Xos, Inc 10-Q for FY2025 Q2
Xos, Inc. (XOS)
10-Q
2025-08-13
For: 2025-06-30
View Original
Added on
April 12, 2026
About this 10-Q
Xos, Inc filed this 10-Q on August 13, 2025, covering the quarter ended June 30, 2025 (FY2025 Q2).
Headline figures
Quarter ended June 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $18.39M
- up 18.4% from $15.54M a year earlier
- Net loss
- $7.51M
- compared with a net loss of $9.66M a year earlier
- Diluted EPS
- -$0.91
- compared with -$1.23 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________________
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2025
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from __________ to __________
Commission file number 001-39598
______________________________________________________________________________
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of Principal Executive Offices) | (Zip Code) | |||||||
Registrant’s telephone number, including area code: (818 ) 316-1890
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of exchange on which registered | ||||||
The | ||||||||
The | ||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
| ☒ | Smaller reporting company | ||||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The registrant had outstanding 8,690,583 shares of Common Stock, $0.0001 par value as of August 7, 2025.
TABLE OF CONTENTS
| Page | |||||
Item 1. Financial Statements (Unaudited) | |||||
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Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Report”), including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would” or the negative of such terms or other similar expressions. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995.
As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
•There is substantial doubt about our ability to continue as a going concern through the next 12 months from the date of the consolidated financial statements in this Report.
•Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of your investment.
•Our mix of offerings, such as the Xos Hub™ and Xosphere™, is novel in the industry and has yet to be tested in the long term.
•We are an early-stage company with a history of losses and may incur significant expenses and continuing losses for the foreseeable future.
•We have yet to achieve positive operating cash flow for a full year and, given our projected funding needs, our ability to generate or maintain positive cash flow is uncertain.
•Our financial results may vary significantly from period to period due to fluctuations in our product development cycle and operating costs, product demand and other factors.
•Our business plans require a significant amount of capital. In addition, our future capital needs may require us to sell additional equity or debt securities that may dilute our stockholders or introduce covenants that may restrict our operations or our ability to pay dividends.
•We have incurred substantial debt, including $20.0 million principal amount of an outstanding Convertible Note, together with accrued interest thereon, which had a maturity date of August 11, 2025. On August 8, 2025, the repayment schedule for the Convertible Note was modified to make it due in quarterly installments from November 11, 2025 through February 11, 2028 (see Note 20 - Subsequent Events). The Convertible Note could impair our flexibility and access to capital and adversely affect our financial position, and our business would be adversely affected if we are unable to service our debt obligations and are subject to default.
•We have experienced and may in the future experience significant delays in the design, manufacturing and wide-spread deployment of our products.
•We previously restated our financial statements for several prior periods, which resulted in unanticipated costs and may adversely affect investor confidence, our stock price, our ability to raise capital in the future and our reputation.
•We identified material weaknesses in our internal control over financial reporting, and we may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements. If we fail to remediate any material weaknesses or if we otherwise fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.
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•If we fail to successfully tool our manufacturing facilities or if our manufacturing facilities become inoperable, we will be unable to produce our vehicles and our business will be harmed.
•We are or may be subject to risks associated with strategic alliances or acquisitions and may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future.
•We derive a significant portion of our revenue from a small number of customers; if revenue derived from these customers decrease or the timing of such revenue fluctuates, our business and results of operations could be negatively affected.
•Our delay in providing sufficient charging solutions for our vehicles has resulted in the delay of the delivery of our vehicles to customers.
•We are dependent on our suppliers, some of which are limited source or single-source suppliers, and their inability or unwillingness to deliver necessary components and materials used in our products at prices and volumes, performance and specifications acceptable to us could harm our business.
•Our business and prospects depend significantly on our ability to build the Xos brand. We may not successfully establish, maintain and strengthen the Xos brand, and our brand and reputation could be harmed by negative publicity regarding Xos or our products.
•If we fail to manage our growth effectively, we may not be able to further design, develop, manufacture and market our products successfully.
•Our battery packs use lithium-ion battery cells, a class of batteries which have been observed to catch fire or vent smoke and flame.
•We have experienced, and may again experience increases in costs, disruption of supply or shortage of materials, in particular for lithium-ion battery cells, semiconductors and other key components.
•We rely on complex machinery for the manufacture of our products, which involves a significant degree of risk and uncertainty in terms of operational performance and costs.
•We may be unable to realize the opportunities expected from the acquisition of ElectraMeccanica Vehicles Corp. (“ElectraMeccanica”).
•We may face regulatory limitations on our ability to sell vehicles directly to consumers, including changes to tax incentive policies.
•Compliance obligations and/or the actual or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory schemes, standards, and other obligations related to data privacy and security (including security incidents) could harm our business.
•The performance characteristics of our products may vary, due to factors outside of our control, which could harm our ability to develop, market and deploy our products.
•We may have insufficient reserves to cover future warranty or part replacement needs or other vehicle, powertrain and battery pack repair requirements, including any potential software upgrades.
•We have experienced product recalls and may experience future product recalls.
•We are highly dependent on the services of Dakota Semler and Giordano Sordoni, our co-founders, as well as our key personnel and senior management, and if we are unable to attract and retain key personnel and hire qualified management, technical and electric vehicle engineering personnel, our ability to compete could be materially and adversely affected.
•The commercial vehicle market is highly competitive, and we may not be successful in competing in this industry.
•Our growth depends on the last-mile and return-to-base segment’s willingness to adopt electric vehicles.
•We have been and may continue to be impacted by macroeconomic conditions, including supply chain disruption, trade policies and tariffs, health crises, inflation, uncertain credit and global financial market, including potential bank
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failures, labor discord, and geopolitical events, such as the ongoing conflicts between Russia and Ukraine and in the Middle East and political tensions with China.
A discussion of these and other factors affecting our business and prospects is set forth in Part II, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2025 (the “2024 Form 10-K”). We encourage investors to review these risk factors.
Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Report may not prove to be accurate. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.
Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
Part I - Financial Information
Glossary of Terms
Unless otherwise stated in this Report or the context otherwise requires, reference to:
•“Business Combination” means the Domestication, the Merger and the other transactions contemplated by the Merger Agreement, collectively;
•“Closing” means the closing of the Business Combination;
•“Common Stock” means the shares of common stock, par value $0.0001 per share, of Xos;
•“Domestication” means the transfer by way of continuation and deregistration of NextGen from the Cayman Islands and the continuation and domestication of NextGen as a corporation incorporated in the State of Delaware;
•“Hub” means our rapid-deployment mobile charger designed to expedite fleet transitions to electric vehicles;
•“Legacy Xos” means Xos, Inc., a Delaware corporation, prior to the consummation of the Business Combination, now known as Xos Fleet, Inc.;
•“Merger” means the merger of NextGen Merger Sub with and into Legacy Xos pursuant to the Merger Agreement, with Legacy Xos as the surviving company in the Merger and, after giving effect to such Merger, Legacy Xos becoming a wholly owned subsidiary of Xos;
•“Merger Agreement” means that certain Merger Agreement, dated as of February 21, 2021, as amended on May 14, 2021, by and among NextGen, Sky Merger Sub I, Inc., a Delaware corporation and direct wholly owned subsidiary of NextGen, and Legacy Xos;
•“NextGen” means NextGen Acquisition Corp., a Cayman Islands exempted company, prior to the consummation of the Domestication;
•“Powertrain” means an assembly of every component that pushes a vehicle forward. A vehicle’s powertrain creates power from the engine and delivers it to the wheels on the ground. The key components of a powertrain include an engine, transmission, driveshaft, axles, and differential;
•“Preferred Stock” means preferred stock, par value $0.0001 per share, authorized under the Certificate of Incorporation of Xos;
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•“Private Placement Warrants” means the warrants to purchase Common Stock originally issued in a private placement in connection with the initial public offering of NextGen;
•“Public Warrants” means the redeemable warrants to purchase shares of Common Stock at an exercise price of $345 per share originally issued in connection with the initial public offering of NextGen;
•“Warrants” means Private Placement Warrants and Public Warrants;
•“X-Pack” means our proprietary battery system;
•“X-Platform” means our proprietary, purpose-built vehicle chassis platform;
•“Xos” means the reporting issuer, Xos, Inc. (formerly known as NextGen Acquisition Corporation), together with its consolidated subsidiaries;
•“Xos Energy Solutions” means our comprehensive charging infrastructure business through which we offer mobile and stationary multi-application chargers, mobile energy storage and turnkey energy infrastructure services to accelerate client transitions to electric fleets; and
•“Xosphere” means our proprietary fleet management platform.
Item 1. Financial Statements
Index to Unaudited Condensed Consolidated Financial Statements
| Page | |||||
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Xos, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Unaudited
(in thousands, except par value)
June 30, 2025 | December 31, 2024 | ||||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net | |||||||||||
Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets, net | |||||||||||
Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
Liabilities and Stockholders’ Equity | |||||||||||
| Accounts payable | $ | $ | |||||||||
Convertible debt, current | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
Common stock warrant liability | |||||||||||
Other non-current liabilities | |||||||||||
Convertible debt, non-current | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 14) | |||||||||||
Stockholders’ Equity | |||||||||||
Common stock $ | |||||||||||
Preferred stock $ | |||||||||||
Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Xos, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
Unaudited
(in thousands, except per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||||||||||||
Cost of goods sold | ||||||||||||||||||||||||||
Gross profit | ||||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||
General and administrative | ||||||||||||||||||||||||||
Research and development | ||||||||||||||||||||||||||
Sales and marketing | ||||||||||||||||||||||||||
Total operating expenses | ||||||||||||||||||||||||||
Loss from operations | ( | ( | ( | ( | ||||||||||||||||||||||
Other expense, net | ( | ( | ||||||||||||||||||||||||
Change in fair value of derivative instruments | ( | ( | ( | |||||||||||||||||||||||
Change in fair value of earn-out shares liability | ||||||||||||||||||||||||||
Loss before provision for income taxes | ( | ( | ( | ( | ||||||||||||||||||||||
Provision for income taxes | ||||||||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Net and comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Net loss per share | ||||||||||||||||||||||||||
Basic | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Weighted average shares outstanding | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Xos, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
Unaudited
(in thousands)
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||
| Shares | Par Value | |||||||||||||||||||||||||||||||
Balance at December 31, 2023 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
Stock options exercised | — | — | — | — | ||||||||||||||||||||||||||||
Stock based compensation expense | — | — | — | |||||||||||||||||||||||||||||
Issuance of common stock for vesting of restricted stock units | — | — | — | — | ||||||||||||||||||||||||||||
Shares withheld related to net share settlement of stock-based awards | ( | — | ( | — | ( | |||||||||||||||||||||||||||
Issuance of common stock for ElectraMeccanica acquisition | — | — | ||||||||||||||||||||||||||||||
Issuance of common stock for commitment shares under the Standby Equity Purchase Agreement | — | — | ||||||||||||||||||||||||||||||
Net and comprehensive loss | — | — | — | ( | ( | |||||||||||||||||||||||||||
Balance at March 31, 2024 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
Stock options exercised | — | — | — | |||||||||||||||||||||||||||||
Stock based compensation expense | — | — | — | |||||||||||||||||||||||||||||
| Issuance of common stock for vesting of restricted stock units | — | — | — | — | ||||||||||||||||||||||||||||
Shares withheld related to net share settlement of stock-based awards | ( | — | ( | — | ( | |||||||||||||||||||||||||||
Net and comprehensive income (loss) | — | — | — | ( | ( | |||||||||||||||||||||||||||
Balance at June 30, 2024 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
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| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||
| Shares | Par Value | |||||||||||||||||||||||||||||||
Balance at December 31, 2024 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Stock options exercised | — | — | — | — | — | |||||||||||||||||||||||||||
| Stock based compensation expense | — | — | — | |||||||||||||||||||||||||||||
| Issuance of common stock for vesting of restricted stock units | — | — | — | — | ||||||||||||||||||||||||||||
| Shares withheld related to net share settlement of stock-based awards | ( | — | ( | — | ( | |||||||||||||||||||||||||||
| Net and comprehensive loss | — | — | — | ( | ( | |||||||||||||||||||||||||||
Balance at March 31, 2025 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
Stock based compensation expense | — | — | — | |||||||||||||||||||||||||||||
| Issuance of common stock for vesting of restricted stock units | — | — | — | — | ||||||||||||||||||||||||||||
Shares withheld related to net share settlement of stock-based awards | ( | — | ( | — | ( | |||||||||||||||||||||||||||
| Net and comprehensive loss | — | — | — | ( | ( | |||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Xos, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Unaudited
(in thousands, unaudited)
Six Months Ended June 30, | |||||||||||
2025 | 2024 | ||||||||||
| OPERATING ACTIVITIES: | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation | |||||||||||
Amortization of right-of-use assets | |||||||||||
| Amortization of debt discounts and issuance costs | |||||||||||
| Amortization of insurance premiums | |||||||||||
Inventory reserve | ( | ( | |||||||||
Impairment of property and equipment | |||||||||||
Change in fair value of derivative instruments | |||||||||||
| Change in fair value of earn-out shares liability | ( | ||||||||||
| Stock-based compensation expense | |||||||||||
Bad debt expense | ( | ||||||||||
Other non-cash items | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ||||||||||
| Inventories | ( | ||||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||
| Other assets | ( | ||||||||||
| Accounts payable | ( | ( | |||||||||
Other liabilities | ( | ||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| INVESTING ACTIVITIES: | |||||||||||
| Purchase of property and equipment | ( | ||||||||||
Net cash acquired in acquisition of ElectraMeccanica Vehicles Corp. | |||||||||||
Net cash provided by investing activities | |||||||||||
| FINANCING ACTIVITIES: | |||||||||||
| Principal payment of equipment leases | ( | ( | |||||||||
| Proceeds from short-term insurance financing note | |||||||||||
| Payment for short-term insurance financing note | ( | ( | |||||||||
Stock options exercised | |||||||||||
Taxes paid related to net share settlement of stock-based awards | ( | ( | |||||||||
| Proceeds from issuance of common stock under Standby Equity Purchase Agreement | |||||||||||
Net cash used in financing activities | ( | ( | |||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
Cash, cash equivalents and restricted cash, beginning of period | |||||||||||
Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||||||
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Reconciliation of Cash, Cash Equivalents and Restricted Cash to Unaudited Condensed Consolidated Balance Sheets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
Supplemental disclosure of cash flow information | |||||||||||
Cash paid for income taxes | $ | $ | |||||||||
Supplemental disclosure of non-cash investing and financing activities | |||||||||||
Purchase of property and equipment in accounts payable | $ | $ | ( | ||||||||
Net assets acquired in acquisition of ElectraMeccanica Vehicles Corp. | $ | $ | |||||||||
Xos common stock issued in exchange for ElectraMeccanica Vehicles Corp. | $ | $ | ( | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Note 1— Description of Business
Xos, Inc., together with its wholly owned subsidiaries (collectively, the “Company” or “Xos”) is a leading fleet electrification solutions provider committed to the decarbonization of commercial transportation. Xos designs and manufactures Classes 5 through 8 battery-electric commercial vehicles designed to travel on last-mile, back-to-base routes of up to 200 miles per day. Xos also offers charging infrastructure products and services through Xos Energy Solutions™ to support electric vehicle fleets. The Company’s proprietary fleet management software, Xosphere™, integrates vehicle operation and vehicle charging aimed at providing commercial fleet operators a more seamless and cost-efficient vehicle ownership experience than traditional internal combustion engine counterparts. Xos developed the X-Platform (its proprietary, purpose-built vehicle chassis platform) specifically for the medium-duty commercial vehicle segment with a focus on last-mile commercial fleet operations. Xos seeks to offer customers a suite of commercial products and services to facilitate electric fleet operations and seamlessly transition their traditional combustion-engine fleets to battery-electric vehicles.
Business Combination
Xos, Inc. was initially incorporated on July 29, 2020, as a Cayman Islands exempted company under the name “NextGen Acquisition Corporation” (“NextGen”). On August 20, 2021, the transactions contemplated by the Agreement and Plan of Merger, as amended on May 14, 2021, by and among NextGen, Sky Merger Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary of NextGen (“Merger Sub”), and Xos, Inc., a Delaware corporation (now known as Xos Fleet, Inc., “Legacy Xos”), were consummated (the “Closing”), whereby Merger Sub merged with and into Legacy Xos, the separate corporate existence of Merger Sub ceased and Legacy Xos became the surviving corporation and a wholly owned subsidiary of NextGen (such transaction the “Merger” and, collectively with the Domestication, the “Business Combination”), and Xos became the publicly traded entity listed on Nasdaq.
ElectraMeccanica Acquisition
On January 11, 2024, the Company and ElectraMeccanica Vehicles Corp. (“ElectraMeccanica”) entered into an arrangement agreement, as amended on January 31, 2024 (the “Arrangement Agreement”), pursuant to which the Company acquired all of the issued and outstanding common shares of ElectraMeccanica (each an “ElectraMeccanica Share”) pursuant to a plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (British Columbia) (the “Arrangement”).
The Arrangement was consummated on March 26, 2024. Subject to the terms and conditions set forth in the Arrangement Agreement and the Plan of Arrangement, on March 26, 2024, each ElectraMeccanica Share outstanding immediately prior to the effective time of the Arrangement was converted automatically into the right to receive 0.0143739 of a share of the Company’s Common Stock, for total consideration of 1,766,388 shares of Common Stock. The Company’s liquidity has been supplemented by accessing ElectraMeccanica’s cash balance, which was approximately $50.2 million (excluding severance related costs paid at closing) as of the effective date of the Arrangement.
Risks and Uncertainties
In recent years, the United States and other significant markets have experienced cyclical downturns and worldwide economic conditions remain uncertain. Global general economic and political conditions, such as recession, inflation, uncertain credit and global financial markets, including potential future bank failures, health crises, supply chain disruption, fuel prices, international currency fluctuations, changes to trade policies and tariffs (or the perception that such changes may occur), and geopolitical events such as local and national elections, corruption, political instability and acts of war or military conflict, or terrorism, make it difficult for our customers and us to accurately forecast and plan future business activities, and could cause our customers to slow spending on our products and services or impact their ability to make timely payments. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption. In addition, there is a risk that our current or future suppliers, service providers, manufacturers or other partners may not survive such difficult economic times, which would directly affect our ability to attain our operating goals on schedule and on budget. The ultimate impact of current economic conditions on the Company is uncertain, but it may have a material negative impact on the Company’s business, operating results, cash flows, liquidity and financial condition.
