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What changed in Xos, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Xos, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+510 added−470 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-29)

Top changes in Xos, Inc.'s 2024 10-K

510 paragraphs added · 470 removed · 382 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

58 edited+21 added−16 removed34 unchanged
Biggest changeXos Energy Solutions™ offers customers full service project management, electric vehicle chargers and ancillary equipment, and infrastructure installation services. This service is available to customers whether they use Xos trucks, competitor trucks, or a mixed fleet. 11 In January 2024, Xos announced the next generation of the Xos Hub™—a rapid-deployment mobile charger designed to expedite fleet transitions to electric vehicles.
Biggest changeIn January 2024, Xos announced the next generation of the Xos Hub™ — a rapid-deployment mobile charger designed to expedite fleet transitions to electric vehicles. The next generation Xos Hub™ offers customers 280kWh of energy storage capacity and charging rates up to 320kW. The Xos Hub™ enables customers to simultaneously charge up to four electric vehicles with standard CCS1 connectors.
We believe the primary competitive factors in the commercial vehicle market for medium- and heavy-duty last-mile and return-to-base segments include, but are not limited to: • total cost of ownership; • emissions profile; • effectiveness within target applications and use cases; • ease of integration into existing operations; • product performance and uptime; • vehicle quality, reliability and safety; • service and support; • technological innovation relating to batteries, software and data analytics; and • fleet management.
We believe the primary competitive factors in the commercial vehicle market for medium- and heavy-duty last-mile and return-to-base segments include, but are not limited to: • total cost of ownership; • emissions profile; 12 • effectiveness within target applications and use cases; • ease of integration into existing operations; • product performance and uptime; • vehicle quality, reliability and safety; • service and support; • technological innovation relating to batteries, software and data analytics; and • fleet management.
Customers In addition to large-scale national accounts with globally recognized commercial fleet operators, we deliver vehicles directly to small- and medium-sized fleets via our in-house sales representatives and established distribution and channel partners. Such accounts include independent service providers (ISPs), which fulfill last-mile routes for enterprise partners.
Customers In addition to large-scale national accounts with globally recognized commercial fleet operators, we deliver vehicles directly to small- and medium-sized fleets via our in-house sales representatives and established distribution and channel partners. Such accounts include independent service providers, which fulfill last-mile routes for enterprise partners.
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. We support some of the industry’s leading chassis manufacturers through Powered by Xos, including Winnebago and Blue Bird Bus.
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. We support some of the industry’s leading chassis manufacturers through Powered by Xos™, including Winnebago and Blue Bird.
These competitors also compete with us in recruiting and retaining qualified research and development, engineering, sales, marketing, corporate and management personnel, as well as in acquiring technologies complementary to, or necessary for, our products and services. Additional mergers and acquisitions may result in even more resources being concentrated on our competitors.
These competitors also compete with us in recruiting and retaining qualified research and development, engineering, sales, marketing, corporate and management personnel, as well as in acquiring technologies complementary to, or necessary for, our products and services. Additional mergers and acquisitions may result in even more resources being concentrated with our competitors.
Our powertrain controls include, but are not limited to, torque arbitration and power state management, thermal management for our powertrain and high-voltage battery systems, advanced driver assistance and safety (ADAS) and charging system communication and controls. • Body controls .
Our powertrain controls include, but are not limited to, torque arbitration and power state management, thermal management for our powertrain and high-voltage battery systems, advanced driver assistance and safety and charging system communication and controls. • Body controls .
Talent Attraction, Growth, and Capability Assessment We leverage best practices in assessments and talent management to strengthen and expand our current capabilities and future pipeline while reinforcing a culture of belonging, empowerment, and innovation.
Talent Attraction, Growth, and Capability Assessment We seek to leverage best practices in assessments and talent management to strengthen and expand our current capabilities and future pipeline while reinforcing a culture of belonging, empowerment, and innovation.
A significant portion of our customers operate in the parcel and delivery segment which has a “peak season” between the Thanksgiving and Christmas season, resulting in preparatory fleet expansions leading into such period followed by declined new vehicle purchases thereafter. Intellectual Property Our ability to protect our material intellectual property is important to our business.
A significant portion of our customers operate in the parcel and delivery segment which has a “peak season” between the Thanksgiving and Christmas holidays, resulting in preparatory fleet expansions leading into such period followed by declined new vehicle purchases thereafter. Intellectual Property Our ability to protect our material intellectual property is important to our business.
