 shares of Class A common stock with a par value of $0.0001 per share.
Holders of Class A common stock are entitled to one vote for each share. At March 31, 2021 and December 31, 2020, there were
4,631,755 and 4,167,131 shares of Class A common stock issued and outstanding, excluding 15,493,245 and 15,957,869 shares
of Class A common stock subject to possible redemption, respectively.
Class B Common Stock
— The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share.
As of March 31, 2021 and December 31, 2020, there were 5,031,250 shares of Class B common stock issued and outstanding.
Holders of Class A common stock and
Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders except as required
by law.
10X CAPITAL VENTURE ACQUISITION CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2021
(Unaudited)
The shares of Class B common stock
will automatically convert into shares of Class A common stock concurrently with or immediately following the consummation
of a Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations
and the like, and subject to further adjustment. In the case that additional shares of Class A common stock or equity-linked
securities are issued or deemed issued in connection with a Business Combination, the number of shares of Class A common
stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the total
number of shares of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares
of Class A common stock by Public Stockholders), including the total number of shares of Class A common stock issued,
or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by
the Company in connection with or in relation to the consummation of al Business Combination, excluding any shares of Class A
common stock or equity-linked securities or rights exercisable for or convertible into shares of Class A common stock issued,
or to be issued, to any seller in a Business Combination and any Private Placement Warrants issued upon conversion of Working
Capital Loans, provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
NOTE 8. WARRANT LIABILITIES
Public Warrants may only be exercised
for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will
trade. The Public Warrants will become exercisable on the later of (a) 12 months from the closing of the Initial Public Offering
and (b) 30 days after the completion of a Business Combination.
The Company will not be obligated to deliver
any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant
exercise unless a registration statement under the Securities Act with respect to the Class A common stock underlying the
warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with
respect to registration. No warrant will be exercisable and the Company will not be obligated to issue any shares of Class A
common stock upon exercise of a warrant unless the share of Class A common stock issuable upon such warrant exercise has
been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder
of the warrants.
The Company has agreed that as soon as
practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its best efforts
to file with the SEC a registration statement registering the registration, under the Securities Act, of the Class A common
stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and
to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration
of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of
Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) business day
after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement
and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on
a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding
the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange
such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the
Company may, at its option, require holders of public warrants who exercise their warrants to do so on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be
required to file or maintain in effect a registration statement, but will use its best efforts to qualify the shares under applicable
blue sky laws to the extent an exemption is not available.
Once the warrants become exercisable,
the Company may call the warrants for redemption:
|
●
|
in whole and not
in part;
|
|
●
|
at a price of $0.01 per warrant;
|
|
●
|
upon not less than 30 days’
prior written notice of redemption to each warrant holder; and
|
|
●
|
if, and only if, the closing
price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations,
recapitalizations and the like and for certain issuances of Class A common stock and equity-linked securities for capital
raising purposes in connection with the closing of a Business Combination) for any 20 trading days within a 30-trading day
period ending three business days before we send to the notice of redemption to the warrant holders.
|
10X CAPITAL VENTURE ACQUISITION CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2021
(Unaudited)
If and when the warrants become redeemable
by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities
for sale under all applicable state securities laws.
If the Company calls the Public Warrants
for redemption for cash, management will have the option to require all holders that wish to exercise the Public Warrants to do
so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of common
stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend,
or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted
for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net
cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company
liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants,
nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such
warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues
additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the
closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common
stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors
and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by
the Sponsor or such affiliates, as applicable, prior to such issuance), (the “Newly Issued Price”) (y) the aggregate
gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the
funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the
volume weighted average trading price of the Class A common stock during the 20 trading day period starting on the trading
day after the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below
$9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of
the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest
cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical
to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and
the shares of common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or
saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, and will be
entitled to certain registration rights. Additionally, the Private Placement Warrants will be exercisable for cash or on a cashless
basis, at the holder’s option, and be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees,
the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by such holders on
the same basis as the Public Warrants.
NOTE 9. FAIR VALUE MEASUREMENTS
The fair value of the Company’s
financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection
with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market
participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks
to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable
inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy
is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets
and liabilities:
|
Level 1:
|
Quoted prices in active markets for
identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset
or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
|
|
Level 2:
|
Observable inputs other than Level 1
inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices
for identical assets or liabilities in markets that are not active.
|
|
Level 3:
|
Unobservable inputs based on an assessment
of the assumptions that market participants would use in pricing the asset or liability.
|
10X CAPITAL VENTURE ACQUISITION CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2021
(Unaudited)
At December 31, 2020,
assets held in the Trust Account were comprised of $201,251,614 in money market funds which are invested primarily in U.S. Treasury
Securities. During the period ended December 31, 2020, the Company did not withdraw any interest income from the Trust
Account.
The following table
presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at
December 31, 2020 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
|
|
Level
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and marketable securities held in Trust Account
|
|
|
1
|
|
|
$
|
201,256,576
|
|
|
$
|
201,251,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability – Public Warrants
|
|
|
1
|
|
|
|
18,011,875
|
|
|
|
18,917,500
|
|
Warrant Liability – Private Placement Warrants
|
|
|
3
|
|
|
|
15,675,000
|
|
|
|
11,550,000
|
|
The Warrants were accounted for as liabilities
in accordance with ASC 815-40 and are presented within warrant liabilities on the Company’s condensed consolidated balance
sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented
within change in fair value of warrant liabilities in the condensed consolidated statement of operations.
The Private Placement Warrants were valued
using a Modified Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Modified
Black Scholes model’s primary unobservable input utilized in determining the fair value of the Private Placement Warrants
is the expected volatility of the common stock. The expected volatility was implied from the Company’s own Public Warrant
pricing. For periods subsequent to the detachment of the warrants from the Units, the close price of the public warrant price
was used as the fair value as of each relevant date.
There were no transfers in or out of Level 3 from other levels
in the fair value hierarchy.
The following table provides quantitative information regarding
Level 3 fair value measurements:
|
|
As of
March 31,
2020
|
|
|
As of
December 31,
2020
|
|
Stock price
|
|
$
|
10.00
|
|
|
$
|
9.71
|
|
Strike price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Term (in years)
|
|
|
5.3
|
|
|
|
5.5
|
|
Volatility
|
|
|
38.6
|
%
|
|
|
35.0
|
%
|
Risk-free rate
|
|
|
1.0
|
%
|
|
|
0.4
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Probability of completing a Business Combination
|
|
|
90.0
|
%
|
|
|
80.0
|
%
|
The following table
presents the changes in the fair value of Level 3 warrant liabilities:
|
|
Private
Placement
|
|
Fair value as of January 1, 2021
|
|
$
|
11,550,000
|
|
Change in fair value
|
|
|
4,125,000
|
|
Fair value as of March 31, 2021
|
|
$
|
15,675,000
|
|
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events
and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements
were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or
disclosure in the condensed financial statements.