Additionally, ongoing geopolitical events, such as the military conflicts between Russia and Ukraine and in Israel or tensions with China and related sanctions and export control restrictions, may increase the severity of supply chain disruptions and
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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
further hinder our ability to source inventory for our vehicles. These conflicts continue to evolve and the ultimate impact on the Company is uncertain, but any prolonged conflict may have a material negative impact on the Company’s business, operating results, cash flows, liquidity and financial condition.
Although the Company has used the best current information available to it in its estimates, actual results could materially differ from the estimates and assumptions developed by management.
Liquidity
As an early-stage growth company, the Company has incurred net losses and cash outflows since its inception. The Company will continue to incur net losses and cash outflows in accordance with its operating plan as the Company continues to scale its operations to meet anticipated demand and establish its product and service offerings. As a result, the Company’s ability to access capital is critical and until the Company can generate sufficient revenue to cover its operating expenses, working capital and capital expenditures, the Company will need to raise additional capital in order to fund and scale its operations. The Company may raise additional capital through a combination of debt financing, other non-dilutive financing and/or equity financing, including through asset-based lending and/or receivable financing and collecting on its outstanding receivables. The Company’s ability to raise or access capital when needed is not assured and, if capital is not available to the Company when, and in the amounts needed, the Company could be required to delay, scale back or abandon some or all of its development programs and other operations, which could materially harm its business, prospects, financial condition and operating results. Global general economic conditions continue to be unpredictable and challenging in many sectors, with disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the effects of potential recessions, rising inflation rates, potential bank failures, supply chain disruption, fuel prices, international currency fluctuations, changes to trade policies and tariffs, and geopolitical events such as local and national elections, corruption, political instability and acts of war or military conflicts including repercussions of the wars between Russia and Ukraine and in Israel and tensions with China, or terrorism.
As of June 30, 2025, the Company’s principal sources of liquidity were its cash and cash equivalents aggregating to $8.8 million. The Company’s short- and long-term uses of cash are for working capital and to pay interest and principal on its debt. The Company has incurred losses since inception and had negative cash flow used in operating activities of $0.1 million and $40.6 million for the six months ended June 30, 2025 and 2024, respectively, and $48.8 million for the year ended December 31, 2024.
As an early-stage growth company, the Company's ability to access capital is critical. However, there can be no assurance such capital will be available to the Company when needed, on favorable terms or at all. The consolidated financial information does not include any adjustments that might result from the outcome of this uncertainty. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.
The Company intends to employ various strategies to obtain the required funding for future operations, which may include capital raising strategies such as debt financing, other non-dilutive financing and/or equity financing, including through asset-based lending and/or receivable financing and collecting on its outstanding receivables. The Company also has in place the SEPA (defined below in Note 10 - Equity), however, the ability to access the SEPA is dependent on various conditions. The Company’s access to capital under the SEPA is not available as of the date of this filing and would not be available unless and until a post-effective amendment to the Registration Statement on Form S-1, filed on July 27, 2023, is filed with the SEC and declared effective and other applicable conditions are met. Moreover, the SEPA is scheduled to expire on February 11, 2026.
On August 9, 2022 (as amended on September 28, 2022), the Company entered into a note purchase agreement (the “Note Purchase Agreement”) with Aljomaih Automotive Co. (“Aljomaih”) under which the Company agreed to sell and issue to Aljomaih a convertible promissory note with a principal amount of $20.0 million and a maturity date of August 11, 2025. On August 8, 2025, the Company and Aljomaih entered into Amendment Number One to the Note Purchase Agreement (the “Aljomaih Amendment”) and amended and restated the Convertible Note issued thereunder. Among other things, the Convertible Note is now due in several quarterly installments payable between November 11, 2025 and February 11, 2028. In addition, interest accrued on the Convertible Notes through August 11, 2025, of approximately $6.0 million in the aggregate, will be converted into shares of Common Stock at the 10 -day VWAP (as defined in the Convertible Note) on August 25, 2025, in accordance with the terms of the Note immediately prior to the Aljomaih Amendment. See Note 9 - Convertible Notes and Part II, Item 5 - Other Information.
14
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Based on the Company’s strategies to raise funds as described above and Xos’s cash and cash equivalents as of June 30, 2025, the Company has concluded that it is not probable that such proceeds would provide sufficient liquidity to fund operations for the next twelve months following the date of the issuance of the unaudited condensed consolidated financial statements. As a result, it is not probable that Xos’s plans alleviate the substantial doubt about the Company’s ability to continue as a going concern for at least one year from the issuance of the unaudited condensed consolidated financial statements in this Report. Absent the Company being able to collect on its outstanding accounts receivable, obtain a sufficient level of new capital in the near-term and/or obtain replacement financing for or extend the maturity of existing debt, the Company could be required to seek protection under Chapters 7 or 11 of the United States Bankruptcy Code. This could potentially cause the Company to cease operations.
Supply Chain Disruptions
While the Company’s ability to source certain critical inventory items has been steadily improving, it is still experiencing long-standing negative effects from global economic conditions, and expects such effects to continue to varying degrees for the foreseeable future. The Company has also observed, and expects to be impacted by, sporadic and unpredictable shortages for specific components, primarily in power electronics and harnesses, and disruptions to the supply of components. The implementation and/or threat of new and increased tariffs, as well as fluctuating fuel prices and geopolitical conflicts have compounded ongoing supply and demand pressures.
Fluctuating tariff regimes—particularly those targeting imports of power electronics, battery components, and structural materials—have introduced significant volatility in the Company’s cost structure and procurement planning. The uncertainty around tariff implementation timelines and scope has necessitated frequent adjustments to sourcing strategies, supplier selection, and contract terms.
To mitigate these impacts, the Company has undertaken the following measures:
•diversification of supply base to include alternate suppliers in tariff-exempt or trade-friendly regions;
•renegotiation of pricing and delivery terms to account for tariff exposure and cost passthroughs;
•reclassification and compliance reviews to ensure correct harmonized tariff schedule (HTS) codes and leverage tariff exemptions or reduced duty programs, where applicable; and
•strategic stockpiling of high-risk components to reduce exposure to near-term tariff hikes.
The Company has been closely monitoring potential changes to trade policies and tariffs in order to proactively adjust and refine our strategy. These actions are aimed at preserving cost competitiveness and securing uninterrupted supply amid a fluid and unpredictable trade policy environment. Notwithstanding these efforts, the ongoing regulatory changes may affect our ability to source components from specific regions or maintain access to critical suppliers on commercially reasonable terms or at all.
Note 2— Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements
The following is a summary of the significant accounting policies consistently applied in the preparation of the accompanying unaudited condensed consolidated financial statements:
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. They do not include all of the information and footnotes required by U.S. GAAP for complete audited financial statements. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
In the opinion of management, all adjustments (primarily consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the years ended
15
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
December 31, 2024 and 2023 presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 31, 2025.
Use of Estimates
Reclassifications
Certain prior period balances have been reclassified to conform to the current period presentation in the unaudited condensed consolidated financial statements and the accompanying notes, including (i) presenting bad debt expense as a reconciling item for the calculation of the net cash used in operating activities, and (ii) classification of amounts comprising stepvans & vehicle incentives, powertrains & Hubs, and other product revenue as described in Note 3 — Revenue Recognition. These reclassifications have no effect on previously reported total assets, total liabilities or net loss.
Warranty Liability
The Company provides customers with a product warranty that assures that the products meet standard specifications and is free for periods typically between 2 to 5 years. The Company accrues warranty reserve for the products sold, which includes its best estimate of the projected costs to repair or replace items under warranties and recalls if identified. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain given the Company’s relatively short history of sales, and changes to its historical or projected warranty experience may cause material changes to the warranty reserve in the future. Claims incurred under the Company’s standard product warranty programs are recorded based on open claims. The Company recorded warranty liability within other current liabilities in the consolidated balance sheets as of June 30, 2025 and December 31, 2024.
The reconciliation of the change in the Company’s product liability balances during the three and six months ended June 30, 2025 and 2024 consisted of the following (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Warranty liability, beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Reduction in liability (payments) | ( | ( | ( | ( | |||||||||||||||||||
Increase in liability | |||||||||||||||||||||||
| Warranty liability, end of period | $ | $ | $ | $ | |||||||||||||||||||
Concentrations of Credit and Business 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. As of June 30, 2025 and 2024, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
16
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
During the three months ended June 30, 2025, one customer accounted for 70 % of the Company’s revenues. During the three months ended June 30, 2024, two customers accounted for 19 %, and 14 % of the Company’s revenues, respectively. During the six months ended June 30, 2025, one customer accounted for 53 % of the Company’s revenues. During the six months ended June 30, 2024, two customers accounted for 25 % and 10 % of the Company’s revenues, respectively.
Accounts receivable totaled $18.1 million, net of allowance of $0.2 million, and $26.9 million, net of allowance of $0.2 million, as of June 30, 2025 and December 31, 2024, respectively. As of June 30, 2025, two customers accounted for 48 % and 11 % of the Company’s accounts receivable, respectively. As of June 30, 2024, one customer accounted for 13 % of the Company’s accounts receivable. As of December 31, 2024, no customer had an accounts receivable balance greater than 10% of the Company’s accounts receivable.
Concentration of Supply Risk
The Company is dependent on its suppliers, the majority of which are single-source suppliers, and the inability of these suppliers to deliver necessary components of its products according to the schedule and at prices, quality levels and volumes acceptable to the Company, or its inability to efficiently manage these components, could have a material adverse effect on the Company’s results of operations and financial condition.
As of June 30, 2025, one vendor accounted for 41 % of the Company’s accounts payable. As of December 31, 2024, three vendors accounted for 19 %, 15 %, and 10 % of the Company’s accounts payable, respectively.
Segment Information
The Company operates under one segment as it has developed, marketed, and sold primarily only one class of similar products of electric step vans, stripped chassis vehicles, battery systems, Hubs, and other products. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer.
Recent Accounting Pronouncements Issued and not yet Adopted:
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires incremental annual income tax disclosures. This amendment includes disclosures of specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold; income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes, and also disaggregated by individual jurisdictions that meet a quantitative threshold; income (or loss) from continuing operations before income tax expenses (or benefit) disaggregated between domestic and foreign; and income tax expense (or benefit) from continuing operations disaggregated by federal, state and foreign. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted and should be applied prospectively (with retrospective application permitted). The Company is evaluating the impact of this amendment to the related financial statement disclosures.
The Company has considered all other applicable recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its unaudited condensed consolidated financial statements or notes thereto.
17
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Note 3— Revenue Recognition
Disaggregated revenues by major source for the three and six months ended June 30, 2025 and 2024 consisted of the following (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Product and service revenue | ||||||||||||||||||||||||||
Stepvans & vehicle incentives(1) | $ | $ | $ | $ | ||||||||||||||||||||||
Powertrains & hubs | ||||||||||||||||||||||||||
Other product revenue | ||||||||||||||||||||||||||
| Total product revenue | ||||||||||||||||||||||||||
| Ancillary revenue | ||||||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||||||||||||
___________
The Company leases stepvans and Hubs to customers under operating leases with terms ranging from 24 to 36 months. At the end of the lease term, customers are required to return the vehicles to Xos. During the three months ended June 30, 2025 and 2024, the Company recorded operating lease revenue of $4,000 and $8,000 , respectively, on a straight-line basis over the contractual terms of the respective leases as part of Stepvans & vehicle incentives, above. During the six months ended June 30, 2025 and 2024, the Company recorded operating lease revenue of $11,000 and $22,000 , respectively, on a straight-line basis over the contractual terms of the respective leases as part of Stepvans & vehicle incentives, above. During the three months ended June 30, 2025 and 2024, the Company recorded operating lease revenue of $11,000 and $0 , respectively, on a straight-line basis over the contractual terms of the respective leases as part of Powertrains & Hubs, above. During the six months ended June 30, 2025 and 2024, the Company recorded operating lease revenue of $22,000 and $0 , respectively, on a straight-line basis over the contractual terms of the respective leases as part of Powertrains & Hubs, above.
Note 4 — Acquisition of ElectraMeccanica
On March 26, 2024, Xos acquired all of the issued and outstanding ElectraMeccanica Shares in exchange for the issuance of 1,766,388 shares of Xos Common Stock. The transfer of common shares resulted in the Xos stockholders and ElectraMeccanica shareholders immediately prior to the transaction owning approximately 79 % and 21 % of Xos upon completion of the transaction, respectively. The Company accounted for the acquisition of ElectraMeccanica as an asset acquisition in accordance with Accounting Standards Codification Topic 805-50, Acquisition of Assets Rather than a Business, because the acquired set of assets and activities did not include a substantive process. Therefore, the acquired set of assets and activities does not meet the definition of a business. This determination was made with key judgments including the following:
•ElectraMeccanica has discontinued, recalled, and repurchased all previously sold three-wheeled electric vehicles (the “SOLO”) because of a loss of propulsion issue that resulted in the vehicles being under a “do not drive” order from the National Highway Traffic Safety Administration. All in-process research and development (“IPR&D”) projects to commercialize the SOLO or a new four-wheeled electric (the “E4”) were terminated by ElectraMecannica. The IPR&D related to SOLO and E4 has nominal value and require significant time, cost, and engineering efforts to commercialize.
•The majority of the assembled workforce was performing administrative tasks or working on the destruction of the remaining inventory and closing of leased facilities at the time of the acquisition. The destruction of the remaining inventory was completed during the three months ended September 30, 2024. The acquired assembled workforce did not contain sufficient engineers with the knowledge and skill set to commercialize ElectraMeccanica’s terminated IPR&D projects.
18
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Accordingly, the purchase consideration provided by Xos to effect the acquisition has been allocated to the acquired assets and assumed liabilities based upon their relative fair values. The following table summarizes the acquisition of ElectraMeccanica on March 26, 2024 (in thousands):
Purchase consideration (1) | $ | ( | |||
Assets acquired | |||||
| Cash and cash equivalents | $ | ||||
Restricted cash | |||||
| Prepaid expenses and other current assets | |||||
| Other non-current assets | |||||
| Total identifiable assets acquired | $ | ||||
Liabilities assumed | |||||
| Accounts payable | $ | ( | |||
Other current liabilities (2) | ( | ||||
Other non-current liabilities (2) | ( | ||||
| Total liabilities assumed | $ | ( | |||
| Net assets acquired and liabilities assumed | $ | ||||
(1) As a result of the asset acquisition accounting, the transaction costs of $3.7 million associated with the acquisition are included in the costs of the assets acquired and allocated amongst qualifying assets using the relative fair value basis. The transaction costs primarily included financial advisor fees, accounting, and legal expenses.
(2) The Company assumed two lease facilities in connection with the ElectraMeccanica acquisition which are reflected in other current liabilities and other non-current liabilities of approximately $1.2 million and $16.0 million, respectively.
Note 5 — Lease Receivable
For deferred equipment agreements that contain embedded operating leases, upon lease commencement, the Company defers and records the equipment cost of operating lease assets within property and equipment, net of accumulated depreciation. These operating lease assets are subsequently amortized to cost of goods sold over the lease term on a straight-line basis.
For deferred equipment agreements that contain embedded sales-type leases, the Company recognizes lease revenue and costs, as well as a lease receivable, at the time the lease commences. Costs related to embedded leases within the Company’s deferred equipment agreements are included in cost of goods sold in the accompanying unaudited condensed consolidated statement of operations and comprehensive loss. Interest on the lease receivable was immaterial to the unaudited condensed consolidated financial statements for both the three and six months ended June 30, 2025 and 2024.
19
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
| (in thousands) | Balance Sheet Location | June 30, 2025 | December 31, 2024 | ||||||||||||||
| Lease receivable | $ | $ | |||||||||||||||
| Allowance for expected credit losses | ( | ( | |||||||||||||||
| Lease receivable, net | |||||||||||||||||
| Less: current portion of lease receivable | Prepaid expenses and other current assets | ( | ( | ||||||||||||||
| Lease receivable, non-current | Other non-current assets | $ | $ | ||||||||||||||
As of June 30, 2025, estimated future maturities of customer sales-type lease receivable and operating lease payments for each of the following fiscal years are as follows:
| Future Lease Receivables/Payments (in thousands) | |||||||||||
| Fiscal year | Sales-Type Leases | Operating Leases | |||||||||
| 2025 | $ | $ | |||||||||
| 2026 | |||||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| Thereafter | |||||||||||
Total lease payments | $ | $ | |||||||||
Note 6 — Inventories
Inventory amounted to $31.0 million and $36.6 million, respectively, as of June 30, 2025 and December 31, 2024 and consisted of the following (in thousands):
June 30, 2025 | December 31, 2024 | |||||||||||||
| Raw materials | $ | $ | ||||||||||||
| Work in process | ||||||||||||||
Finished goods | ||||||||||||||
Total inventories | $ | $ | ||||||||||||
Inventories as of June 30, 2025 and December 31, 2024 were comprised of raw materials, work in process and finished goods related to the production of vehicles, powertrains, Hubs, and other products for sale and finished goods inventory including vehicles in transit to fulfill customer orders, new vehicles, new vehicles awaiting final pre-delivery quality review inspection, and Xos Energy Solutions products available for sale.
20
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Note 7 — Selected Balance Sheet Data
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets as of June 30, 2025 and December 31, 2024 consisted of the following (in thousands):
June 30, 2025 | December 31, 2024 | |||||||||||||
Prepaid inventories | $ | $ | ||||||||||||
Prepaid expenses and other(1) | ||||||||||||||
Lease receivable | ||||||||||||||
Contract assets | ||||||||||||||
Financed insurance premiums | ||||||||||||||
Assets held for sale(2) | ||||||||||||||
Total prepaid expenses and other current assets | $ | $ | ||||||||||||
(1) Primarily relates to security deposits for outstanding equipment leases, other receivables, prepaid insurance, and prepaid licenses and subscriptions.
(2) Assets held for sale are comprised of manufacturing equipment no longer used in production and intended to be sold.
Other Non-Current Assets
Other non-current assets as of June 30, 2025 and December 31, 2024 consisted of the following (in thousands):
June 30, 2025 | December 31, 2024 | |||||||||||||
| Security deposits | $ | $ | ||||||||||||
Duty drawback receivable(1) | ||||||||||||||
Lease receivable, non-current | ||||||||||||||
| Other non-current assets | ||||||||||||||
| Total other non-current assets | $ | $ | ||||||||||||
(1)
21
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Other Current Liabilities
Other current liabilities as of June 30, 2025 and December 31, 2024 consisted of the following (in thousands):
| June 30, 2025 | December 31, 2024 | |||||||||||||
Accrued expenses and other (1) | $ | $ | ||||||||||||
Accrued interest⁽²⁾ | ||||||||||||||
Accrued payroll⁽³⁾ | ||||||||||||||
Contract liabilities | ||||||||||||||
Customer deposits | ||||||||||||||
Warranty liability | ||||||||||||||
Equipment notes payable, current | ||||||||||||||
Short-term insurance financing notes | ||||||||||||||
Operating lease liabilities, current | ||||||||||||||
Finance lease liabilities, current | ||||||||||||||
Total other current liabilities | $ | $ | ||||||||||||
____________
(1) Primarily relates to the liabilities assumed in connection with the ElectraMeccanica acquisition, accrued inventory purchases, accrued professional fees, and other accrued expenses.