Today the most popular customer configurations utilizing our MD X-Platform include the following: • Commercial Stepvans: Stepvan configurations are an attractive choice for our wide-range of parcel delivery, linen, and food & beverage customers. • Armored Trucks: Armored truck configurations using our MD X-Platform are popular with Xos customers specializing in armored cash transport and logistics.
Today the most popular customer configurations utilizing our chassis include the following: • Commercial Stepvans: Stepvan configurations are an attractive choice for our wide-range of parcel delivery, linen, and food & beverage customers. • Armored Trucks: Armored truck configurations using our X-Platform are popular with Xos customers specializing in armored cash transport and logistics.
Available Information (Website) The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed with or furnished to the Securities and Exchange Commission (“SEC”) pursuant to Sections 13(a) and 15(d) of the “Exchange Act”, are available, free of charge, on our Investor Relations website at https://investors.xostrucks.com/ as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Available Information (Website) The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed with or furnished to the Securities and Exchange Commission (“SEC”) pursuant to Sections 13(a) and 15(d) of the “Exchange Act”, are available, free of charge, on our Investor Relations website at https://www.xostrucks.com/investor-overview as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
On March 26, 2024, Xos completed the previously announced business combination involving ElectraMeccanica Vehicles Corp.(“ElectraMeccanica”), whereby Xos acquired all of the issued and outstanding common shares of ElectraMeccanica (the “ElectraMeccanica Shares”) pursuant to a plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (British Columbia) (the “Arrangement”) in accordance with the terms of an arrangement agreement entered into by Xos and ElectraMeccanica on January 11, 2024, as amended on January 31, 2024 (the “Arrangement Agreement”).
On March 26, 2024, Xos completed the previously announced business combination involving ElectraMeccanica, whereby Xos acquired all of the issued and outstanding common shares of ElectraMeccanica (the “ElectraMeccanica Shares”) pursuant to a plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (British Columbia) (the “Arrangement”) in accordance with the terms of an arrangement agreement entered into by Xos and ElectraMeccanica on January 11, 2024, as amended on January 31, 2024 (the “Arrangement Agreement”).
ZEV credits in California are calculated under the ZEV regulation and are paid in relation to ZEVs sold and registered in California including battery electric vehicles (“BEVs”) and fuel cell electric vehicles (“FCEVs”). The ZEV program assigns ZEV credits to each vehicle manufacturer.
ZEV credits in California are calculated under the ZEV regulation and are paid in relation to ZEVs sold and registered in California including battery electric vehicles and fuel cell electric vehicles. The ZEV program assigns ZEV credits to each vehicle manufacturer.
For some state rebate and incentive programs, only a finite amount of funding is available. Notable for Xos customers is the California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (“HVIP”), which provides point-of-sale vouchers for certain qualifying ZEVs.
For some state rebate and incentive programs, only a finite amount of funding is available. Notable for Xos customers is the California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (“HVIP”), which provides point-of-sale vouchers for certain qualifying zero-emission vehicles (“ZEVs”).
The IRA includes multiple incentives to promote clean energy, electric vehicles, battery and energy storage manufacture or purchase, including through providing tax credits to consumers. For example, qualifying Xos customers may be eligible to receive up to $40,000 per vehicle in federal tax credits for the purchase of qualified electric vehicles in the U.S. through 2032.
The Inflation Reduction Act includes multiple incentives to promote clean energy, electric vehicles, battery and energy storage manufacture or purchase, including through providing tax credits to consumers. For example, qualifying Xos customers may be eligible to receive up to $40,000 per vehicle in federal tax credits for the purchase of qualified electric vehicles in the U.S. through 2032.
Item 1. Business Overview Xos, Inc. and 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 Class 5-8 battery-electric commercial vehicles that travel on last-mile, back-to-base routes of up to 200 miles per day.
Item 1. Business Overview 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 that travel on last-mile, back-to-base routes of up to 200 miles per day.
Regulations in Canada Our vehicles available for sale in the Canadian market are subject to environmental and safety certifications administered by the appropriate Canadian regulatory authorities, including, but not limited to the Canada Motor Vehicle Safety Standards (“CMVSS”), which is administered by Transport Canada. Air quality standards are administered by Environment Canada, which accepts US EPA certification.
Regulations in Canada Our vehicles available for sale in the Canadian market are subject to environmental and safety certifications administered by the appropriate Canadian regulatory authorities, including, but not limited to the Canada Motor Vehicle Safety Standards, which is administered by Transport Canada. Air quality standards are administered by Environment Canada, which accepts U.S. EPA certification.