(2) Represents accrued interest on Convertible Promissory Note, which interest is convertible into shares of our common stock at maturity. See Note 9 — Convertible Notes.
(3) Primarily relates to payroll liabilities such as accrued payroll, accrued vacation, accrued bonuses and other payroll liabilities.
Revenue recognized from the customer deposits balance for the six months ended June 30, 2025 and 2024 was $0.4 million and $0.6 million, respectively. Revenue recognized for the year ended December 31, 2024 from the customer deposits balance as of December 31, 2023 was $0.7 million.
Other Non-Current Liabilities
Other non-current liabilities as of June 30, 2025 and December 31, 2024 consisted of the following (in thousands):
| June 30, 2025 | December 31, 2024 | |||||||||||||
Accrued interest expense and other | $ | $ | ||||||||||||
Equipment notes payable, non-current | ||||||||||||||
Operating lease liabilities, non-current | ||||||||||||||
Finance lease liabilities, non-current | ||||||||||||||
Total other non-current liabilities | $ | $ | ||||||||||||
Note 8 — Earn-out Shares Liability
The Company has a contingent obligation to issue 547,000 shares (the “Earn-out Shares”) of Common Stock and grant 8,700 restricted stock units (“Earn-out RSUs”) to certain stockholders and employees upon the achievement of certain market share price milestones within specified periods following the Business Combination on August 20, 2021.
The Earn-out Shares will be issued in tranches based on the following conditions:
22
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
i.If the volume-weighted average closing share price (“VWAP”) of the Common Stock equals or exceeds $420.00 per share for any 10 trading days within any consecutive 20 -trading day period between the Merger closing date and the five year anniversary of such closing date (“Earn-out Period”), then the Company is required to issue an aggregate of 180,000 shares (“Tranche 1 Earn-out Shares”) of Common Stock to holders with the contingent right to receive Earn-out Shares (excluding any Earn-out RSUs). If after Closing and during the Earn-out Period, there is a Change in Control (as defined in the Merger Agreement), the Company is required to issue Tranche 1 Earn-out Shares when the value per share of the Company is equal to or greater than $420.00 per share, but less than $600.00 . If there is a change in control where the value per share of common stock is less than $420.00 , then the Earn-out Shares shall terminate prior to the end of the Earn-out Period and no Common Stock shall be issuable.
ii.If the VWAP of the Common Stock equals or exceeds $600.00 per share for any 10 trading days within any consecutive 20 -trading day period during the Earn-out Period, then the Company is required to issue an aggregate of 180,000 shares (“Tranche 2 Earn-out Shares”) of Common Stock to holders with the contingent right to receive Earn-out Shares (excluding any Earn-out RSUs). If after Closing and during the Earn-out Period, there is a Change in Control (as defined in the Merger Agreement), the Company is required to issue Tranche 2 Earn-out Shares when the value per share of the Company is equal to or greater than $600.00 per share, but less than $750.00 .
iii.If the VWAP of the Common Stock equals or exceeds $750.00 per share for any 10 trading days within any consecutive 20 -trading day period during the Earn-out Period, then the Company is required to issue an aggregate of 180,000 shares (“Tranche 3 Earn-out Shares”) of Common Stock to holders with the contingent right to receive Earn-out Shares (excluding any Earn-out RSUs). If after Closing and during the Earn-out Period, there is a Change in Control (as defined in the Merger Agreement), the Company is required to issue Tranche 3 Earn-out Shares when the value per share of the Company is equal to or greater than $750.00 per share.
Pursuant to the guidance under ASC 815, Derivatives and Hedging, the right to Earn-out Shares was classified as a Level 3 fair value measurement liability, and the increase or decrease in the fair value during the reporting period is recognized in the unaudited condensed consolidated statement of operations accordingly. The fair value of the Earn-out Shares liability was estimated using the Monte Carlo simulation of the stock prices based on historical and implied market volatility of a peer group of public companies.
For each of the periods ended June 30, 2025 and December 31, 2024, the fair value of the Earn-out Shares liability was estimated to be $0 0 and $36,000 in its unaudited condensed consolidated statements of operations and comprehensive loss during the three months ended June 30, 2025 and 2024, respectively. The Company recognized a gain of $0 and $33,000 during the six months ended June 30, 2025 and 2024, respectively.
The allocated fair value to the Earn-out RSU component, which is covered by ASU 718, Compensation — Stock Compensation, is recognized as stock-based compensation expense over the vesting period commencing on the grant date of the award.
Note 9 — Convertible Notes
Convertible Promissory Note
On August 9, 2022, the Company entered into a note purchase agreement (the “Note Purchase Agreement”) with Aljomaih Automotive Co. (“Aljomaih”) under which the Company agreed to sell and issue to Aljomaih a convertible promissory note with a principal amount of $20.0 million. On August 11, 2022, pursuant to the Note Purchase Agreement, the Company sold and issued $20.0 million in principal amount of a convertible promissory note (the “Original Note”) to Aljomaih. On September 28, 2022, the Company and Aljomaih agreed to amend and restate the Original Note (as amended and restated, the “Note”) to, among other things, adjust the calculation of the shares of the Company’s Common Stock issuable as interest, as described further below.
The Note, which was initially scheduled to mature on August 11, 2025, bears interest at a rate of 10.0 % per annum, payable at maturity in validly issued, fully paid and non-assessable shares of Common Stock (“Interest Shares”), unless earlier converted or paid. If the 10 -day VWAP ending on the trading day immediately prior to the applicable payment date is greater than or equal to the Minimum Price (as defined in Nasdaq Rule 5635(d)) or the Company has received the requisite approval from its stockholders (which it has), the number of Interest Shares to be issued will be calculated based on such 10 -day VWAP;
23
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
otherwise, the number of Interest Shares to be issued would have been based on the Nasdaq Minimum Price. The conversion price for the Note will initially be equal to $71.451 per share, subject to adjustment in some events pursuant to the terms of the Note. The Company will have the right, in its sole discretion and exercisable at its election by sending notice of such exercise to Aljomaih, to irrevocably fix the method of settlement that will apply to all conversions of Notes. Methods of settlement include (i) physical settlement in shares of Common Stock, (ii) cash settlement determined by multiplying the principal being converted by the 10 -day VWAP ending on the trading day immediately prior to the conversion date and dividing by the conversion price, or (iii) a combination of Common Stock and cash.
The Note also includes an optional redemption feature that provides the Company, on or after August 11, 2024, or as otherwise agreed to between the Company and Aljomaih in writing, the right to redeem the outstanding principal and accrued and unpaid interest, upon written notice not less than 5 trading days prior to exercise of the option, in full or in part and without penalty.
The Company accounts for the Note in accordance with the guidance contained in ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, under which the Note was analyzed for the identification of material embedded features that meet the criteria for equity treatment and/or bifurcation and must be recorded as a liability. The Company initially classified the Note as a non-current liability given a maturity date of greater than one year, however, during the quarter ended September 30, 2024, the Note was reclassified as a current liability since its maturity date is less than one year from September 30, 2024. Subsequent to the period end, the Note was amended, and as a result of such amendment, a portion of the Note has been reclassified as a non-current liability at June 30, 2025, due to a change in the principal repayment schedule of the Note. See Note 20 — Subsequent Events.
The Note will not be included in the computation of either basic or diluted EPS for the three months ended June 30, 2025 in Note 17 — Net Loss per Share. This financial instrument is not included in basic EPS because it does not represent participating securities. Further, the Note is not included in diluted EPS because the Company reported a net loss from continuing operations for the three and six months ended June 30, 2025; thus, including these financial instruments would have an antidilutive effect on EPS.
Note 10 — Equity
Xos Common and Preferred Stock
The Company is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Company is authorized to issue is 1,010,000,000 shares. 1,000,000,000 shares shall be Common Stock, each having a par value of one-hundredth of one cent ($0.0001 ). 10,000,000 shares shall be Preferred Stock, each having a par value of one-hundredth of one cent ($0.0001 ).
Voting Rights: Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Company for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).
Preferred Stock: The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Company (the “Board of Directors”) is expressly authorized to provide for the issue of all or any number of the shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions
24
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Notes to Condensed Consolidated Financial Statements
Unaudited
adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the Delaware General Corporation Law (the “DGCL”). The Board of Directors is also expressly authorized to increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.
Standby Equity Purchase Agreement
On March 23, 2022, the Company entered into a Standby Equity Purchase Agreement with YA II PN, Ltd. (“Yorkville”), which was subsequently amended on June 22, 2023 (as amended, the “SEPA”), whereby the Company has the right, but not the obligation, to sell to Yorkville up to $125.0 million of shares of its Common Stock at its request any time until February 11, 2026, subject to certain conditions. The Company expects to use any net proceeds from the SEPA for working capital and general corporate purposes.
As consideration for Yorkville’s commitment to purchase shares of Common Stock at the Company’s direction upon the terms and subject to the conditions set forth in the SEPA, upon execution of the SEPA, the Company issued 619 shares of Common Stock to Yorkville.
On June 22, 2023, the Company and Yorkville entered into the First Amendment to Standby Equity Purchase Agreement (the “SEPA Amendment”), in which the Company and Yorkville amended the SEPA to: (1) change the calculation of the purchase price of an Option 1 Advance (as defined in the SEPA) from an average of the daily VWAP of the Common Stock during a three-day pricing period to the lowest VWAP during such three-day pricing period; (2) change the denomination of any requested advances from the Company to Yorkville under the SEPA from dollars to shares; (3) increase Yorkville’s beneficial ownership limitation under the SEPA from 4.99 % to 9.99 % of the outstanding Common Stock, provided that if any portion of an advance under the SEPA would cause Yorkville to exceed the beneficial ownership limitation due to Yorkville’s ownership of the Company’s securities convertible into Common Stock, then the maximum number of shares of Common Stock that such securities will be convertible into will be reduced by the number of shares of Common Stock included in such advance for such period that Yorkville holds such shares of common stock covered by such advance and the number of shares of Common Stock covered by such advance will not be reduced; (4) extend the commitment period to February 11, 2026 and (5) make other administrative and drafting changes.
During the six months ended June 30, 2025 and 2024, the Company issued 0 and 5,500 shares of Common Stock under the SEPA for proceeds of $0 and $46,750 , respectively. As of both June 30, 2025 and December 31, 2024, the remaining commitment available under the agreement was $119.4 3,333,333 shares of Common Stock, which is insufficient for us to fully utilize the remaining commitment under the SEPA, given the current market price of our Common Stock.
Note 11 — Derivative Instruments
Public and Private Placement Warrants
As of June 30, 2025, the Company had 18,633,301 Public Warrants and 199,997 Private Placement Warrants outstanding, with fair values of $0.2 million and $2,000 , respectively.
Each Warrant is exercisable to purchase one-thirtieth of one share of Common Stock. The Public Warrants have an exercise price of $345.00 per whole share, subject to adjustments, and will expire on August 20, 2026 or earlier upon redemption or liquidation. The Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants were issued upon separation of the units and only whole Public Warrants trade. The Public Warrants became exercisable; provided that the Company has an effective registration statement under the Securities Act covering the issuance of the Common Stock issuable upon exercise of the Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or the
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Notes to Condensed Consolidated Financial Statements
Unaudited
Company permits holders to exercise their Warrants on a cashless basis under the circumstances specified in the warrant agreement). A registration statement was filed with the SEC covering the issuance of the Common Stock issuable upon exercise of the Warrants, and the Company undertook use its commercially reasonable efforts to maintain the effectiveness of such registration statement and a current prospectus relating to those shares of Common Stock until the Public Warrants expire or are redeemed. If the shares of Common Stock are at the time of any exercise of a Public Warrant not listed on a national securities exchange such that they satisfy 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, it will not be required to file or maintain in effect a registration statement.
The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the Common Stock issuable upon exercise of the Private Placement Warrants were not transferable, assignable or salable until September 19, 2021, subject to certain limited exceptions. Additionally, the Private Placement Warrants will 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 shareholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Redemption of Warrants for cash when the price per share of Common Stock equals or exceeds $540.00 :
At any time that the Warrants are exercisable, the Company may redeem the outstanding Warrants (except as described above with respect to the Private Placement Warrants):
•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 last reported sale price of Common Stock for any 20 trading days within a 30 -trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders (the “Reference Value”) equals or exceeds $540.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations and the like).
The Company will not redeem the Warrants as described above unless a registration statement under the Securities Act covering the issuance of the Common Stock issuable upon exercise of the Warrants is then effective and a current prospectus relating to those Common Stock is available throughout the 30-day redemption period. 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.
Redemption of Warrants for Common Stock when the price per share equals or exceeds $300.00 :
At any time that the Warrants are exercisable, the Company may redeem the outstanding Warrants (including both Public Warrants and Private Placement Warrants):
•in whole and not in part;
•at $0.10 per Warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” of Common Stock;
•if, and only if, the Reference Value equals or exceeds $300.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like); and
•if the Reference Value is less than $540.00 per share (as adjusted), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.
26
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Notes to Condensed Consolidated Financial Statements
Unaudited
The “fair market value” of Common Stock shall mean the average reported last sale price of Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Warrants.
In no event will the Company be required to net cash settle any Warrant. The Warrants may also expire worthless.
Note 12 — Share-Based Compensation
2018 Stock Plan
On November 27, 2018, the Legacy Xos’s board of directors and stockholders adopted the 2018 Stock Plan. There are no shares available for issuance under the 2018 Stock Plan; however, the 2018 Stock Plan continues to govern the terms and conditions of the outstanding awards granted under the 2018 Stock Plan.
As of June 30, 2025, there were 1,211 Options outstanding under the 2018 Stock Plan. The amount and terms of Option grants were determined by the board of directors of Legacy Xos. The Options granted under the 2018 Stock Plan generally expire within 10 years from the date of grant and generally vest over four years , at the rate of 25 % on the first anniversary of the date of grant and ratably on a monthly basis over the remaining 36 -month period thereafter based on continued service.
Stock option activity during the six months ended June 30, 2025 consisted of the following:
| Options | Weighted Average Fair Value Per Share | Weighted Average Exercise Price Per Share | Weighted Average Remaining Years | Aggregate Intrinsic Value | |||||||||||||||||||||||||
December 31, 2024 — Options outstanding | $ | $ | $ | ||||||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||||||||
March 31, 2025 — Options outstanding | $ | $ | $ | ||||||||||||||||||||||||||
Expired or canceled | ( | ( | |||||||||||||||||||||||||||
June 30, 2025 — Options outstanding | |||||||||||||||||||||||||||||
June 30, 2025 — Options vested and exercisable | $ | $ | $ | ||||||||||||||||||||||||||
Aggregate intrinsic value represents the difference between the exercise price of the options and the fair value of the Company’s common stock. The aggregate intrinsic value of options exercised during the three months ended June 30, 2025 and 2024 were approximately $0 and $115 , respectively. The aggregate intrinsic value of options exercised during the six months ended June 30, 2025 and 2024 were approximately $2,351 and $141,000 , respectively.
The Company estimates the grant date fair value of options utilizing the Black-Scholes option pricing model, which is dependent upon several variables, including expected option term, expected volatility of the Company's share price over the expected term, expected risk-free rate and expected dividend yield rate. There were no
2021 Equity Plan
On August 18, 2021 the Company’s stockholders approved the Xos, Inc. 2021 Equity Incentive Plan (the “2021 Equity Plan”), which was ratified by the Company’s board of directors on August 20, 2021. The 2021 Equity Plan provides for the grant of incentive stock options (“ISOs”), within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) to employees, including employees of any parent or subsidiary, and for the grant of non-statutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance awards and other forms of awards to employees, directors and consultants, including employees and consultants of Xos’s affiliates. On June 24, 2024, the Company’s stockholders approved the Xos, Inc. Amended and Restated 2021 Equity Incentive Plan (the “A&R 2021 Equity Plan”) to increase the aggregate number of shares of Common Stock reserved for issuance under the 2021 Equity Plan
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Notes to Condensed Consolidated Financial Statements
Unaudited
by 1,180,819 shares. On June 24, 2025, the Company’s stockholders approved the 2025 Amendment to the Xos, Inc. Amended and Restated 2021 Equity Incentive Plan (the “2025 Amendment”) to increase the aggregate number of shares of Common Stock reserved for issuance under the 2021 Equity Plan by 3,100,000 shares.
As of June 30, 2025, there were 4,183,263 shares of Common Stock available for issuance under the A&R 2021 Equity Plan, as amended.
RSU activity during the six months ended June 30, 2025 consisted of the following:
| RSUs | Weighted Average Grant Date Fair Value | Weighted Average Fair Value | |||||||||||||||
December 31, 2024 — RSU outstanding | $ | $ | |||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ||||||||||||||||
| Forfeited | ( | ||||||||||||||||
March 31, 2025 — RSU outstanding | $ | $ | |||||||||||||||
| Granted | |||||||||||||||||
| Vested | ( | ||||||||||||||||
| Forfeited | ( | ||||||||||||||||
June 30, 2025 — RSU outstanding | $ | $ | |||||||||||||||
The Company recognized stock-based compensation expense (including Earn-out RSUs) in the unaudited condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2025 totaling approximately $1.6 million and $3.1 million, respectively, and June 30, 2024, totaling approximately $1.6 million and $3.6 million, respectively, which consisted of the following (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
Cost of goods sold | $ | $ | $ | $ | ||||||||||||||||||||||
Research and development | ||||||||||||||||||||||||||
Sales and marketing | ||||||||||||||||||||||||||
General and administrative | ||||||||||||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||||||||||||
We allocate stock-based compensation expense to cost of goods sold, research and development expense, sales and marketing expense and general and administrative expense, based on the roles of the applicable recipients of such stock-based compensation. The unamortized stock-based compensation expense was $5.9 million as of June 30, 2025, and weighted average remaining amortization period as of June 30, 2025 was 1.58 years.
The aggregate fair value of RSUs that vested was $1.5 million and $1.8 million during the three and six months ended June 30, 2025, respectively.
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Notes to Condensed Consolidated Financial Statements
Unaudited
Note 13 — Property and Equipment, net
Property and equipment, net consisted of the following at June 30, 2025 and December 31, 2024 (in thousands):
| June 30, 2025 | December 31, 2024 | |||||||||||||
| Equipment | $ | $ | ||||||||||||
| Finance lease assets | ||||||||||||||
| Furniture and fixtures | ||||||||||||||
Company vehicles(1) | ||||||||||||||
| Leasehold improvements | ||||||||||||||
| Computers, software and related equipment | ||||||||||||||
| Property and equipment, gross | ||||||||||||||
Accumulated depreciation | ( | ( | ||||||||||||
Property and equipment, net | $ | $ | ||||||||||||
(1)Amounts include operating lease assets (stepvans and Hubs) for which the Company is a lessor. As of June 30, 2025, gross operating lease assets and accumulated depreciation on operating lease assets were $0.3 million and $0.1 million, respectively. As of December 31, 2024 gross operating lease assets and accumulated depreciation on operating lease assets were $0.4 million and $0.1 million, respectively.
Depreciation expense during the three months ended June 30, 2025 and 2024, totaled $0.6 million and $0.9 million, respectively. Depreciation expense during the six months ended June 30, 2025 and 2024 totaled $1.1 million and $1.8 million, respectively.
Note 14 — Commitments and Contingencies
Legal Contingencies
Legal claims may arise from time to time in the normal course of business, the results of which may have a material effect on the Company’s accompanying unaudited condensed consolidated financial statements. As of June 30, 2025 and December 31, 2024, the Company was not a party to any legal proceedings, that individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company’s results of operations, financial condition or cash flows.
Other Contingencies
Note 15 — Related Party Transactions
The Company has lease agreements with Fitzgerald Manufacturing Partners. The owner of Fitzgerald Manufacturing Partners is a stockholder of the Company. For each of the three months ended June 30, 2025 and 2024, the Company incurred rent expense of $0.2 million and $0.2 million, respectively, related to these agreements. For the six months ended June 30, 2025 and 2024, the Company incurred rent expense of $0.3 million and $0.4 million, respectively, related to these agreements.
During both the three and six months ended June 30, 2025 and 2024, the Company sold zero one 0 0.2
29
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Note 16 — Income Taxes
The Company’s effective tax rate during the three months ended June 30, 2025 and 2024 was (0.17 )% and (0.04 )%, respectively. The Company’s effective tax rate during the six months ended June 30, 2025 and 2024 was (0.14 )% and (0.04 )%, respectively. State taxes coupled with losses not benefited resulted in an effective tax rate below the statutory tax rate of 21% for the six months ended June 30, 2025.
The Company recognizes tax benefits related to positions taken, or expected to be taken, on its tax returns, only if the positions are “more-likely-than-not” sustainable. Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements. The Company does not have any uncertain tax positions that meet this threshold as of June 30, 2025 and December 31, 2024.
The Company is subject to taxation and files income tax returns with the U.S. federal government and various states, as well as Canada and China. The Company is not currently under examination by any tax authorities. The Company generally is not subject to examination for tax years prior to 2020.
30
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Note 17 — Net Loss per Share
Basic and diluted net loss per share during the three and six months ended June 30, 2025 and 2024 consisted of the following (in thousands, except per share amounts):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Net loss attributable to common stockholders, basic | ( | ( | ( | ( | ||||||||||||||||||||||
Net loss attributable to common stockholders, diluted | ( | ( | ( | ( | ||||||||||||||||||||||
Denominator: | ||||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||||
Weighted average common shares outstanding, basic | ||||||||||||||||||||||||||
| Basic net loss per share | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Diluted | ||||||||||||||||||||||||||
Weighted average common shares outstanding, diluted | ||||||||||||||||||||||||||
| Diluted net loss per share | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Potential ending shares outstanding that were excluded from the computation of diluted net loss per share because their effect was anti-dilutive as of June 30, 2025 and 2024 consisted of the following (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
Contingent earn-out shares | ||||||||||||||||||||||||||
Common stock underlying public and private warrants | ||||||||||||||||||||||||||
Restricted stock units | ||||||||||||||||||||||||||
Stock options | ||||||||||||||||||||||||||
If-converted common stock from convertible debt | ||||||||||||||||||||||||||
31
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Notes to Condensed Consolidated Financial Statements
Unaudited
Note 18 — Segment Reporting
The following table presents segment revenue, gross profit (loss), and net loss for the periods presented (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||||||||||||
Cost of goods sold | ||||||||||||||||||||||||||
Gross profit | ||||||||||||||||||||||||||
| less: | ||||||||||||||||||||||||||
| Employee related | ||||||||||||||||||||||||||
Facility and rent | ||||||||||||||||||||||||||
| Insurance | ||||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||||
Professional services | ||||||||||||||||||||||||||
Computer and software as a service | ||||||||||||||||||||||||||
Research and development materials | ||||||||||||||||||||||||||
Other(1) | ||||||||||||||||||||||||||
| Other (income) expense, net | ( | ( | ||||||||||||||||||||||||
| Change in fair value of derivative instruments | ( | |||||||||||||||||||||||||
| Change in fair value of earn-out shares liability | ( | ( | ||||||||||||||||||||||||
| Provision for income taxes | ||||||||||||||||||||||||||
| Segment net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
____________
(1) Other includes $1.9 million of financed equipment lease expense during the six months ended June 30, 2025 and $0 of financed equipment lease expense for the six months ended June 30, 2024, as well as bad debt expense, travel & entertainment, general and administrative freight, property/franchise taxes, and merchant fees.
Note 19 — Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability.
U.S. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As presented in the tables below, this hierarchy consists of three broad levels:
•Level 1: Quoted prices in active markets for identical assets and liabilities.
•Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.
•Level 3: Significant inputs to the valuation model are unobservable and significant to the overall fair value measurement of the assets or liabilities. Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
32
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, other current liabilities, warrants and earn-out shares liability. The fair value of cash, cash equivalents and accounts receivable approximates carrying value due to their short-term maturity.
As required by ASC 820, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. Derivative financial instruments which are required to be measured at fair value on a recurring basis are measured at fair value using Level 3 inputs for all periods presented. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and liabilities carried at fair value on a recurring basis as of June 30, 2025 and December 31, 2024 consisted of the following (in thousands):
June 30, 2025 | |||||||||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Financial Liabilities: | |||||||||||||||||||||||
| Private Placement Warrants | $ | $ | $ | $ | |||||||||||||||||||
| Public Warrants | |||||||||||||||||||||||
| Total Financial Liabilities | $ | $ | $ | $ | |||||||||||||||||||
December 31, 2024 | |||||||||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Financial Liabilities: | |||||||||||||||||||||||
| Private Placement Warrants | $ | $ | $ | $ | |||||||||||||||||||
| Public Warrants | |||||||||||||||||||||||
| Total Financial Liabilities | $ | $ | $ | $ | |||||||||||||||||||
There was no change in the fair value of Level 3 financial liabilities during the three and six months ended June 30, 2025.
____________
Note 20 — Subsequent Events
One Big Beautiful Bill Act
On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The Act modifies various energy credits to accelerate the phase out of these credits. The Act also includes certain changes to the US taxation of foreign activity, including changes to foreign tax credits, Global Intangible Low-Taxed Income (GILTI), Foreign-Derived Intangible Income (FDII), and Base Erosion and Anti-Abuse Tax (BEAT), amongst other changes. These changes are generally effective for tax years beginning after December 31, 2025. These changes were not reflected in the income tax provision for the period ended June 30, 2025, as enactment occurred after the balance sheet date. The Company is currently evaluating the impact on future periods.
Convertible Promissory Note
On August 8, 2025, the Note was amended primarily (i) to provide for payment of Interest Shares with respect to all interest accrued through the initial maturity date, and (ii) to change the scheduled repayment of principal from all at once on August 11, 2025, to spread over ten quarterly installments beginning November 11, 2025 and ending February 11, 2028. The Aljomaih
33
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Amendments provide that, notwithstanding the postponement of maturity of the Note, Interest Shares shall still be issued with respect to all interest accrued through the initial maturity date. The approximately $6.0 million of interest accrued under the Note through August 11, 2025 will be converted into shares of the Company’s common stock at the 10 -day VWAP (as defined in the Note) on August 25, 2025. The first four principal installments are $1.5 million, the fifth through eighth installments are $2.0 million and the final two installments are $3.0 million each; provided that such installments may be increased in the event certain financing activities result in proceeds to the Company in excess of four times the aggregate amount of Note principal payments otherwise required on or prior to any installment date. As a result of the amendment, the classification of the Note has been presented as $4.5 million within current liabilities and $15.5 million within non-current liabilities in the Company’s condensed consolidated financial statements. See Part II, Item 5 - Other Information.
Bancorp Notes Settlement
Pursuant to a Compromise Settlement and Release Agreement, dated as of August 1, 2025 (the “Bancorp Settlement Agreement”), between the Company, The Bancorp, Inc. (“Parent”), and Parent’s affiliate The Bancorp Bank, N.A. (“Bank”), the Company issued 64,043 shares of unregistered common stock (the “Settlement Shares”) to Parent and paid Bank $110,000 in cash to settle approximately $348,000 owed by the Company to Bank under certain vehicle leases extended by the Bank. The Settlement Shares were issued to Parent in reliance on exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D promulgated thereunder. Parent provided the Company with representations, warranties, and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made full information regarding its business and operations available to Parent. There was no general solicitation concerning the offer or sale of the Settlement Shares. Parent acquired the Settlement Shares for its own account, for investment purposes, and not with a view to public resale or distribution thereof within the meaning of the Securities Act.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information which Xos’s management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Report and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”) filed with the SEC on March 31, 2025. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in this Item 2 (including in the sections entitled “Overview” and “Liquidity and Capital Resources” below), in the accompanying unaudited notes to condensed consolidated financial statements in this Report, under the section entitled “Risk Factors” of this Report, and under the heading “Risk Factors” in the 2024 Form 10-K. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we”, “us”, “our”, and “the Company” are intended to mean the business and operations of Xos and its consolidated subsidiaries.
Recent Developments
On August 8, 2025, the Company and Aljomaih amended the Convertible Note primarily (i) to provide for payment of Interest Shares with respect to all interest accrued through the initial maturity date, and (ii) to change the scheduled repayment of principal from all at once on August 11, 2025, to spread over ten quarterly installments beginning November 11, 2025 and ending February 11, 2028. See Part II, Item 5 — Other Information of this Report. Management plans to continue to seek opportunities to reduce costs and, in particular, cash expenditures, in a manner intended to minimize their adverse impact on our core operations. However, there can be no assurance that the measures described above, or any other cost-cutting measures we may implement in the future, will be sufficient to address our immediate or longer-term liquidity and working capital needs.
Key Factors Affecting Operating Results
We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed in this Report.
Successful Commercialization of our Products and Services
We expect to derive future revenue from sales of our vehicles, battery systems and other product and service offerings. As many of these products are in development, we will require substantial additional capital to continue developing our products and services and bring them to full commercialization as well as fund our operations for the foreseeable future. Until we can generate sufficient revenue from product sales, we expect to finance a substantial portion of our operations through commercialization and production and any future capital raising efforts. The amount and timing of our future funding requirements, if any, will depend on many factors, including the pace and results of our commercialization efforts.
Customer Demand
We have sold a limited number of our vehicles to our existing customers, have agreements with future customers and have received interest from other potential customers. The sales of our vehicles and services to our existing and future customers will be an important indicator of our performance.
Supply Chain Disruptions
While our ability to source certain critical inventory items has been steadily improving, we are still experiencing long-standing negative effects from global economic conditions, and management expects such effects to continue to varying degrees for the foreseeable future. We have also observed, and expect to be impacted by, sporadic and unpredictable shortages for specific components, primarily in power electronics and harnesses, and disruptions to the supply of components.
Fluctuating tariff regimes—particularly those targeting imports of power electronics, battery components, and structural materials—have introduced significant volatility in the Company’s cost structure and procurement planning. The uncertainty around tariff implementation timelines and scope has necessitated frequent adjustments to sourcing strategies, supplier selection, and contract terms.
To mitigate these impacts, the Company has undertaken the following measures:
•diversification of supply base to include alternate suppliers in tariff-exempt or trade-friendly regions;
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•renegotiation of pricing and delivery terms to account for tariff exposure and cost passthroughs;
•reclassification and compliance reviews to ensure correct HTS codes and leverage tariff exemptions or reduced duty programs, where applicable; and
•strategic stockpiling of high-risk components to reduce exposure to near-term tariff hikes.
We have been closely monitoring potential changes to trade policies and tariffs in order to proactively adjust and refine our strategy. These actions are aimed at preserving cost competitiveness and securing uninterrupted supply amid a fluid and unpredictable trade policy environment. Notwithstanding these efforts, the ongoing tariffs and regulatory changes may affect our ability to source components from specific regions or maintain access to critical suppliers.
Overview
We are a leading fleet electrification solutions provider committed to the decarbonization of commercial transportation. We design and manufacture Classes 5 through 8 battery-electric commercial vehicles that travel on last-mile, back-to-base routes of up to 200 miles per day. We also offer, through Xos Energy Solutions™, mobile and fixed charging infrastructure products, such as the Xos Hub, and have from time to time offered services to support electric vehicle fleets. Our proprietary fleet management software, Xosphere™, integrates vehicle operation and vehicle charging to provide commercial fleet operators a more seamless and cost-efficient vehicle ownership experience than traditional internal combustion engine counterparts. We developed the X-Platform (our proprietary, purpose-built vehicle chassis platform) and high-voltage architecture with a focus on the medium-duty commercial vehicle segment and, in particular, last-mile commercial fleet operations.
Our X-Platform provides modular features that allow us to accommodate a wide range of last-mile applications and enable us to offer clients vehicles at a lower total cost of ownership compared to traditional diesel fleets. The X-Platform was engineered to be modular in nature to allow fleet operators to customize their vehicles to fit their commercial applications (e.g., upfitting with a specific vehicle body and/or tailoring battery range).
Through our Powered by Xos™ business we also provide mix-use powertrain solutions for off-highway, industrial and other specialty vehicles, such as forklifts, school buses, medical and dental clinics, blood donation vehicles, and mobile command vehicles. Our powertrain offerings encompass a broad range of solutions, including high-voltage batteries, power distribution and management componentry, battery management systems, system controls, inverters, electric traction motors and auxiliary drive systems.
Xos Energy Solutions™ is our charging infrastructure business through which we offer mobile and stationary multi-application chargers, including the Xos Hub, and mobile energy storage to accelerate transitions to electric fleets by maximizing incentive capture and reducing implementation lead times and costs.
We have also developed a fleet management platform called Xosphere™ that interconnects vehicle, maintenance, charging, and service data. The Xosphere™ is aimed at minimizing electric fleet total cost of ownership through fleet management integration. This comprehensive suite of tools allows fleet operators to monitor vehicle and charging performance in real-time with in-depth telematics; reduce charging cost; optimize energy usage; and manage maintenance and support with a single software tool.
During the three months ended June 30, 2025, we delivered 128 vehicles, 3 Hubs and 4 powertrains. During the three months ended June 30, 2024, we delivered 78 vehicles, 4 Hubs and 8 powertrains. During the three months ended June 30, 2025, we generated $17.1 million in revenue (or 93% of revenue) in vehicle sales, $0.9 million (or 5% of revenue) in powertrain and Hub sales, $0.2 million (or 1% of revenue) in other product revenue, and $0.2 million (or 1% of revenue) in ancillary revenue. During the three months ended June 30, 2024, we generated $13.1 million in revenue (or 85% of revenue) from vehicle sales, $1.4 million (or 9% of revenue) in powertrain and Hub sales, $0.6 million (or 4% of revenue) in other product revenue, and $0.3 million (or 2% of revenue) from ancillary revenue.
During the six months ended June 30, 2025, we delivered 150 vehicles, 8 Hubs and 6 powertrains. During the six months ended June 30, 2024, we delivered 138 vehicles, 4 Hubs and 10 powertrains. During the six months ended June 30, 2025, we generated $20.7 million in revenue (or 85% of revenue) in vehicle sales, $2.5 million (or 10% of revenue) in powertrain and Hub sales, $0.6 million (or 3% of revenue) in other product revenue, and $0.5 million (or 2% of revenue) in ancillary revenue. During the six months ended June 30, 2024, we generated $24.7 million in revenue (or 86% of revenue) from vehicle sales, $1.8 million (or 6% of revenue) in powertrain and Hub sales, $1.3 million (or 4% of revenue) in other product revenue, and $0.9 million (or 3% of revenue) from ancillary revenue.
We believe our growth in the coming years will be supported by the growth of e-commerce and last-mile delivery, and will depend in part on regulatory and consumer interest in reducing the impacts of climate change. E-commerce continues to grow
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rapidly and has been accelerated by changes in consumer purchasing behavior as a result of the COVID-19 pandemic. Commercial trucks are the largest emitters of greenhouse gasses per capita in the transportation industry. Although there can be no assurance such goals will be maintained, the U.S. federal, state and foreign governments, along with corporations such as FedEx, UPS and Amazon, have set ambitious goals to reduce greenhouse gas emissions. We believe regulation relating to commercial vehicles, sustainability initiatives from leading financial and corporate institutions and growth of last-mile logistics will be important factors in establishing the level of demand for, and adoption of, our products worldwide.
Xos is an early-stage growth company, and as such has incurred net losses and cash outflows since its inception. As an early-stage growth company, the Company's ability to access capital is critical. However, there can be no assurance such capital will be available to the Company when needed, on favorable terms or at all. If we are unable to collect on our outstanding accounts receivable, obtain a sufficient level of new capital in the near-term and/or obtain replacement financing for or extend the maturity of existing debt, we could be required to dissolve and liquidate our assets under bankruptcy laws or otherwise.
As an early-stage growth company, we have incurred net losses and cash outflows since our inception. We will continue to incur net losses and cash outflows in accordance with our operating plan as we continue to scale our operations to meet anticipated demand and seek to establish our product and service offerings. As a result, our ability to access capital is critical and until we can generate sufficient revenue to cover our operating expenses, working capital and capital expenditures, we will need to raise additional capital in order to fund and scale our operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our commercialization, research and development programs and/or other efforts and our ability to continue our operations would be negatively impacted. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all. In addition, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our unaudited condensed consolidated financial statements and/or seek protection under Chapters 7 or 11 of the United States Bankruptcy Code. This could potentially cause us to cease operations and result in a complete or partial loss of your investment in our Common Stock.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Xos and its wholly owned subsidiaries, Xos Fleet, Inc. and Xos Services, Inc. (f/k/a Rivordak, Inc.), as well as the entities acquired pursuant to the Arrangement with ElectraMeccanica. All significant intercompany accounts and transactions have been eliminated in consolidation. All long-lived assets are maintained in, and all losses are attributable to, the United States.