Our People Operations team is and will be responsible for our human capital policies and strategies and their collective recommendations to our CEO and key leadership members allow us to proactively manage our human capital and care for our employees in a manner that is consistent with our values.
Our People Operations team is and will be 16 responsible for our human capital policies and strategies and their collective recommendations to our Chief Executive Officer and key leadership members allow us to proactively manage our human capital and care for our employees in a manner that is consistent with our values.
The governing regulations, which are issued by the Pipeline and Hazardous Materials Safety Administration, are based on the UN Recommendations on the Safe Transport of Dangerous Goods Model Regulations and related UN Manual Tests and Criteria. The regulations vary by mode of shipping transportation, such as by ocean vessel, rail, truck or air.
The governing regulations, which are issued by the 15 Pipeline and Hazardous Materials Safety Administration, are based on the United Nations Recommendations on the Safe Transport of Dangerous Goods Model Regulations and related U.N. Manual Tests and Criteria. The regulations vary by mode of shipping transportation, such as by ocean vessel, rail, truck or air.
Xos customers have significantly benefited from the California HVIP program. Approximately 100 Xos vehicles delivered to date have been subsidized by HVIP, and HVIP funding is being secured for many more Xos vehicle deliveries and orders. 15 Infrastructure Incentives A number of states and municipalities also offer incentive programs to encourage the installation of charging infrastructure for electric vehicles.
Xos customers have significantly benefited from the California HVIP program. Approximately 200 Xos vehicles delivered through December 31, 2024 have been subsidized by HVIP, and HVIP funding is being secured for many more Xos vehicle deliveries and orders. Infrastructure Incentives A number of states and municipalities also offer incentive programs to encourage the installation of charging infrastructure for electric vehicles.
Governmental Programs, Incentives & Regulations Our business is impacted by various government programs, credits, incentives and policies. Our business and products are also subject to numerous governmental regulations that vary among jurisdictions. Electric vehicle and charging infrastructure demand has been spurred by government incentives and regulations at federal, state and local levels.
Our business and products are also subject to numerous governmental regulations that vary among jurisdictions. Electric vehicle and charging infrastructure demand has been spurred by government incentives and regulations at federal, state and local levels.
See Note 19 — Subsequent Events in the accompanying consolidated financial statements for more information. Our Products & Services Xos Vehicles Class 5-6 Medium Duty Rolling Chassis: We currently manufacture a Class 5-6 Medium Duty Rolling Chassis (the “MD X-Platform”) with multiple body options to address a range of customer applications.
See Note 5 — Acquisition of ElectraMeccanica in the accompanying consolidated financial statements for more information. Our Products & Services Xos Vehicles Class 5-6 Medium Duty Rolling Chassis: We currently manufacture a Class 5-6 Medium Duty Rolling Chassis with multiple body options to address a range of customer applications.
The modularity of our MD X-Platform 10 allows for numerous use cases and body configurations to satisfy customer demands.
The modularity of our X-Platform chassis allows for numerous use 9 cases and body configurations to satisfy customer demands.
Other U.S. states have adopted similar standards including Colorado, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Vermont. We may take advantage of these regimes by registering and selling ZEVs in these other U.S. states.
Other U.S. states have adopted similar standards including Colorado, Connecticut, Delaware, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Washington, and the District of Columbia. We may take advantage of these regimes by registering and selling ZEVs in these other U.S. states.
The registration and sale of zero-emission vehicles (“ZEV”) in California could earn Xos ZEV credits that Xos could in turn sell to traditional original equipment manufacturers (“OEMs”) looking to offset emissions from their traditional internal combustion engine vehicles in order to meet California’s emissions regulations.
The registration and sale of ZEVs in California could earn Xos ZEV credits that Xos could in turn sell to traditional OEMs looking to offset emissions from their traditional internal combustion engine vehicles in order to meet California’s emissions regulations.
In addition to competition from traditional diesel OEMs, we face competition from disruptive vehicle manufacturers that are developing alternative fuel and electric commercial vehicles, such as Nikola, Rivian, Workhorse, Harbinger, The Lion Electric Company, and Motiv Power Systems.
In addition to competition from traditional diesel OEMs, we face competition from disruptive vehicle manufacturers that are developing alternative fuel and electric commercial vehicles, such as Rivian and Harbinger.
We have also entered into robust partnerships with established distributors to facilitate service for commercial fleets. During the year ended December 31, 2023, two customers accounted for 54% and 10%, respectively, of the Company’s revenues .