Currently, we conduct business through one operating segment. We are an early-stage growth company with minimal commercial operations and our activities to date have been conducted primarily within North America. For more information about our basis of operations, refer to Note 1 - Description of Business in the accompanying unaudited notes to condensed consolidated financial statements for more information.
Components of Results of Operations
Revenues
To date, we have primarily generated revenue from the sale of electric step vans, stripped chassis vehicles and battery systems. Our stripped chassis is our vehicle offering that consists of our X-Platform electric vehicle base and battery systems, which customers can upfit with their preferred vehicle body. As we continue to expand our commercialization, we expect our revenue to come from these products and other vehicle offerings including chassis cabs, which will feature our chassis and powertrain with the inclusion of a proprietary designed cab, and tractors, a shortened version of the chassis cab designed to haul trailers (also known as “day cabs”), that travel in last-mile use cases. Through Xos Energy Solutions™, we have provided charging infrastructure, including our Xos Hub, as well as certain energy services. In addition, we offer Xosphere™, our fleet management platform.
Revenue consists of product sales, inclusive of shipping and handling charges, net of estimates for customer allowances, service offerings, and leasing. Revenue is measured as the amount of consideration we expect to receive in exchange for delivering products. All revenue is recognized when we satisfy the performance obligations under the contract. We recognize revenue by delivering the promised products to the customer, with the revenue recognized at the point in time the customer takes control of the products. For shipping and handling charges, revenue is recognized at the time the products are delivered to or picked up by the customer. For operating leases which are accounted for under ASC 842, Leases, revenue is recognized on a straight-line basis over the term of the lease agreement. The majority of our current contracts have a single performance obligation, which is met at the point in time that the product is delivered, and title passes, to the customer, and are short term in nature.
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Revenue also consists of sales-type leases which are accounted for under ASC 842, Leases. Revenue is the lower of the fair value of the asset leased or the present value of the lease receivable and prepayments.
We also earn tradable credits in the operation of our automotive business under various regulations related to emission reduction, clean fuel, and others. We sell these credits to other regulated entities who can use the credits to comply with emission standards and other regulatory requirements. We recognize revenue on the sale of these credits, which have negligible incremental costs associated with them, at the time control of the regulatory credit is transferred to the purchasing party.
Cost of Goods Sold
Cost of goods sold includes materials and other direct costs related to production of our vehicles, including components and parts, batteries, direct labor costs and manufacturing overhead, among others. Cost of goods sold also includes material and other direct costs related to the production and assembly of powertrains and battery packs as well as materials and other costs incurred related to charging infrastructure installation. Materials include inventory purchased from suppliers, as well as assembly components that are assembled by company personnel, including allocation of stock-based compensation expense. Direct labor costs relate to the wages of those individuals responsible for the assembly of vehicles, powertrain units, Hubs and batteries delivered to customers. Cost of goods sold also includes depreciation expense on property and equipment related to cost of goods sold activities, calculated over the estimated useful life of the property and equipment on a straight-line basis. Upon property and equipment retirement or disposal, the cost of the asset disposed, and the related accumulated depreciation from the accounts and any gain or loss is reflected in the unaudited condensed consolidated statements of operations and comprehensive loss, allocated to cost of goods sold.
Cost of goods sold includes reserves for estimated warranty expenses as well as reserves for estimated returns of vehicles. Additionally, cost of goods sold includes adjustments for the results of physical inventory counts. Cost of goods sold also includes reserves to write down the carrying value of our inventory to their net realizable value and to provide for any excess or obsolescence.
We are continuing to undertake efforts to find more cost-effective vendors and sources of parts and raw materials to lower our overall cost of production.
General and Administrative Expense
General and administrative (“G&A”) expense consists of personnel-related expenses, outside professional services, including legal, audit and accounting services, as well as expenses for facilities, non-sales related travel, and general office supplies and expenses. Personnel-related expenses consist of salaries, benefits, allocations of stock-based compensation, and associated payroll taxes. Overhead items including rent, insurance, utilities, and other items are included in G&A expense. G&A expense also includes depreciation expense on property and equipment related to G&A activities, calculated over the estimated useful life of the property and equipment on a straight-line basis. Upon property and equipment retirement or disposal, the cost of the asset disposed, and the related accumulated depreciation from the accounts and any gain or loss is reflected in the unaudited condensed consolidated statements of operations and comprehensive loss, allocated to G&A.
Research and Development Expense
Research and development (“R&D”) expense consists primarily of costs incurred for the design and development of our vehicles and battery systems, which include:
•payroll expense for employees primarily engaged in R&D activities, including allocation of stock-based compensation expense;
•expenses related to licenses and subscriptions of software utilized in R&D activities;
•fees paid to third-parties such as consultants and contractors for engineering and computer-aided design work on vehicle designs and other third-party services; and
•expenses related to materials and, supplies consumed in the development and modifications to existing vehicle designs, new vehicle designs contemplated for additional customer offerings, and our battery pack design
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Sales and Marketing Expense
Sales and marketing (“S&M”) expense consists primarily of expenses related to our marketing of vehicles and brand initiatives, which includes:
•payroll expense for employees primarily engaged in S&M activities, including allocation of stock-based compensation expense; and
•web design, marketing and promotional items, and consultants who assist in the marketing of the Company and its products and services;
Other Expense, Net
Other expense, net primarily includes interest expense for our equipment leases and interest expense related to our financing obligations, including the amortization for debt discount and issuance costs, partially offset by income from the sublease of our Los Angeles, California, office space.
Change in Fair Value of Derivative Instruments
Change in fair value of derivative instruments relates to Common Stock warrant liability assumed as part of the Business Combination. Changes in the fair value relate to remeasurement of our Public and Private Placement Warrants to fair value as of any respective exercise date and as of each subsequent balance sheet date and mark-to-market adjustments for these derivative liabilities each measurement period.
Change in Fair Value of Contingent Earn-out Shares Liability
The contingent earn-out shares liability was established as part of the Business Combination. Changes in the fair value relate to remeasurement to fair value as of each subsequent balance sheet date.
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Results of Operations
Comparison of the Three and Six Months Ended June 30, 2025 and 2024
The following table sets forth our historical operating results for the periods indicated:
For the Three Months Ended June 30, | ||||||||||||||||||||||||||
(dollars in thousands) | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||
| Revenues | $ | 18,393 | $ | 15,535 | $ | 2,858 | 18 | % | ||||||||||||||||||
| Cost of goods sold | 16,774 | 13,505 | 3,269 | 24 | % | |||||||||||||||||||||
Gross profit | 1,619 | 2,030 | (411) | (20) | % | |||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||
General and administrative | 5,906 | 9,176 | (3,270) | (36) | % | |||||||||||||||||||||
Research and development | 2,087 | 2,998 | (911) | (30) | % | |||||||||||||||||||||
Sales and marketing | 707 | 1,224 | (517) | (42) | % | |||||||||||||||||||||
Total operating expenses | 8,700 | 13,398 | (4,698) | (35) | % | |||||||||||||||||||||
Loss from operations | (7,081) | (11,368) | 4,287 | (38) | % | |||||||||||||||||||||
Other expense, net | (405) | 1,545 | (1,950) | (126) | % | |||||||||||||||||||||
| Change in fair value of derivative instruments | (6) | 128 | (134) | (105) | % | |||||||||||||||||||||
| Change in fair value of earn-out shares liability | — | 36 | (36) | (100) | % | |||||||||||||||||||||
Loss before provision for income taxes | (7,492) | (9,659) | 2,167 | (22) | % | |||||||||||||||||||||
Provision for income taxes | 13 | 4 | 9 | 225 | % | |||||||||||||||||||||
Net Loss | $ | (7,505) | $ | (9,663) | $ | 2,158 | (22) | % | ||||||||||||||||||
For the Six Months Ended June 30, | ||||||||||||||||||||||||||
(dollars in thousands) | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||
| Revenues | $ | 24,272 | $ | 28,697 | $ | (4,425) | (15) | % | ||||||||||||||||||
| Cost of goods sold | 21,442 | 23,879 | (2,437) | (10) | % | |||||||||||||||||||||
Gross profit | 2,830 | 4,818 | (1,988) | (41) | % | |||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||
General and administrative | 13,802 | 18,135 | (4,333) | (24) | % | |||||||||||||||||||||
Research and development | 4,017 | 6,072 | (2,055) | (34) | % | |||||||||||||||||||||
Sales and marketing | 1,361 | 2,222 | (861) | (39) | % | |||||||||||||||||||||
Total operating expenses | 19,180 | 26,429 | (7,249) | (27) | % | |||||||||||||||||||||
Loss from operations | (16,350) | (21,611) | 5,261 | (24) | % | |||||||||||||||||||||
Other expense, net | (1,256) | 961 | (2,217) | (231) | % | |||||||||||||||||||||
| Change in fair value of derivative instruments | (60) | (40) | (20) | 50 | % | |||||||||||||||||||||
| Change in fair value of earn-out shares liability | — | 33 | (33) | (100) | % | |||||||||||||||||||||
Loss before provision for income taxes | (17,666) | (20,657) | 2,991 | (14) | % | |||||||||||||||||||||
Provision for income taxes | 25 | 9 | 16 | 178 | % | |||||||||||||||||||||
Net Loss | $ | (17,691) | $ | (20,666) | $ | 2,975 | (14) | % | ||||||||||||||||||
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Revenues
Our total revenues increased by $2.9 million, or 18%, from $15.5 million in the three months ended June 30, 2024 to $18.4 million in the three months ended June 30, 2025, primarily driven by an increase in unit sales offset by a decrease in average selling price resulting from product mix. During the three months ended June 30, 2025, we sold 128 vehicles, 3 Hubs and 4 powertrains, compared to 78 vehicles, 4 Hubs and 8 powertrains during the three months ended June 30, 2024.
Our total revenues decreased by $4.4 million, or 15%, from $28.7 million in the six months ended June 30, 2024 to $24.3 million in the six months ended June 30, 2025, primarily driven by product mix, resulting in a decrease in average selling price. During the six months ended June 30, 2025, we sold 150 vehicles, 8 Hubs and 6 powertrains, compared to 138 vehicles, 4 Hubs, and 10 powertrains during the six months ended June 30, 2024.
Revenue for the three months ended June 30, 2025 and 2024 consisted of the following (dollars in thousands):
Three Months Ended June 30, | ||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change (6) | |||||||||||||||||||||||
| Product and service revenue | ||||||||||||||||||||||||||
Stepvans & vehicle incentives | $ | 17,087 | $ | 13,146 | $ | 3,941 | 30 | % | ||||||||||||||||||
Powertrains & Hubs | 930 | 1,423 | (493) | (35) | % | |||||||||||||||||||||
Other product revenue | 152 | 642 | (490) | (76) | % | |||||||||||||||||||||
| Total product revenue | 18,169 | 15,211 | 2,958 | 19 | % | |||||||||||||||||||||
Ancillary revenue | 224 | 324 | (100) | (31) | % | |||||||||||||||||||||
| Total revenues | $ | 18,393 | $ | 15,535 | $ | 2,858 | 18 | % | ||||||||||||||||||
Revenue for the six months ended June 30, 2025 and 2024 consisted of the following (dollars in thousands):
Six Months Ended June 30, | ||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change (6) | |||||||||||||||||||||||
| Product and service revenue | ||||||||||||||||||||||||||
Stepvans & vehicle incentives | $ | 20,671 | $ | 24,731 | $ | (4,060) | (16) | % | ||||||||||||||||||
Powertrains & Hubs | 2,522 | 1,845 | 677 | 37 | % | |||||||||||||||||||||
Other product revenue | 619 | 1,270 | (651) | (51) | % | |||||||||||||||||||||
| Total product revenue | 23,812 | 27,846 | (4,034) | (14) | % | |||||||||||||||||||||
Ancillary revenue | 460 | 851 | (391) | (46) | % | |||||||||||||||||||||
| Total revenues | $ | 24,272 | $ | 28,697 | $ | (4,425) | (15) | % | ||||||||||||||||||
We may encounter additional pressure on our loss from operations in the second half of 2025, due to changes in our expected product mix and increased expected costs due to tariffs on parts and commodities we use in the manufacture of our products.
Cost of Goods Sold
Cost of goods sold increased by $3.3 million, or 24%, from $13.5 million in the three months ended June 30, 2024 to $16.8 million in the three months ended June 30, 2025. The increase in cost of goods sold is directly attributable to the increase in our product revenue and associated increases of (i) $3.6 million in direct materials (ii) $0.4 million for warranty reserve and (iii) $0.2 million in direct labor, manufacturing overhead, and freight. These increases were offset by decreases of (i) $0.7 million related to reductions in inventory reserves and associated write-downs to net realizable value and (ii) $0.2 million less in unfavorable physical inventory count and other adjustments.
The changes in direct labor encompasses employee labor costs. The changes in direct labor, manufacturing overhead and direct material costs are driven by changes in units sold. A significant portion of the overhead costs incurred include freight, indirect salaries, facility rent, utilities, and depreciation of production equipment, which are primarily fixed in nature and allocated based on production levels. Accordingly, these costs increase correspondingly with an increase in production volume and units sold.
Cost of goods sold decreased by $2.4 million, or 10%, from $23.9 million in the six months ended June 30, 2024 to $21.4 million in the six months ended June 30, 2025. The decrease in cost of goods sold is attributable to a change in product
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mix resulting in decreases of (i) $1.6 million in direct materials, (ii) $0.7 million related to reductions in inventory reserves and associated write-downs to net realizable value, (iii) $0.5 million in direct labor, manufacturing overhead, and freight, and (iv) $0.4 million for dealer return reserves. These decreases were offset by increases of (i) $0.5 million for warranty reserve and (ii) $0.3 million in unfavorable physical inventory count and other adjustments .
General and Administrative
General and administrative expenses decreased by $3.3 million, or 36%, from $9.2 million in the three months ended June 30, 2024 to $5.9 million in the three months ended June 30, 2025, attributable to decreases of (i) $1.6 million in headcount and personnel costs for legal, finance, accounting, information technology and general and administrative functions, including stock-based compensation expense, (ii) $0.3 million in depreciation expense, (iii) $0.8 million in other operating expenses including travel, recruiting, and computer software costs, (iv) $0.4 million in professional fees, (v) $0.1 million in insurance expense and (vi) $0.1 million in facility costs.
General and administrative expenses decreased by $4.3 million, or 24%, from $18.1 million in the six months ended June 30, 2024 to $13.8 million in the six months ended June 30, 2025, attributable to decreases of (i) $3.8 million in headcount and personnel costs for legal, finance, accounting, information technology and general and administrative functions, (ii) $1.1 million in other operating expenses including travel, recruiting, and computer software costs, (iii) $0.7 million in depreciation expense due to the allocation of less overhead costs, (iv) $0.4 million in stock-based compensation expense due to decreased headcount, (v) $0.4 million in professional fees and (vi) $0.1 million in insurance expense. These decreases were offset by increases of (i) $1.9 million in financed equipment lease expense with no such comparable expense for the six months ended June 30, 2024 and (ii) $0.3 million in facility costs.
Research and Development
Research and development expenses decreased by $0.9 million, or 30%, from $3.0 million in the three months ended June 30, 2024 to $2.1 million in the three months ended June 30, 2025. The change was primarily due to decreases of (i) $0.9 million in allocation of personnel costs, including stock-based compensation expense, driven by lower headcount in engineering.
Research and development expenses decreased by $2.1 million, or 34%, from $6.1 million in the six months ended June 30, 2024 to $4.0 million in the six months ended June 30, 2025. The change was primarily due to decreases of (i) $1.5 million in allocation of personnel costs, including stock-based compensation expense, driven by lower headcount in engineering, (ii) $0.4 million in other research and development costs, including consulting and software and (iii) $0.2 million in equipment and material purchases due to fewer research and development projects in development year over year.
Sales and Marketing
Sales and marketing expense decreased by $0.5 million, or 42%, from $1.2 million in the three months ended June 30, 2024 to $0.7 million in the three months ended June 30, 2025. The change was primarily due to decreases of (i) $0.4 million in allocation of personnel costs, including stock-based compensation expense, driven by lower headcount and (ii) $0.1 million in other sales and marketing expenses such as customer accommodation payments and sales events.
Sales and marketing expense decreased by $0.8 million, or 39%, from $2.2 million in the six months ended June 30, 2024 to $1.4 million in the six months ended June 30, 2025. The change was primarily due to decreases of (i) $0.6 million in allocation of personnel costs, including stock-based compensation expense, driven by lower headcount and (ii) $0.2 million in other sales and marketing expenses such as customer accommodation payments and sales events.
Other Expense, net
Other expense, net increased by $1.9 million, from income of $1.5 million in the three months ended June 30, 2024 to an expense of $0.4 million in the three months ended June 30, 2025. The change was attributable to $2.1 million in other income from the duty drawback receivable during the three months ended June 30, 2024 with no such comparable income for the three months ended June 30, 2025. This was offset by an increase of $0.2 million in other income primarily due to sublease income.
Other expense, net increased by $2.3 million, from income of $1.0 million in the six months ended June 30, 2024 to an expense of $1.3 million in the six months ended June 30, 2025. The change was attributable to (i) $2.1 million in other income from duty drawback receivable for the six months ended June 30, 2024 with no such comparable income for the three months ended June 30, 2025 and (ii) increases of $0.4 in impairment on assets held for sale. This was offset by an increase of $0.2 million in other income primarily due to sublease income.
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Change in Fair Value of Derivatives
The loss on the change in fair value of derivative instruments increased by $0.1 million, or 105%, from a gain of $0.1 million in the three months ended June 30, 2024 to a loss of $6,000 in the three months ended June 30, 2025. The change in fair value in both periods is primarily attributable to the change in our stock price and the resulting valuation at the respective reporting period.
The loss on the change in fair value of derivative instruments increased by $20,000, or 50%, from $40,000 in the six months ended June 30, 2024 to $60,000 in the six months ended June 30, 2025. The change in fair value in both periods is primarily attributable to the change in our stock price and the resulting valuation at the respective reporting period.
Change in Fair Value of Contingent Earn-out Interests Liability
The gain on the change in fair value of contingent earn-out shares liability decreased by $36,000 from $36,000 in the three months ended June 30, 2024 to $0 in the three months ended June 30, 2025. The change in fair value in both periods is primarily attributable to the change in our stock price and the resulting valuation at the respective reporting period.
The gain on the change in fair value of contingent earn-out shares liability decreased by $33,000 from $33,000 in the six months ended June 30, 2024 to $0 in the six months ended June 30, 2025. The change in fair value in both periods is primarily attributable to the change in our stock price and the resulting valuation at the respective reporting period.
Provision for Income Taxes
The Company recorded income tax provision of $13,000 and $4,000 during the three months ended June 30, 2025 and 2024, respectively.