We have also entered into robust partnerships with established distributors to facilitate service for commercial fleets. During the year ended December 31, 2024, three customers accounted for 13%, 11% and 10%, respectively, of the Company’s revenue .
Our comprehensive suite of tools allows fleet operators to (i) monitor vehicle and charging performance in real-time with in-depth telematics; (ii) reduce charging cost; (iii) optimize energy usage; and (iv) manage maintenance and service support with a single software tool.
The Xosphere™ aims to minimize electric fleet TCO through fleet management integration and predictive servicing data. Our comprehensive suite of tools allows fleet operators to (i) monitor vehicle and charging performance in real-time with in-depth telematics; (ii) reduce charging cost; (iii) optimize energy usage; and (iv) manage maintenance and service support with a single software tool.
We have not experienced any work stoppages and consider our relationships with our employees to be good. None of our employees are subject to a collective bargaining agreement or represented by a labor union. Corporate Information Xos, Inc. was initially incorporated on July 29, 2020 as a Cayman Islands exempted company under the name “NextGen Acquisition Corporation” (“NextGen”).
None of our employees are subject to a collective bargaining agreement or represented by a labor union. Corporate Information Xos, Inc. was initially incorporated on July 29, 2020 as a Cayman Islands exempted company under the name “NextGen Acquisition Corporation” (“NextGen”).
Xos Energy Solutions™ Xos Energy Solutions™ is our comprehensive charging infrastructure business through which Xos offers mobile and stationary multi-application chargers, mobile energy storage, and turnkey energy infrastructure services to accelerate client transitions to electric fleets. Xos Energy Solutions™ product and service offerings maximize incentive capture and reduce energy infrastructure installation times and costs.
Xos Energy Solutions™ Xos Energy Solutions™ is our charging infrastructure business through which Xos offers mobile and stationary multi-application chargers and mobile energy storage to accelerate client transitions to electric fleets. Xos Energy Solutions’ product and service offerings are aimed at maximizing incentive capture and reducing energy infrastructure installation times and costs.
Unlike the United States, there are no impediments to a manufacturer applying for and receiving a dealer license to perform sales and services, however, we must obtain the necessary provincial licenses to enable sales and services in each location.
Unlike the United States, there are no impediments to a manufacturer applying for and receiving a dealer license to perform sales and services, however, we must obtain the necessary provincial licenses to enable sales and services in each location. Seasonality Historically, the automotive industry has experienced higher revenue in the spring and summer months.
Our well-being programs are an integral part of our total rewards strategy as we work to address business and employee challenges through a multi-channel approach that provides our diverse populations with choices to meet their specific needs. 18 Employment Data As of December 31, 2023, we had 161 full-time employees and 25 contractors.
Our well-being programs are an integral part of our total rewards strategy as we work to address business and employee challenges through a multi-channel approach that provides our diverse populations with choices to meet their specific needs.
Automobile Manufacturer and Dealer Regulation State laws regulate the manufacture, distribution, sale, and service (including delivery) of automobiles, and generally require motor vehicle manufacturers and dealers to be licensed in order to sell vehicles directly to customers in the state.
Many of those regulations are different from those applicable in the United States and may require redesign and/or retesting. Automobile Manufacturer and Dealer Regulation State laws regulate the manufacture, distribution, sale, and service (including delivery) of automobiles, and generally require motor vehicle manufacturers and dealers to be licensed in order to sell vehicles directly to customers in the state.
Government agencies around the world are expected to continue providing incentives for the purchase of electric vehicles and charging infrastructure, and regulations may be introduced to reduce emissions and encourage the use of clean energy vehicles. Governmental regulations regarding the manufacture, sale and implementation of products and systems similar to ours are subject to future change.
Government agencies around the world are expected to continue providing incentives for the purchase of electric vehicles and charging infrastructure, and regulations may be introduced to reduce emissions and encourage the use of clean energy vehicles.
Xosphere™ also includes connection modules that feature over-the-air update (OTA) capabilities through Xos’ cloud intelligence platform and feature remote diagnostics and maintenance services. Xosphere™ is compatible with Xos vehicles, powertrains, and charging solutions, regardless of the customer’s specific mix of products and services.
Xosphere™ also includes connection modules that feature over-the-air update capabilities through Xos’s cloud intelligence platform and feature remote diagnostics and maintenance services. Xosphere™ is compatible with Xos vehicles, powertrains, and charging solutions, regardless of the customer’s specific mix of products and services. As a result, Xos customers are empowered to cross-manage and optimize multiple Xos products with a single tool.
The Byrdstown plant is capable of producing the X-Platform, battery systems, the Xos Hub™, and conducting certain prototyping and powertrain installation services. In addition to our manufacturing facility in Tennessee, we maintain battery production and remanufacturing capabilities in Los Angeles to produce batteries for specific use cases, remanufacture battery packs, and conduct ongoing research and development initiatives.
The Byrdstown, Tennessee plant is capable of producing our chassis, battery systems and Hub, and conducting certain prototyping and powertrain installation services. In addition to our manufacturing facility in Tennessee, we maintain vehicle-servicing capabilities and conduct ongoing research and development activities in our Los Angeles, California facility.
We cannot predict what impact, if any, such changes may have on our business. Programs & Incentives EV Tax Credits (Inflation Reduction Act) On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law and is effective for taxable years beginning after December 31, 2022, and remains subject to future guidance releases.
Programs & Incentives Electric Vehicle Tax Credits On August 16, 2022, the Inflation Reduction Act of 2022 (“Inflation Reduction Act”) was enacted into law and is effective for taxable years beginning after December 31, 2022, and remains subject to future guidance releases.
The SEC maintains a website at http://www.sec.gov that contains reports, proxy, information statements and other information regarding registrants that file electronically with the SEC. We use our Investor Relations website as a means of disclosing material information. Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, and public conference calls and webcasts.
The SEC maintains a website at https://www.sec.gov that contains reports, proxy, information statements and other information 17 regarding registrants that file electronically with the SEC. We use our Investor Relations website as a means of disclosing material information.
We also create targeted learning experiences, democratizing learning and career development opportunities across the organization, and empowering employees to design their own career paths with skill development targeted for the roles of today and the future. The extent to which our leaders are equipped to care for, inspire, and empower our people plays a vital role in our strategy.
We also aim to create targeted learning experiences, democratizing learning and career development opportunities across the organization, and empowering employees to design their own career paths with skill development targeted for the roles of today and the future.
In an effort to protect our brand, as of December 31, 2023, we had 24 pending or approved U.S. trademark applications. 17 We regularly review our development efforts to assess the existence and patentability of new inventions, and we are prepared to file additional patent applications when we determine it would benefit our business to do so.
We regularly review our development efforts to assess the existence and patentability of new inventions, and we are prepared to file additional patent applications when we determine it would benefit our business to do so.
As of December 31, 2023, we had seven awarded U.S. patents. We pursue the registration of our domain names and material trademarks and service marks in the United States.
As of December 31, 2024, we had eight awarded U.S. patents. We pursue the registration of our domain names and material trademarks and service marks in the United States. In an effort to protect our brand, as of December 31, 2024, we had 23 pending or approved U.S. trademark applications.
The Xos Hub™ allows fleet operators the ability to rapidly deploy electric vehicles without an immediate need to install permanent charging infrastructure.
Our mobile Xos Hub™ can be transported to various locations and provides an easy-to-install alternative to permanent DC fast charging infrastructure. The Xos Hub™ allows fleet operators the ability to rapidly deploy electric vehicles without an immediate need to install permanent charging infrastructure.
Our energy sales representatives are able to assist customers throughout the entire infrastructure design and installation process, including project management, permitting consultation, and funding options upon request. 13 Powered by Xos Armed with in-depth expertise and technology designed for commercial fleet electrification, Xos actively pursues opportunities to supply OEM’s with powertrain kits as first-fit solutions to electrify commercial vehicle offerings from makers of other equipment such as recreational vehicles, buses, forklifts, and other commercial vehicles.
Powered by Xos™ Armed with in-depth expertise and technology designed for commercial fleet electrification, Xos actively pursues opportunities to supply original equipment manufacturers (“OEMs”) with powertrain kits as first-fit solutions to electrify commercial vehicle offerings from makers of other equipment such as recreational vehicles, buses, forklifts, and other commercial vehicles.
Our robust network of mobile technicians, third party service partners, and full line dealer partnerships continues to support our ability to provide customers with comprehensive after-sales services to ensure maximum uptime and minimal operational disruption. 14 Manufacturing & Supply Chain Manufacturing Xos assembles our electric chassis platform, the X-Platform, starting the process with marrying frame rails and cross members, all the way to the final stage testing of a fully powered electric chassis which is then shipped to a body upfit partner.