The Company recorded income tax provision of $25,000 and $9,000 during the six months ended June 30, 2025 and 2024, respectively.
Liquidity and Capital Resources
General
As of June 30, 2025, our principal sources of liquidity were our cash and cash equivalents of $8.8 million and an accumulated deficit of approximately $221.1 million. Our short-term uses of cash are for working capital and to pay the principal of our indebtedness. During the three months ended June 30, 2025, we incurred a net loss of approximately $7.5 million and had net cash used in operating activities of $0.1 million.
Under ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern (“ASC 205-40”), we have the responsibility to evaluate whether conditions and/or events raise substantial doubt about our ability to meet our future financial obligations as they become due within one year of the financial statements included elsewhere in this Report. The result of our ASC 205-40 analysis, due to uncertainties discussed below, is that there is substantial doubt about our ability to continue as a going concern through the next 12 months from the date of the unaudited condensed consolidated financial statements in this Report.
As an early-stage growth company, we have incurred net losses and cash outflows since our inception. We will continue to incur net losses and cash outflows in accordance with our operating plan as we continue to scale our operations to meet anticipated demand and seek to establish our product and service offerings. As a result, our ability to access capital is critical and until we can generate sufficient revenue to cover our operating expenses, working capital and capital expenditures, we will need to raise additional capital in order to fund and scale our operations. These conditions and events raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial information does not include any adjustment that may result from the outcome of this uncertainty.
In response to these conditions, we are currently evaluating different strategies to obtain the required funding for future operations. We have plans to secure and intend to employ various strategies to raise additional capital, which may include the SEPA (as defined below) as well as other capital raising strategies such as debt financing (which may include asset-based lending and/or receivable financing), other non-dilutive financing and/or equity financing. However, our access to the SEPA is not available as of the date of this Report and will not be available unless and until a post-effective amendment to the Registration Statement on Form S-1 filed on July 27, 2023, is filed and declared effective and other applicable conditions are met. Moreover, unless extended by mutual agreement of the parties, the SEPA is scheduled to expire on February 11, 2026. Our
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ability to access other capital when needed is not assured and, if capital is not available to us when, and in the amounts needed, we could be required to delay, scale back or abandon some or all of our development programs and other operations, which could materially harm our business, prospects, financial condition and operating results.
Global general economic and political conditions, such as inflation, tariffs (or the threat of tariffs), uncertain credit and global financial markets, supply chain disruption, international currency fluctuations, and geopolitical events have had and could continue to have an adverse impact in our ability to raise additional funds. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our commercialization, research and development programs and/or other efforts and our ability to continue our operations would be negatively impacted. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all. In addition, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our unaudited condensed consolidated financial statements and/or seek protection under Chapters 7 or 11 of the United States Bankruptcy Code. This could potentially cause us to cease operations and result in a complete or partial loss of your investment in our Common Stock.
Standby Equity Purchase Agreement
On March 23, 2022, we entered into a Standby Equity Purchase Agreement with YA II PN, Ltd. (“Yorkville”), which was subsequently amended on June 22, 2023 (as amended, the "SEPA"), whereby we have the right, but not the obligation, to sell to Yorkville up to $125.0 million of our shares of Common Stock at our request any time until February 11, 2026, subject to certain conditions. As of June 30, 2025, the remaining commitment available under the SEPA was $119.4 million. However, our ability to access the remaining commitment amount may be limited by various factors, including, but not limited to, the availability of an effective registration statement permitting the resale of such shares of Common Stock. In particular, the Company’s access to capital under the SEPA is not available as of the date of this Report and will not be available until the Company files with the SEC a post-effective amendment to the applicable Registration Statement. Moreover, such registration statement only registers the resale of 3,333,333 shares of Common Stock, which is insufficient for us to fully utilize the remaining commitment under the SEPA, given the current market price of our Common Stock. Furthermore, unless extended by mutual agreement of the parties, the SEPA is scheduled to expire on February 11, 2026. We used the net proceeds received from sales of Common Stock pursuant to the SEPA for working capital and general corporate purposes and expect similar uses of any remaining proceeds going forward. See Note 9 — Convertible Notes and Note 10 — Equity — Standby Equity Purchase Agreement in the accompanying unaudited condensed consolidated financial statements for more information regarding the SEPA.
Cash Flow Data
The following table provides a summary of cash flow data for the six months ended June 30, 2025 and 2024 (in thousands):
Six Months Ended June 30, | ||||||||||||||||||||||||||
2025 | 2024 | |||||||||||||||||||||||||
| Net cash used in operating activities | $ | (111) | $ | (40,576) | ||||||||||||||||||||||
Net cash provided by investing activities | — | 51,199 | ||||||||||||||||||||||||
Net cash used in financing activities | (2,100) | (1,577) | ||||||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents and restricted cash | $ | (2,211) | $ | 9,046 | ||||||||||||||||||||||
Cash Flow from Operating Activities
Our cash flow from operating activities is significantly affected by the growth of our business. Our operating cash flow is also affected by our working capital needs to support growth in inventory and fluctuations in accounts receivable, accounts payable and other current assets and liabilities.
Net cash used in operating activities was $0.1 million for the six months ended June 30, 2025, primarily consisting of a cash-basis net loss of $13.1 million from normal operations of the Company (after non-cash adjustments of $4.6 million), partially offset by favorable net working capital changes of $13.0 million, primarily driven by lower accounts receivable due to collections, inventories due to improved inventory turns and other liabilities, partially offset by lower accounts payable and higher prepaid expenses and other current assets.
Net cash used in operating activities was $40.6 million for the six months ended June 30, 2024, primarily consisting of a cash-basis net loss of $13.6 million from normal operations of the Company (after non-cash adjustments of $7.0 million), further
44
driven by unfavorable net working capital changes of $26.9 million, primarily driven by higher accounts receivable and inventory.
Cash Flow from Investing Activities
Net cash provided by investing activities was $0 for the six months ended June 30, 2025.
Net cash provided by investing activities was $51.2 million for the six months ended June 30, 2024, due to net cash acquired in connection with the acquisition of ElectraMeccanica, partially offset by property and equipment purchases of $0.2 million.
Cash Flow from Financing Activities
Net cash used in financing activities was $2.1 million for the six months ended June 30, 2025, which primarily related to (i) net short-term insurance financing note activity of $0.2 million, (ii) equipment lease principal payments of $1.2 million and (iii) taxes paid relating to net-settlement of stock-based awards of $0.7 million.
Net cash used in financing activities was $1.6 million for the six months ended June 30, 2024, primarily related to (i) equipment lease principal payments of $1.2 million and (ii) taxes paid relating to net-settlement of stock-based awards of $0.8 million. This was partially offset by proceeds from net short-term insurance financing note activity of $0.3 million.
Management plans to continue to seek opportunities to reduce costs and, in particular, cash expenditures, in a manner intended to minimize their adverse impact on our core operations. However, there can be no assurance that the measures described above, or any other cost-cutting measures we may implement in the future, will be sufficient to address our immediate or longer-term liquidity and working capital needs.
Contractual Obligations and Commitments
We did not have any material contractual obligations or other commitments as of June 30, 2025, other than as disclosed in the 2024 Form 10-K, and in Note 14 - Commitments and Contingencies.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined under the applicable rules and regulations of the SEC.
Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenues and expenses during the reporting periods. Our most significant estimates and judgments involve inventory valuation, incremental borrowing rates for assessing operating and financing lease liabilities, useful lives of property and equipment, earn-out shares liability, stock-based compensation, common stock warrant liability, product warranty liability and valuations utilized in connection with acquisitions. We base our estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to our financial statements.
There were no material changes in our critical accounting policies from those disclosed in our 2024 Form 10-K.
Recent Accounting Pronouncements
See Note 2 — Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements to our unaudited condensed consolidated financial statements included in this filing for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company (as defined in Item 10(f)(1) of Regulation S-K), we are not required to provide the information under this Item.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Principal Executive Officer and Principal Financial Officer carried out evaluations of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2025. Based upon each of their evaluations, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective at the reasonable assurance level for the three months ended June 30, 2025, due to the material weaknesses in our internal control over financial reporting discussed below.
Management’s Annual Report on Internal Controls over Financial Reporting
Management is responsible for designing, implementing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management, including the Chief Executive Officer and Chief Financial Officer, recognizes that our disclosure controls or our internal control over financial reporting cannot prevent or detect all possible instances of errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2025 and, in making this assessment, used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Because of the material weaknesses described below, our management believes that, as of June 30, 2025, our internal control over financial reporting was not effective based on those criteria.
Material Weaknesses in Internal Controls Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Accordingly, a material weakness increases the risk that the financial information we report contains material errors. If we fail to remediate these material weaknesses, determine that our internal controls over financial reporting are not effective, discover areas that need improvement in the future or discover additional material weaknesses, these shortcomings could have an adverse effect on our business and financial results, and the price of our Common Stock could be negatively affected.
As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, during the financial reporting close process, management identified material weaknesses in the design and operation of the Company’s internal controls over financial reporting related to three areas, specifically, inventory management, revenue recognition, and information technology (IT) general controls. We believe these material weaknesses were caused by turnover of accounting, operations and IT positions within the Company’s organization, resulting in the inability of Company accounting personnel who have recently assumed new and additional responsibilities, to identify, evaluate and address technical accounting and disclosure matters that affect our annual and interim unaudited condensed consolidated financial statements on a timely basis. Due to Management’s efforts to reduce costs and preserve liquidity, the Company was not able to develop and retain sufficient resources to fulfill internal control responsibilities, resulting in the lack of a sufficient complement of personnel with an appropriate degree of knowledge and experience. Management has determined that these deficiencies are related to insufficient internal resources in technical accounting and financial reporting impacting our internal control over financial reporting for the year ended December 31, 2024 and the quarters ended March 31, 2025 and June 30, 2025.
Based on the results of our evaluation and the material weaknesses described above, Management concluded that the Company’s internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability
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of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP as of December 31, 2024, March 31, 2025, and June 30, 2025.
Notwithstanding these material weaknesses, Management has concluded that our unaudited condensed consolidated financial statements included in this Form 10-Q are fairly stated in all material respects in accordance with U.S. GAAP for each of the periods presented therein.
Remediation of Material Weakness in Internal Control Over Financial Reporting
In order to remediate these material weaknesses in internal control over financial reporting related to the ineffective design and operation of controls related to inventory management, revenue recognition and IT general controls, management is implementing financial reporting control changes to address these material weaknesses. Management is implementing remediation steps to improve its disclosure controls and procedures and its internal controls over financial reporting, including further documenting and implementing control procedures to address the identified risks of material misstatements, and implementing monitoring activities over such control procedures. We believe we are on schedule to remediate the material weaknesses during the year ended December 31, 2025. Remediation efforts to date include the following:
•Adding qualified resources and improved training over the inventory management and revenue recognition processes;
•Adding qualified resources to ensure proper segregation of duties over IT systems, processes and controls
•Utilizing internal employees and/or partnering with external consultants specializing in public company control compliance to assess and implement additional controls over the inventory management and revenue recognition processes, and over IT general controls.
To further remediate the material weaknesses, Management, including the Chief Executive Officer and Chief Financial Officer, have reaffirmed and re-emphasized the importance of internal controls, control consciousness and a strong control environment. We also expect to continue to review, optimize and enhance our financial reporting controls and procedures. These material weaknesses will not be considered remediated until the applicable remediated control operates for a sufficient period of time and management has concluded, through testing, that this enhanced control is operating effectively.
Changes in Internal Control over Financial Reporting
Except as noted above, there were no changes in the Company’s internal control over financial reporting that occurred during the three months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not currently a party to any legal proceedings, the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition or results of operations.
Item 1A. Risk Factors
Our risk factors are described in the “Risk Factors” section of our 2024 Form 10-K. There have been no material changes to our risk factors since the filing of the 2024 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Pursuant to a Compromise Settlement and Release Agreement, dated as of August 1, 2025 (the “Bancorp Settlement Agreement”), between the Company, The Bancorp, Inc. (“Parent”), and Parent’s affiliate The Bancorp Bank, N.A. (“Bank”), the Company issued 64,043 shares of unregistered common stock (the “Settlement Shares”) to Parent and paid Bank $110,000 in cash to settle approximately $348,000 owed by the Company to Bank under certain vehicle leases extended by the Bank. The Settlement Shares were issued to Parent in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D promulgated thereunder. Parent provided the Company with representations, warranties, and information concerning its qualifications as a “sophisticated investor” and/or “accredited investor.” The Company provided and made full information regarding its business and operations available to Parent. There was no general solicitation concerning the offer or sale of the Settlement Shares. Parent acquired the Settlement Shares for its own account, for investment purposes, and not with a view to public resale or distribution thereof within the meaning of the Securities Act.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a) On August 8, 2025, the Company and Aljomaih entered into Amendment No. 1 to Note Purchase Agreement and a Second Amended and Restated Convertible Promissory Note (collectively, the “Aljomaih Amendments”). The Aljomaih Amendments provided that, notwithstanding the postponement of maturity of the Note (see below), Interest Shares shall still be issued with respect to all interest accrued through the initial maturity date. The approximately $6.0 million of interest accrued under the Note through August 11, 2025 will be converted into shares of the Company’s common stock at the 10-day VWAP (as defined in the Note) on August 25, 2025.
The Aljomaih Amendments also changed the schedule for repayment of principal. Rather than being due all at once on August 11, 2025, principal payments are now spread over ten quarterly installments beginning November 11, 2025 and ending February 11, 2028. The first four such installments are $1.5 million, the fifth through eighth installments are $2.0 million and the final two installments are $3.0 million each; provided that such installments may be increased in the event certain financing activities result in proceeds to the Company in excess of four times the aggregate amount of Note principal payments otherwise required on or prior to any installment date.
The Aljomaih Amendments also extended the term of Aljomaih’s right of first offer with respect to distribution of Company products and services in the Middle East until the later of February 11, 2028 and full repayment of the Note.
The foregoing description of the Aljomaih Amendments is qualified in its entirety by reference to the actual Aljomaih Amendments, copies of which are filed as Exhibits 10.4 and 10.5 to this Quarterly Report on Form 10-Q and incorporated by reference to this Item 5.
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The Company’s board of directors appointed Ms. Pogosyan as the Company’s Chief Financial Officer and Treasurer effective August 10, 2025. Ms. Pogosyan previously served as the Company's Vice President of Finance and Acting Chief Financial Officer since May 2023. On August 11, 2025, the Company and Ms. Pogosyan executed a promotion letter (the “Promotion Letter”) in connection with such appointment. The Promotion Letter amended Ms. Pogosyan’s Offer Letter, as amended to date, to reflect her new titles. Ms. Pogosyan remains the Company's principal financial officer and principal accounting officer, and the change in her titles was not accompanied by any modification to her compensation or any material change in her duties or responsibilities. The foregoing description of the Promotion Letter is qualified in its entirety by reference to the actual Promotion Letter, a copy of which is filed as Exhibit 10.6 to this Quarterly Report on Form 10-Q and incorporated by reference to this Item 5.
(b) During our last fiscal quarter, none of our directors or officers, as defined in Rule 16a-f(1), adopted terminated
Item 6. Exhibits
(a)Exhibits.
| Exhibit Number | Description | |||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 3.3 | ||||||||
10.1# | ||||||||
10.2# | ||||||||
10.3# | ||||||||
10.4* | ||||||||
10.5* | ||||||||
10.6#* | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
32.1** | ||||||||
| 101.INS | XBRL Instance Document. | |||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104.0 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
* Filed herewith.
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** Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act, or the Exchange Act (whether made before or after the date of this Report), irrespective of any general incorporation language contained in such filing.
# Indicates management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| XOS, INC. | ||||||||
Date: August 13, 2025 | By: | /s/ Dakota Semler | ||||||
| Name: | Dakota Semler | |||||||
| Title: | Chief Executive Officer (Principal Executive Officer) | |||||||
Date: August 13, 2025 | By: | /s/ Liana Pogosyan | ||||||
| Name: | Liana Pogosyan | |||||||
| Title: | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |||||||
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Exhibit 10.4
AMENDMENT NUMBER ONE
TO
NOTE PURCHASE AGREEMENT
THIS AMENDMENT NUMBER ONE TO NOTE PURCHASE AGREEMENT (this “Amendment”) is made and entered into as of August 8, 2025, by and among Xos, Inc. (the “Company”), and the Investor (as defined in the Agreement). Capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed to them in the Agreement.
WHEREAS, the parties entered into a Note Purchase Agreement dated as of August 9, 2022 (the “Agreement”), pursuant to which Company made a Convertible Promissory Note (the “Original Note”) to Investor in the aggregate principal amount of $20,000,000, dated August 11, 2022; and
WHEREAS, the parties previously revised certain terms of the Note and the Original Note was replaced with an Amended and Restated Convertible Promissory Note (the “Existing Note”), dated September 28, 2022; and
WHEREAS the parties now wish to modify the Agreement in certain respects in connection with further changes to the terms of the Note.
NOW THEREFORE, in consideration of the mutual agreements and covenants set forth hereinafter and in the Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereby agree as follows:
1.Modification to Note. Immediately upon execution hereof, the Note, as amended to date, shall be further amended and restated (as amended and restated, the “New Note”) to read as set forth in the form of Second Amended and Restated Convertible Promissory Note, attached as Exhibit A hereto. Investor shall surrender the Existing Note to Company and Company shall deliver the New Note to Investor in replacement thereof.
2.Extension of Right of First Offer. The definition of “Restricted Period” in Section 6(d) of the Agreement is hereby amended in its entirety to read as follows:
“Restricted Period” shall mean the period that commences on the date of this Agreement and terminates upon the later of: (i) February 11, 2028; and (ii) the date the principal amount of the US$20,000,000 Note is repaid in full by the Company to the Investor.
3.Notices. (a) The Company’s address for notice set forth in Section 8(h) of the Agreement is hereby modified to read as follows:
3550 Tyburn Street, Los Angeles, California 90065, Attention: General Counsel, Email: [*] with a copy to 3550 Tyburn Street, Los Angeles, California 90065, Attention: Chief Financial Officer, Email: [*], or at such other address or electronic address as the Company shall have furnished to the Investors in writing, with a copy (which shall not constitute notice) to Proskauer, 2029 Century Park East, Suite 2400, Los Angeles, California 90067, Attention: Ben Orlanski, Email: [*].
(b) The Investor’s address for notice pursuant to Section 8(h) of the Agreement is hereby designated as follows:
Ibrahim M. Aljomaih
Aljomaih Automotive Company
P.O. Box 224
King Khalid Street
31471 Dammam
Kingdom of Saudi Arabia
Email: [*]
cc: [*]
with a copy (which shall not constitute notice) to:
Duane Morris LLP
201 S. Biscayne Boulevard, Suite 3400
Miami, Florida 33131
Attention: Robert Zinn and Jennifer Migliori
Email: [*] and [*]
4.This Amendment will not be deemed accepted by either party unless and until it has been signed by a duly authorized representative of each party. In the event of a conflict between the terms and conditions of this Amendment and the terms and conditions of the Agreement, this Amendment will govern.
5.Except as modified by this Amendment, the Agreement otherwise remains in full force and effect in accordance with its terms.
[Signature page follows immediately]
IN WITNESS WHEREOF, The parties have caused this Amendment to be executed by their authorized signatories as of the date set forth below.
| XOS, INC. | |||||
Dated: August 7, 2025 | By: /s/ DAKOTA SEMLER | ||||
| Dakota Semler | |||||
| Chief Executive Officer | |||||
(Principal Executive Officer) | |||||
| ALJOMAIH AUTOMOTIVE CO. | |||||
Dated: August 8, 2025 | By: /s/ IBRAHIM M. ALJOMAIH | ||||
| Ibrahim M. Aljomaih | |||||
| Vice Chairman and Managing Director | |||||
Exhibit 10.5
NEITHER THIS SECURITY NOR THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH REGULATION S, PURSUANT TO A REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. IN ADDITION, NO HEDGING TRANSACTION MAY BE CONDUCTED WITH RESPECT TO THESE SECURITIES UNLESS SUCH TRANSACTION IS IN COMPLIANCE WITH THE ACT. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “IRC”), THIS NOTE IS BEING ISSUED WITH AN ORIGINAL ISSUE DISCOUNT. THE COMPANY AGREES TO PROVIDE PROMPTLY TO THE INVESTOR, UPON WRITTEN REQUEST, THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY. ANY SUCH WRITTEN REQUEST SHOULD BE MADE PURSUANT TO SECTION 5(G) OF THIS NOTE.
XOS, INC.
SECOND AMENDED AND RESTATED
CONVERTIBLE PROMISSORY NOTE
$20,000,000 Original Issue Date: August 11, 2022
Initially Amended and Restated: September 28, 2022
Further Amended and Restated: August 8, 2025
FOR VALUE RECEIVED, Xos, Inc., a Delaware corporation (the “Company”), promises to pay to Aljomaih Automotive Co. or its registered assigns (“Investor”), in lawful money of the United States of America the principal sum of Twenty Million U.S. Dollars ($20,000,000) together with such amount that has accrued as principal pursuant to Section 1(a) hereof or such lesser amount as shall equal the outstanding principal amount hereof, together with interest from the date of this Convertible Promissory Note (this “Note”), which shall accrue as set forth in Section 1(a) hereof. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and payable on February 11, 2028 (the “Maturity Date”). This Note is one of the “Notes” issued pursuant to the Purchase Agreement. This Note was amended and restated as of September 28, 2022, and is hereby further amended and restated as of August 8, 2025.
The following is a statement of the rights of Investor and the conditions to which this Note is subject, and to which Investor, by the acceptance of this Note, agrees:
1.Payments.
a.Interest in Shares. The principal amount of this Note outstanding shall accrue interest from the date of this Note at a rate of 10.0% per annum (computed on the basis of a year of 365 days for the actual number of days elapsed). Subject to the Authorized Share Cap, the Company shall pay interest in validly issued, fully paid and non-assessable shares of Common Stock (the “Interest Shares”). If (x) the 10-day VWAP ending on the Trading Day immediately prior to the applicable payment date is greater than or equal to the Nasdaq Minimum Price or (y) the Company has received Nasdaq Stockholder Approval, the number of Interest Shares to be issued shall be calculated based on the 10-Day VWAP; otherwise, the number of Interest Shares to be issued shall be based on the Nasdaq Minimum Price. Accrued interest on this Note shall be due and payable upon the Maturity Date unless earlier converted or paid.
b.Mandatory Prepayment. The Company shall make the following prepayments of principal amounts of this Note at the times and in the amounts (each a “Mandatory Prepayment Amount”) set forth in this Section 1(b) (the “Mandatory Prepayment”).
| Mandatory Prepayment Date | Mandatory Prepayment Amount(1) | ||||
| November 11, 2025 | $1,500,000.00 | ||||
| February 11, 2026 | $1,500,000.00 | ||||
| May 11, 2026 | $1,500,000.00 | ||||
| August 11, 2026 | $1,500,000.00 | ||||
| November 11, 2026 | $2,000,000.00 | ||||
| February 11, 2027 | $2,000,000.00 | ||||
| May 11, 2027 | $2,000,000.00 | ||||
| August 11, 2027 | $2,000,000.00 | ||||
| November 11, 2027 | $3,000,000.00 | ||||
| February 11, 2028 | $3,000,000.00 | ||||
(1) Mandatory Prepayment Amounts are in U.S. Dollars.
In the event the Mandatory Prepayment Amount for any Mandatory Prepayment Date, when aggregated with all prepayments of the Note made prior to such Mandatory Prepayment Date (the “Cumulative Prepayments”), is less than 25% of the total of all amounts raised (the “Total ATM Proceeds”) in the at-the-money equity offering for which the Company has retained Roth Capital Partners, LLC, then the Company shall prepay an additional amount on such Mandatory Prepayment date such that the Cumulative Prepayments shall be no less than 25% of the Total ATM Proceeds at such time.
On the date fixed for prepayment pursuant to the Section 1(b) (the “Mandatory Prepayment Date”), the Company shall make payment of the applicable Mandatory Prepayment Amount to the Investor, or upon the direction of the Investor as specified by the Investor in a writing to the Company (which direction shall be sent to the Company by the Investor at least two Business Days prior to the Mandatory Prepayment Date). Only principal amounts shall be paid in any Mandatory Prepayment, and the accrued Interest with respect to such principal amounts shall be payable in Interest Shares on the Maturity Date.
c.Optional Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time on or after August 11, 2024, or as otherwise agreed to between the Company and the Investor in writing, the Company shall have the right, exercisable on not less than five Trading Days prior written notice to the Investor, to prepay the outstanding Note (principal and accrued and unpaid interest), in full or in part, and without penalty, in accordance with this Section 1(c) (the “Optional Prepayment”). Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered in writing to the Investor and state: (i) that the Company is exercising its right to prepay the Note, and (ii) the date of prepayment, which shall be not less than five Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment pursuant to this Section 1(c) (the “Optional Prepayment Date”), the Company shall make payment of the Optional Prepayment Amount to the Investor, or upon the direction of the Investor as specified by the Investor in a writing to the Company (which direction shall be sent to the Company by the Investor at least two Business Days prior to the Optional Prepayment Date). If the Company exercises its right to prepay the Note, the Company shall make payment to the Investor of (x) an amount in cash equal to the then outstanding principal amount of this Note plus (y) the number of Interest Shares corresponding to the accrued and unpaid interest on the unpaid principal amount of this Note in accordance with Section 1(a) to, but excluding, the Optional Prepayment Date (the “Optional Prepayment Amount”).
d.Elective Conversion Upon a Change of Control. In the event of a Change of Control that occurs prior to any repayment pursuant to Section 1 or Section 2 or conversion pursuant to Section 3 hereof, Investor may elect by written notice to the Company within ten Business Days of the receipt of
notice of such Change of Control to convert the entire outstanding principal amount of this Note and receive accrued and unpaid interest on this Note in Interest Shares pursuant to Section 3(b) and in accordance with Section 1(a). On or before the later to occur of (i) the thirtieth calendar day prior to the anticipated effective date of a Change of Control and (ii) the date the Company first learns of the anticipated effective date of a Change of Control, the Company shall send to the Investor a written notice of such Change of Control.
e.Early Conversion of Accrued Interest. On August 25, 2025, all accrued and unpaid Interest on this Note from the date of issuance through August 11, 2025 shall be converted into Interest Shares in accordance with Section 1(a).
2.Events of Default. During the continuance of an Event of Default, and in addition to any other rights or remedies that the Investor may have under applicable law or the provisions of this Note, the Majority Investors may, subject to the approval of Aljomaih Automotive Co., elect by written notice to the Company and holders of the Notes, to either: (i) convert this Note into shares of Common Stock or (ii) declare this Note to be, and upon such declaration this Note shall be and become, immediately due and payable in (x) an amount in cash equal to the then outstanding principal amount of this Note plus (y) the number of Interest Shares corresponding to the accrued and unpaid interest on the unpaid principal amount of this Note in accordance with Section 1(a). Notwithstanding the foregoing, upon the occurrence of any Event of Default described in Section 2(f) or Section 2(g), immediately and without notice, 100% of the principal of, and accrued and unpaid interest, if any, on, this Note shall automatically be immediately due and payable, without presentment, demand, protest or any other notice of any kind or any other action required on the part of the Investor, all of which are hereby expressly waived, anything contained herein or in the other Note Documents to the contrary notwithstanding, in addition to any other rights or remedies that the Investor may have under applicable law or the provisions of this Note. The occurrence of any of the following shall constitute an “Event of Default” under this Note and the other Note Documents:
a.Failure to Pay. The Company shall fail to pay (i) any principal of this Note when due and payable on the Maturity Date, upon Optional Prepayment, upon any required repurchase, upon declaration of acceleration or otherwise; or (ii) interest on any Note or any other amounts when due and payable, and the default continues for a period of ten Business Days after receipt by the Company of written notice from Investor;
b.Breach of Covenants. The Company shall fail to observe or perform any other covenant or obligation contained in this Note or the Purchase Agreement (other than those specified in Section 2(a)), in each case that has not been cured or that is incurable within 30 calendar days of receipt by the Company of written notice by the Investor;
c.Representations and Warranties. Any representation or warranty made by the Company in the Purchase Agreement shall not have been true and correct in all material respects when made, or with respect to any representation and warranty that contains a materiality qualifier, shall not have been true and correct in all such respects when made, where the same would have a Material Adverse Effect (as defined in the Purchase Agreement);
d.Conversion. The Company shall fail to comply with its obligation to convert this Note and deliver the applicable Conversion Consideration in accordance with the provisions herein upon exercise of the Investor’s conversion right and such failure continues for five Business Days;
e.Other Payment Obligations. A default shall exist under any mortgages, agreements or other instruments under which there is outstanding, or by which there is secured or evidenced, any Indebtedness (as defined in the Purchase Agreement) for money borrowed of at least $15,000,000 (or its foreign currency equivalent on the date of such default) in the aggregate of the Company and any of its Significant Subsidiaries, where such default results in such indebtedness becoming or being declared due and payable before its stated maturity and such acceleration shall not have been rescinded or annulled or such default shall not have been cured or waived, or such indebtedness is not paid or discharged, as the case may be, within 30 calendar days after written notice to the Company by at least 25% in aggregate principal amount of Notes issued pursuant to the Purchase Agreement then outstanding;
f.Voluntary Bankruptcy or Insolvency Proceedings. The Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) admit in writing its inability to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved, liquidated or wound up, or adopt any plan of liquidation to the effect the foregoing, (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi) take any action for the purpose of effecting any of the foregoing; or
g.Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company, or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within 45 days of commencement.
3.Conversion.
a.Optional Conversion. On or after November 9, 2022, the Investor may elect at any time while any principal amount of this Note is outstanding, to convert the outstanding principal amount of this Note by providing written notice of such election to the Company.
b.Conversion upon a Change of Control. If a Change of Control occurs prior to any repayment pursuant to Section 1 or Section 2 or conversion pursuant to Section 3(a), then, upon the Investor’s election in accordance with Section 1(c), (i) any portion of the outstanding principal amount of this Note shall convert, immediately prior to such Change of Control, into that number of shares of Common Stock equal to the quotient obtained by dividing (x) such outstanding principal amount as of immediately prior to such Change of Control by (y) the Conversion Price and (ii) the number of Interest Shares corresponding to the accrued and unpaid interest on the unpaid principal amount of this Note in accordance with Section 1(a) to, but excluding, the date of such Change of Control shall be payable.
c.Settlement upon Conversion. Upon any conversion of this Note, the Company will settle such conversion by paying or delivering, as applicable and as provided in this Section 3(c), either (x) shares of Common Stock, rounded down to the nearest whole share (a “Physical Settlement”); (y) solely cash as provided in Section 3(d)(i)(2) (a “Cash Settlement”); or (z) a combination of cash and shares of Common Stock, rounded down to the nearest whole share (a “Combination Settlement”). The Company will have the right to elect the Settlement Method applicable to any conversion of this Note; provided, however, that: (i) subject to clause (ii) below, the Company will send notice of such Settlement Method to the Investor no later than the fifth Business Day immediately after such Conversion Date; (ii) if all or any portion of this Note is called for Optional Prepayment, then the Company will specify, in the related Optional Prepayment Notice sent pursuant to Section 1(b), the Settlement Method that will apply to all conversions of this Note with a Conversion Date that occurs on or after the related date of Optional Prepayment Notice and before the related Optional Prepayment Date; (iii) the Company will use the same Settlement Method for all conversions of Notes with the same Conversion Date; and (iv) if the Company does not timely elect a Settlement Method with respect to the conversion of this Note, then the Company will be deemed to have elected the Default Settlement Method (and, for the avoidance of doubt, the failure to timely make such election will not constitute an Event of Default).
The Company will have the right, in its sole discretion and exercisable at its election by sending notice of such exercise to the Investors, to irrevocably fix the Settlement Method that will apply to all conversions of Notes with a Conversion Date that occurs on or after the date such notice is sent to Investors; provided that (x) the Settlement Method so elected must be a Settlement Method that the Company is then permitted to elect; (y) no such irrevocable election will affect any Settlement Method theretofore elected (or deemed to be elected); and (z) the Default Settlement Method will automatically be deemed to be set to the Settlement Method so fixed. Such notice, if sent, must set forth the applicable Settlement Method and expressly state that the election is irrevocable and
applicable to all conversions of Notes with a Conversion Date that occurs on or after the date such notice is sent to Investors. For the avoidance of doubt, such an irrevocable election, if made, will be effective without the need to amend this Note.
d.Conversion Consideration.
i. Generally. Subject to Section 3(d)(ii), the type and amount of consideration (the “Conversion Consideration”) due in respect of this Note upon conversion will be as follows:
1.if Physical Settlement applies to such conversion, a number of shares of Common Stock equal to: (x) the outstanding principal amount being converted divided by (y) the Conversion Price;
2.if Cash Settlement applies to such conversion, cash in an amount equal to: (I) (x) the outstanding principal amount being converted multiplied by (y) the 10-day VWAP ending on the Trading Day immediately prior to the applicable Conversion Date, divided by (II) the Conversion Price; or
3.if Combination Settlement applies to such conversion, consideration consisting of: (a) a number of shares of Common Stock equal to: (I) the outstanding principal amount being converted into shares of Common Stock divided by (II) the Conversion Price; and (b) cash in an amount equal to: (I) (x) the remaining outstanding principal amount being converted multiplied by (y) the 10-day VWAP ending on the Trading Day immediately prior to the applicable Conversion Date, divided by (II) the Conversion Price; and
in the case of each of the foregoing clauses (1) through (3), the number of Interest Shares corresponding to the accrued and unpaid interest on the unpaid principal amount of this Note in accordance with Section 1(a) to, but excluding, the Conversion Date.
ii. Fractional Shares. If Physical Settlement or Combination Settlement applies to the conversion of this Note and the number of shares of Common Stock deliverable pursuant to Section 3(d)(i) upon such conversion is not a whole number, then such number will be rounded down to the nearest whole number.
e.Delivery of the Conversion Consideration. Except as set forth in this Section 3, the Company will pay or deliver, as applicable, the Conversion Consideration due upon the conversion of any Note to the Investor on or before the tenth Business Day immediately after the Conversion Date; provided, however, that, with respect to any Conversion Date occurring during a Change of Control Period, the Company will settle any such conversion concurrent with the closing of the Change of Control and the Conversion Date will instead be deemed to be the effective date of the closing of such Change of Control immediately prior to the effectiveness thereof.
f.Deemed Payment of Principal and Interest; Settlement of Accrued Interest Notwithstanding Conversion. If the Investor converts this Note, the Company’s delivery of the Conversion Consideration due in respect of such conversion will be deemed to fully satisfy and discharge the Company’s obligation to pay the principal of, and accrued and unpaid interest, if any, on, such Note to, but excluding the Conversion Date.
g.Effect of Converting a Note. At the Close of Business on the Conversion Date for any conversion of this Note, this Note (or such portion thereof) will (unless there occurs a Default in the delivery of the Conversion Consideration or interest due upon such conversion) be deemed to cease to be outstanding (and, for the avoidance of doubt, no Person will be deemed to be a holder of such Note (or such portion thereof) as of the Close of Business on such Conversion Date).
h.Holder of Record of Conversion Shares. The Person in whose name any share of Common Stock is issuable upon conversion of any Note will be deemed to become the holder of record of such share as of the Close of Business on the Conversion Date for such conversion.
i.Delivery of Original Note. If this Note is to be converted pursuant to this Section 3, Investor agrees to deliver the original of this Note (or a notice to the effect that the original Note has been lost, stolen or destroyed and an agreement acceptable to the Company whereby the Investor agrees to indemnify the Company from any loss incurred by it in connection with this Note) immediately following the applicable Conversion Date for cancellation.
4.Definitions. As used in this Note, the following capitalized terms have the following meanings:
“10-day VWAP” means the average of the Daily VWAP for the 10 Trading Days ending on the Trading Day immediately prior to the applicable date.
“Affiliate” has the meaning set forth in Rule 144 under the Securities Act as in effect on the Initial Closing Date.
“Authorized Share Cap” means 33,199,327 shares of Common Stock, which amount shall be subject to the same adjustments as the Conversion Price.
“Business Day” means any day other than a day on which federal or state banking institutions in the Borough of Manhattan, the City of New York are authorized or obligated by law, executive order or regulation to close.
“Change of Control” means (a) a sale, directly or indirectly, to a third party, in a transaction or series of transaction, of all or substantially all of the consolidated assets of the Company, whether effected by merger, consolidation or other business combination transaction, (b) a merger, sale of the equity securities of the Company, consolidation or other business combination transaction of the Company with or into another corporation, limited liability company or other entity pursuant to which stockholders of the Company prior to such sale, merger, consolidation or other capital reorganization or business combination transaction own less than 50% of the voting interests or beneficial interests in the Company or surviving or resulting entity, or (c) the consummation of any transaction, including any merger or consolidation, the result of which is that any “person” or “group” (as reported on a Schedule filed pursuant to Rule 13(d) of the Exchange Act or otherwise reasonably determined by the Company) becomes the owner, directly or indirectly, of more than 50% of the voting interests or beneficial interests in the Company. Notwithstanding anything to the contrary, no Change of Control shall result from the acquisition of securities or other voting interests or beneficial interests in the Company by Investor or any Affiliates of Investor.