Manufacturing & Supply Chain Manufacturing Xos assembles our electric chassis platform, the X-Platform, starting the process with marrying frame rails and cross members, all the way to the final stage testing of a fully powered electric chassis which is then shipped to a body upfit partner.
Our custom user interface integrates into all Xos vehicles and is designed to enhance safe vehicle operation and provide critical safety information and driver efficiency guidance. Xos Energy Soluti ons™ DC Fast Chargers Xos Energy Solutions™ offers a suite of Xos DC Fast Chargers that are compatible with both passenger and commercial electric vehicles.
Our custom user interface integrates into all Xos vehicles and is designed to enhance safe vehicle operation and provide critical safety information and driver efficiency guidance.
Each of these sources is subject to periodic modifications and what we anticipate will be increasingly stringent requirements. Violations of these laws, regulations or permits and licenses may result in substantial administrative, civil, or even criminal fines, penalties, and possibly orders to cease any violating operations or to conduct or pay for corrective works.
Violations of these laws, regulations or permits and licenses may result in substantial administrative, civil, or even criminal fines, penalties, and possibly orders to cease any violating operations or to conduct or pay for corrective works. In some instances, violations may also result in the suspension or revocation of permits or licenses. EPA Emissions and Certificate of Conformity The U.S.
Energy & Infrastructure In order to accelerate the adoption of electric trucks across all sectors, Xos has a sales force specialized in charging infrastructure installations to facilitate fleet electrification.
Energy & Infrastructure In order to accelerate the adoption of electric trucks across all sectors, Xos has a sales force specialized in charging infrastructure installations to facilitate fleet electrification. Our energy sales representative is able to assist customers throughout the entire infrastructure design and installation process, including project management, permitting consultation, and funding options upon request.
As a manufacturer, we must self-certify that our vehicles meet all applicable FMVSS, or otherwise are exempt, before the vehicles may be imported or sold in the U.S. 16 We are also required to comply with other federal laws and regulations administered by NHTSA, as well as Federal Motor Carrier Safety Regulations (“FMCSR”), Federal Highway Administration (“FHA”) requirements, and standards set forth by the EPA.
We are also required to comply with other federal laws and regulations administered by NHTSA, as well as Federal Motor Carrier Safety Regulations, Federal Highway Administration requirements, and standards set forth by the EPA. Our vehicles sold outside of the U.S. are subject to similar foreign compliance, safety, environmental and other regulations.
Vehicle manufacturers are required to maintain ZEV credits equal to a set percentage of non-electric vehicles sold and registered in California. Each vehicle sold and registered in California earns a number of credits based on the drivetrain type and the all-electric range (“AER”) of the vehicle under the Urban Dynamometer Driving Schedule Test Cycle.
Vehicle manufacturers are required to maintain ZEV credits equal to a set percentage of non-electric vehicles sold and registered in California.
Our set of leadership standards outlines clear expectations for our leaders: that they regularly connect with team members, spend time teaching and coaching, and champion their team’s career development. We are committed to helping our leaders strengthen these capabilities with dedicated learning paths and non-traditional learning opportunities.
We believe the extent to which our leaders are equipped to care for, inspire, and empower our people plays a vital role in our strategy. Our set of leadership standards outlines clear expectations for our leaders: that they regularly connect with team members, spend time teaching and coaching, and champion their team’s career development.
We employ programs to understand employee sentiment on their mental and emotional well-being, health & safety, employee experience, culture, diversity, equity and inclusion, leadership and strategic alignment. Suggestion boxes and focus groups collect additional information on employee sentiment and needs, and we communicate the resulting actions taken with our employee population.
Suggestion boxes and focus groups collect additional information on employee sentiment and needs, and we communicate the resulting actions taken with our employee population.
Employee Well-Being Initiatives Our holistic approach to well-being encompasses the financial, social, mental/emotional, physical, and professional needs of our employees. Foundational to our well-being philosophy is providing a broad array of resources and solutions to educate employees and build capability and support for meeting individual well-being needs and goals.
Foundational to our well-being philosophy is providing a broad array of resources and solutions to educate employees and build capability and support for meeting individual well-being needs and goals. We employ programs to understand employee sentiment on their mental and emotional well-being, health & safety, employee experience, culture, diversity, equity and inclusion, leadership and strategic alignment.
Vehicle Control Software We designed and developed on-board vehicle control software to leverage third-party software and integrate our proprietary powertrain controls, body controls, instrument cluster, infotainment and Xosphere™ software. • Powertrain controls .