“Change of Control Period” means the period from, and including, the date the Company delivers written notice pursuant to Section 1(c) to the Investor of a Change of Control to, but excluding, the effective date of such Change of Control.
“Close of Business” means 5:00 p.m., New York City time.
“Common Stock” means the Company’s common stock, par value $0.0001 per share.
“Conversion Date” means any date the Investor has sent a notice to the Company, electing to convert all or any portion of this Note, pursuant to Section 1(c), Section 2, Section 3(a) or Section 3(b).
“Conversion Price” means $2.3817 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock).
“Daily VWAP” means the per share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page “XMTR <equity> AQR” (or its equivalent successor if such page is not available) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session on such Trading Day (or if such volume-weighted average price is unavailable, the market value of one share of the Common Stock on such Trading Day determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained for this purpose by the Company). The “Daily VWAP” shall be determined without regard to after-hours trading or any other trading outside of the regular trading session trading hours.
“Default” means any event that is (or, after notice, passage of time or both, would be) an Event of Default.
“Default Settlement Method” means Physical Settlement; provided, however, that the Company may, from time to time, change the Default Settlement Method, to any Settlement Method that the Company is then permitted to elect, by sending notice of the new Default Settlement Method to the Investor.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Initial Closing Date” means the Initial Closing Date as defined in the Purchase Agreement.
“Investor” means the Person specified in the introductory paragraph of this Note or any Person who shall at the time be the registered holder of this Note.
“Investors” means the investors that have purchased Notes.
“Majority Investors” means the Majority Investors as defined in the Purchase Agreement.
“Nasdaq Minimum Price” means $1.89 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock), which is the “minimum price” in accordance with Nasdaq Stock Market Rule 5635.
“Nasdaq Stockholder Approval” means the receipt by the Company of requisite approval from its stockholders to issue Interest Shares below the Conversion Price or to issue more than 19.99% of its outstanding shares of Common Stock at an issue price below the Nasdaq Minimum Price.
“Note Documents” means the Note Documents as defined in the Purchase Agreement.
“Notes” means the convertible promissory notes issued by the Company pursuant to the Purchase Agreement.
“Person” means and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority.
“Purchase Agreement” means the Note Purchase Agreement dated August 9, 2022 (as amended, modified or supplemented), by and among the Company and the Investors (as defined in the Purchase Agreement) party thereto.
“Registration Rights Agreement” means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, among the Company and the Investors listed therein, as may be amended and/or restated from time to time.
“Securities Act” means the Securities Act of 1933, as amended.
“Settlement Method” means Cash Settlement, Physical Settlement or Combination Settlement.
“Significant Subsidiary” of any Person means any Subsidiary of that Person that constitutes a “significant subsidiary” (as defined in Rule 1-02(w) of Regulation S-X under the Exchange Act) of that Person.
“Subsidiary” means, with respect to any Person, (A) any corporation, association or other business entity (other than a partnership or limited liability company) of which more than 50% of the total voting power of the capital stock entitled (without regard to the occurrence of any contingency, but after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees, as applicable, of such corporation, association or other business entity is owned or controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of such Person; and (B) any partnership or limited liability company where (i) more than 50% of the capital accounts, distribution rights, equity and voting interests, or of the general and limited partnership interests, as applicable, of such partnership or limited liability company are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person, whether in the form of membership, general, special or limited partnership or limited liability company interests or otherwise; and (ii) such Person or any one or more of the other Subsidiaries of such Person is a controlling general partner of, or otherwise controls, such partnership or limited liability company.
“Trading Day” means a day on which the Nasdaq Stock Market is open for trading; provided that if the Common Stock (or such other security) is not so listed or traded, “Trading Day” means a Business Day.
5.Miscellaneous.
a.Successors and Assigns; Transfer of this Note or Securities Issuable on Conversion Hereof.
i. Subject to the restrictions on transfer described in this Section 5(a), Section 5(m)(v) and Section 3(j) of the Purchase Agreement, the rights and obligations of the Company and Investor shall be binding upon and benefit the registered successors, assigns, heirs, administrators and transferees of the parties.
ii. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by either (A) Investor without the prior written consent of the Company, or (B) the Company without the prior written consent of the Majority Investors.
iii. The Company may not, directly or indirectly, (1) consolidate or merge with or into another entity or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to another person, unless the entity formed by or surviving any such consolidation or merger (if other than the Company) or the entity to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Note and related documents pursuant to agreements reasonably satisfactory to the Majority Investors provided that such entity shall not have any obligations under the Note after the Investor elects to convert the entire outstanding principal amount of this Note pursuant to Section 1(c) and the Company satisfies its obligations thereunder.
b.Waiver and Amendment. Any provision of this Note may be amended, waived or modified upon the written consent of the Company and the Majority Investors; provided, however, that no such amendment, waiver or consent shall: (i) reduce the principal amount of this Note; (ii) reduce the rate of interest of this Note; or (iii) relate to that treatment of this Note in a Change of Control, without the written consent of Investor; and provided further that that any such amendment, waiver or modification shall apply equally to all Notes, and no waiver or modification that applies to one or more (but not all) Notes or one or more (but not all) holders of Notes different than to all Notes or holders of Notes shall become effective until approved by such differently affected holder or holders of Notes.
c.Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be provided in accordance with Section 8(g) of the Purchase Agreement.
d.Pari Passu Notes. Investor acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Notes. In the event Investor receives payments in excess of its pro rata share of the Company’s payments to the Investors of all of the Notes, then Investor shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.
e.Payment. Unless converted into the Company’s equity securities pursuant to the terms hereof, payment shall be made in lawful tender of the United States.
f.Usury. In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.
g.Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing and mailed, electronically mailed or delivered to each party as follows: (i) if to an Investor, at the Investor’s address or electronic address set forth on the signature page hereto, or at such other address or electronic address as the Investor shall have furnished the Company in writing or (ii) if to the Company, at 3550 Tyburn Street, Los Angeles, California 90065, Attention: General Counsel, Email: [*] with a copy to 3550 Tyburn Street, Los Angeles, California 90065, Attention: Chief Financial Officer, Email: [*], or at such other address or electronic address as the Company shall have furnished to the Investors in writing, with a copy (which shall not constitute notice) to Proskauer, 2029 Century Park East, Suite 2400, Los Angeles, California 90067, Attention: Ben Orlanski, Email: [*]. All such notices and communications will be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) when sent via electronic mail, upon confirmation of delivery when directed to the relevant electronic mail address, (iv) one Business Day after being deposited with an overnight courier service of recognized standing or (v) four Business Days after being deposited in the U.S. mail, first class with postage prepaid.
h.Waivers. The Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.
i.Governing Law; Venue. Notwithstanding the place where this Note may be executed by any of the parties hereto, the parties expressly agree that (1) this Note shall be governed by and construed under the laws of the State of New York and (2) the venue for any action taken with respect to this Note shall be any state or federal court in New York County in the State of New York.
j.Waiver of Jury Trial; Judicial Reference. By acceptance of this Note, Investor hereby agrees and the Company hereby agrees to waive their respective rights to a jury trial of any claim or cause of action based upon or arising out of this Note or any of the Note Documents. If the jury waiver set forth in this paragraph is not enforceable, then any claim or cause of action arising out of or relating to this Note, the Note Documents or any of the transactions contemplated therein shall be settled by judicial reference pursuant to Code of Civil Procedure Section 638 et seq. before a referee sitting without a jury, such referee to be mutually acceptable to the parties or, if no agreement is reached, by a referee appointed by a District Judge of the United States District Court for the Southern District of New York. This paragraph shall not restrict a party from exercising remedies under the Uniform Commercial Code or from exercising pre-judgment remedies under applicable law. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
k.Counterparts. This Note may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Note may also be executed and delivered by facsimile signature, PDF or any electronic signature complying with the U.S. federal ESIGN Act of 2000 (e.g., www.docusign.com).
l.Currency. All currency amounts set forth in this Note are in U.S. Dollars.
m.Taxes.
i. The Company shall deduct and withhold from payments due pursuant to this Note the amounts required to be deducted and withheld under applicable law, if any; provided that, so long as Investor has provided a valid IRS Form W-9 or appropriate version of IRS Form W-8 in accordance with Section 5(m)(ii), the Company shall use its commercially reasonable efforts to (i) provide to the Investor, prior to the date the applicable payment is scheduled to be made, with
written notice of its intent to deduct and withhold together with a calculation of the amount to be deducted and withheld and (ii) cooperate with the Investor to minimize or obtain an exemption from such deduction or withholding. Any amounts withheld shall be timely paid over the appropriate governmental authority in accordance with applicable law. To the extent that amounts are deducted and withheld from payments otherwise payable pursuant to this Note, such deducted and withheld amounts shall be treated for all purposes of this Note as having been paid to the person in respect of whom such deduction and withholding was made. If a payment is payable (in whole or in part) in consideration other than cash and if the cash portion of any such payment is insufficient to satisfy all required tax withholding obligations (or the payment consists entirely of non-cash consideration), the Company shall retain an amount of the non-cash consideration otherwise payable equal in value to the amount required to satisfy any applicable withholding taxes (as reasonably determined jointly by the Company and Investor).
ii. Any Investor (including for purposes of this Section 5(m)(ii) any successor, assign, participant or other transferee) that is entitled to an exemption from or reduction of withholding tax (including, without limitation, any withholding tax imposed under any of IRC Sections 1441 – 1446, IRC Sections 1471 – 1474, and/or IRC Sections 3401 – 3406) under the law of the United States, or an applicable treaty to which such jurisdiction is a party, with respect to payments under the Note or any other Note Document shall deliver to the Company, at the time or times prescribed by applicable law and at any times reasonably requested by the Company, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Company as will permit such payments to be made without withholding or at a reduced rate. In addition, any Investor, if reasonably requested by the Company, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Company as will enable the Company to determine whether or not such Investor is subject to backup withholding or information reporting requirements. Without limiting the generality of the foregoing, on or prior to the date of this Note and upon any future transfer or assignment in accordance with Section 5(a),
1.if Investor is a “United States Person” as defined in IRC Section 7701(a)(30), it shall deliver to the Company a duly executed United States Internal Revenue Service Form W-9; and
2.if Investor is not such a United States Person (a “Foreign Investor”), such Foreign Investor shall deliver to the Company (i) a duly executed United States Internal Revenue Service Form W-8BEN or Form W-8BEN-E, as applicable, and (ii) if the Foreign Investor is eligible to claim exemption from United States federal withholding tax under IRC Section 871(h) or 881(c) with respect to payments of “portfolio interest,” a certificate in form and substance reasonably satisfactory to the Company representing that such Investor is not a bank for purposes of IRC Section 881(c), is not a 10-percent shareholder (within the meaning of IRC Section 871(h)(3)(B)) of the Company and is not a controlled foreign corporation related to the Company (within the meaning of IRC Section 864(d)(4))). To the extent a Foreign Investor is treated as a partnership for U.S. federal income tax purposes or is not the beneficial owner of interest or other amounts paid with respect to the Note, such Investor shall deliver to the Company a duly executed United States Internal Revenue Service Form W-8IMY, accompanied by applicable United States Internal Revenue Service Forms W-9, W-8BEN, W-8BEN-E and/or other certification documents from each beneficial owner (provided that if Investor is treated as a partnership for U.S. federal income tax purposes, Investor shall provide a certificate on behalf of each direct and indirect partner representing that such direct and indirect partner is not a bank for purposes of IRC Section 881(c), is not a 10-percent shareholder (within the meaning of IRC Section 871(h)(3)(B)) of the Company and is not a controlled foreign corporation related to the Company (within the meaning of IRC Section 864(d)(4))). To the extent the forms and other documentation described in this Section 5(m)(ii)(2) (including, for the avoidance of doubt, the portfolio interest certificate specified in Section 5(m)(ii)(2)(ii)) are provided by Investor to the reasonable satisfaction of the Company, the Company agrees to treat all interest paid or payable pursuant to this Note as “portfolio interest” exempt from United States federal withholding tax under IRC Section 871(h) or 881(c) unless otherwise
required due to a change in applicable law or by a tax authority in connection with an audit or other similar proceeding.
iii. If a payment made to Investor in connection with this Note would be subject to U.S. federal withholding tax imposed by FATCA if Investor were to fail to comply with the applicable reporting requirements of FATCA (including those contained in IRC Section 1471(b) or 1472(b), as applicable), Investor shall deliver to Company at the time or times prescribed by law and at such time or times reasonably requested by the Company such documentation prescribed by applicable law (including as prescribed by IRC Section 1471(b)(3)(C)(i)) and such additional documentation reasonably requested by the Company as may be necessary for the Company to comply with its obligations under FATCA and to determine that Investor has complied with Investor’s obligations under FATCA or to determine the amount, if any, to deduct and withhold from payments to such Investor. “FATCA” means (a) IRC Sections 1471 through 1474, as of the date of this Note (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to IRC Section 1471(b)(1), (b) any treaty, law, regulation or other official guidance enacted in any other jurisdiction, or relating to an intergovernmental agreement between the United States and any other jurisdiction with the purpose (in either case) of facilitating the implementation of (a) above, and (c) any agreement pursuant to the implementation of paragraphs (a) or (b) above with the United States Internal Revenue Service, the United States government or any governmental or taxation authority in the United States.
iv. Investor agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall deliver promptly to the Company updated or other appropriate documentation (including any new documentation reasonably requested by the Company).
v. The Company shall establish and maintain a record of ownership (the “Register”) in which it agrees to register by book entry Investor’s and each subsequent assignee’s name and address and the principal amounts (and stated interest) of Investor’s and each subsequent assignee’s interest in the Note. Any Investor that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Company, maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in the participated Notes (the “Participant Register”); provided such Investor shall have no obligation to disclose all or any portion of the Participant Register (including the identity of any participant) to the Company except to the extent that such disclosure is necessary to establish that the Note is in registered form under Treasury Regulations Section 5f.103-1(c). The entries in the Register and the Participant Register shall be conclusive absent manifest error. This Section 5(m)(v) shall be construed so that the Note is at all times maintained in “registered form” within the meaning of IRC Sections 163(f), 871(h)(2) and 881(c)(2) and any related regulations (or any successor provisions of the IRC or such regulations).
vi. [Reserved.]
vii. The Company hereby represents and warrants to Investor that no tax withholding shall be required with respect to the repayment of any principal amounts of this Note including, without limitation, the Mandatory Prepayments under Section 1(b) hereof.
n.Right of Setoff. The Company hereby grants to Investor a right of setoff for all the obligations of the Company under this Note and related documents to Investor, whether now existing or hereafter arising upon and against all deposits, credits and property, now or hereafter in the possession, custody, safekeeping or control of Investor or any entity under the control of Investor (including a subsidiary of Investor) or in transit to any of them, and other obligations owing to Investor or any such entity. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Investor may setoff the same or any part thereof and apply the same to any liability or obligations of the Company under this Note and related documents even though unmatured and regardless of the
adequacy of any other collateral securing the obligations of the Company under this Note and related documents.
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The parties have executed this Note as of the date first noted above.
| XOS, INC. | |||||
Dated: August 7, 2025 | By: /s/ LIANA POGOSYAN | ||||
| Liana Pogosyan | |||||
| Chief Financial Officer | |||||
| ALJOMAIH AUTOMOTIVE CO. | |||||
Dated: August 8, 2025 | By: /s/ IBRAHIM M. ALJOMAIH | ||||
| Ibrahim M. Aljomaih | |||||
| Vice Chairman and Managing Director | |||||
| Email: [*] | |||||
| Address for Notice: [*] | |||||
Exhibit 10.6
To: Liana Pogosyan
Subject: Promotion Letter – Liana Pogosyan
Dear Liana,
Congratulations once more on your promotion regarding the Chief Financial Officer (CFO) and Treasurer opportunity. This position reports to the Chief Executive Officer, Dakota Semler, and leads the Finance and Accounting team. Outlined below are the details of your promotion. Thank you for your continuing efforts to the Xos team. We appreciate your ongoing commitment to our team’s success. As we discussed, the details of your promotion are as follows:
•New Position: Chief Financial Officer (CFO) and Treasurer
•Effective Date: August 10, 2025
This Promotion Letter amends the offer letter between you and the Company, dated January 5, 2022 (as amended from time to time, the “Offer Letter”), and memorializes the consent of both you and the Company that, commencing on the Effective Date, you shall serve as Chief Financial Officer and Treasurer of the Company and, in such capacities, as the “principal financial officer” and “principal accounting officer” (within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), with the duties and responsibilities attendant to such offices. In addition, this Promotion Letter memorializes the consent of both you and the Company, effective May 26, 2023, that you would serve as Acting Chief Financial Officer and VP of Finance of the Company and, in such capacities, as the principal financial officer and principal accounting officer of the Company, with the duties and responsibilities attendant to such offices.
The Company shall have complete discretion to interpret the provisions of this letter agreement and to decide all matters under this letter agreement. Such interpretation and decision shall be final, conclusive and binding on you and any person claiming under or through you, in the absence of clear and convincing evidence that the company acted arbitrarily and capriciously.
No Right to Continued Employment: Nothing in this Promotion Letter shall be interpreted or construed to confer upon the employee any right with respect to continuance of employment by Xos, or a subsidiary of Xos, nor shall this letter interfere in any way with the right of Xos, or a subsidiary of Xos, to terminate your employment at any time.
All the best,
| /s/ LESLIE GRANADOS | ||
| Leslie Granados | ||
| Manager, People Operations & Talent Management | ||
ACCEPTED:
| /s/ LIANA POGOSYAN | August 11, 2025 | |||||||
| Liana Pogosyan | Today’s Date | |||||||
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Dakota Semler, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Xos, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 13, 2025 | /s/ DAKOTA SEMLER | ||||
| Dakota Semler | |||||
| Chief Executive Officer | |||||
(Principal Executive Officer) | |||||
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Liana Pogosyan, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Xos, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 13, 2025 | /s/ LIANA POGOSYAN | ||||
| Liana Pogosyan | |||||
| Chief Financial Officer | |||||
(Principal Financial Officer and Principal Accounting Officer) | |||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Xos, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dakota Semler, the Chief Executive Officer of the Company, and I, Liana Pogosyan, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
1.the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 13, 2025 | /s/ DAKOTA SEMLER | ||||
| Dakota Semler | |||||
| Chief Executive Officer | |||||
(Principal Executive Officer) | |||||
| /s/ LIANA POGOSYAN | |||||
| Liana Pogosyan | |||||
| Chief Financial Officer | |||||
(Principal Financial Officer and Principal Accounting Officer | |||||
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Xos, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.