We believe this supports Xos’s commitment to deliver durable, high-quality electric vehicles while continually driving down total cost of ownership for our customers. Vehicle Control Software We designed and developed on-board vehicle control software to leverage third-party software and integrate our proprietary powertrain controls, body controls, instrument cluster, infotainment and Xosphere™ software. 11 • Powertrain controls .
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 to provide commercial fleet operators a more seamless and cost-efficient vehicle ownership experience than traditional internal combustion engine counterparts.
The Company’s 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. Xos developed its chassis (the “X-Platform”) and high-voltage architecture with a focus on the medium-duty commercial vehicle segment and, in particular, last-mile commercial fleet operations.
Compliance with such laws and regulations at an international, regional, national, state and local level is an important aspect of our ability to continue our operations. Environmental standards applicable to us are established by the laws and regulations of the countries in which we operate, standards adopted by regulatory agencies and the permits and licenses issued to us.
The laws and regulations to which we are subject govern, among others, vehicle emissions and the storage, handling, treatment, transportation and disposal of hazardous materials and the remediation of environmental contamination. Compliance with such laws and regulations at an international, regional, national, state and local level is an important aspect of our ability to continue our operations.
The new lease commenced on January 1, 2022, and will terminate pursuant to its terms on January 31, 2027, unless amended and/or extended. We also have a manufacturing facility located in Byrdstown, Tennessee that utilizes the facilities of Fitzgerald Manufacturing Partners, LLC, the largest manufacturer of glider kits in the United States.
We recognize a monthly income of $43,000 (including common area maintenance) o ver the lease term. We also have a manufacturing facility located in Byrdstown, Tennessee that utilizes the facilities of Fitzgerald Manufacturing Partners, LLC, the largest manufacturer of glider kits in the United States. We lease two properties in Byrdstown subject to leases that expire in 2026 and 2027.
Facilities Our headquarters are located in an 85,142 square foot facility in Los Angeles, California, where we design, engineer and develop our vehicles and battery packs. We entered a new lease agreement for the facility with the landlord in August 2021.
Facilities Our headquarters are located in an 85,142 square foot facility in Los Angeles, California, where we perform executive and administrative functions and service our vehicles and systems, among other things.
Regulations in the United States We operate in an industry that is subject to extensive environmental regulation, which has become more stringent over time. The laws and regulations to which we are subject govern, among others, vehicle emissions and the storage, handling, treatment, transportation and disposal of hazardous materials and the remediation of environmental contamination.
Each vehicle sold and registered in California earns a number of credits based on the drivetrain type and the all-electric range of the vehicle under the Urban Dynamometer Driving Schedule Test Cycle. 14 Regulations in the United States We operate in an industry that is subject to extensive environmental regulation, which has become more stringent over time.
Service & Maintenance We continue to grow our service network with added Xos field service technicians nationwide.
Service & Maintenance We continue to grow our service network with added Xos field service technicians nationwide. Our robust network of mobile technicians, third-party service partners, and full line dealer partnerships continues to support our ability to provide customers with comprehensive after-sales services to ensure maximum uptime and minimal operational disruption.
Removed
Xos developed the X-Platform (its proprietary, purpose-built vehicle chassis platform) and the X-Pack (its proprietary battery system) specifically for the medium- and heavy-duty commercial vehicle segment with a focus on last-mile commercial fleet operations.
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Xos also offers, through Xos Energy Solutions™, mobile and fixed charging infrastructure products, such as the Xos Hub, and has from time to time offered services to support electric vehicle fleets.
Removed
Class 7-8 Heavy Duty Chassis: In May 2022 we launched our Class 7-8 Heavy Duty Chassis (the “HD X-Platform,” and together with the “MD X-Platform, the “X-Platform”). We plan to continue to develop the HD X-Platform for use by future customers in regional haul fleets with body configurations to include box trucks, refrigerated units, and flatbeds.
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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.
Removed
The next generation Xos Hub™ offers customers 280kWh of energy storage capacity and charging rates up to 160kW. The Xos Hub™ is capable of simultaneously charging up to four electric vehicles. Xos has made deliveries to several customers, including FedEx Ground and Duke Energy, and expects to deliver units to several other large fleets in utilities in the coming months.
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Xos has made deliveries to 10 several customers, including FedEx Ground, Xcel Energy, Florida Power & Light, Duke Energy, RKU Distributing and ABM Facility Solutions, and expects to deliver units to several other large fleets in the near future. Xosphere™ Our fleet management platform—Xosphere™—interconnects vehicle, maintenance, charging, and service data to improve overall customer experience.
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Xosphere™ Our fleet management platform—Xosphere™—interconnects vehicle, maintenance, charging, and service data to improve overall customer experience. The Xosphere™ aims to minimize electric fleet TCO through fleet management integration and predictive servicing data.
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Technology Supporting Our Products & Services Xos Vehicles & Powered by Xos™ Our proprietary X-Platform chassis serves as the foundation for all Xos vehicle products. Unlike traditional Class 5 and 6 platforms, our chassis was originally designed and modeled around a more robust Class 7 vehicle architecture.
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As a result, Xos customers are empowered to cross-manage and optimize multiple Xos products with a single tool. Technology Supporting Our Products & Services Xos Vehicles & Powered by Xos™ Our proprietary battery pack systems (the “X-Pack”) and the X-Platform were engineered to be modular.
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As a result, it was designed to feature sturdier and larger frame rails, a reinforced suspension system, and enhanced durability for demanding commercial use cases. We believe this rugged design provides superior strength and reliability, making it well-suited for a wide range of vehicle body integrations and last-mile applications.
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Such modular design for the X-Pack and X-Platform enables fleet operators to match our chassis with their preferred vehicle body and battery range in order to meet their specific commercial use case. X-Pack We have developed proprietary battery pack technology purpose-built for last-mile commercial use cases.
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Over the past several years, we have worked to improve to the high-voltage system architecture of our vehicles. These modifications have led to substantial weight savings — eliminating hundreds of pounds in cabling, mounting brackets, and redundant components — while improving both serviceability and durability.
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Our Xos battery packs (“X-Packs”) feature “cut-to-length” modular architecture to provide flexibility and satisfy customers’ preferred range and payload capacities. We strive to continuously improve our in-house designs while also utilizing partner battery packs to provide innovative solutions for our customers and improve vehicle TCO. X-Platform The X-Platform is the foundation of Xos vehicle products.
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Our streamlined architecture now contains nearly all high-voltage cables, wiring harnesses, and sensitive electronic components within protective structures or fully enclosed frame rails, aimed at increasing the resilience of our vehicles in real-world fleet operations. All Xos vehicles utilize lithium iron phosphate (LFP) battery packs, which are the most widely adopted chemistry in commercial electric vehicles globally.
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Our modular proprietary chassis accommodates a wide range of commercial use applications and vehicle body upfits. Such modularity provides Xos with a competitive advantage in the commercial transportation sector in which commercial fleet operators deploy vehicles across an array of applications and environments.
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These batteries are sourced through industry-leading partners in order to deliver consistent performance and long cycle-life for our customers. Compared to alternatives like nickel manganese cobalt (NMC) batteries, LFP batteries contain significantly fewer rare earth and conflict minerals, which we believe results in a more resilient supply chain and better long-term cost performance.
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Each X-Platform is able to accommodate a sufficient number of battery packs to provide up to 200 miles of range across our current vehicle product variants. Our vehicle range capability allows Xos vehicles to meet the demands of rigorous last-mile 12 routes. Each X-Platform is constructed with high-strength steel and designed to enhance durability relative to competitive products.
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We are increasingly subject to varying and sometimes conflicting rules, tariffs, and import restrictions that can change with little notice. These regulatory changes may impact our ability to continue sourcing components from certain regions or accessing key suppliers.
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Charger types on offer include 60kW and 120kW EV cabinet chargers. The DC Fast Chargers can be configured with different features to meet different use cases and budgets. Fleet owners and operators can monitor chargers through the Xosphere™ fleet management platform to remotely observe performance, maintain charging profiles and optimize TCO.
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See “ Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, could adversely affect our business, prospects, financial condition and operating results,” in Part I, Item 1A “Risk Factors” of this Report. Governmental Programs, Incentives & Regulations Our business is impacted by various government programs, credits, incentives and policies.
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Xos Hub™ We also offer the Xos Hub™, a mobile energy storage and charging system. The Xos Hub™ enables customers to simultaneously charge up to four electric vehicles with standard CCS1 connectors. Our mobile Xos Hub™ can be transported to various locations and provides an easy-to-install alternative to permanent DC fast charging infrastructure.
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However, any 13 reduction or elimination of government programs, incentives or credits because of policy changes, the reduced need for such programs due to the perceived success of the electric vehicle, fiscal tightening or other reasons may result in the diminished competitiveness of the electric vehicle industry, which would adversely affect our business.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe anticipate that in the future there will be new opportunities for us to apply for grants, loans and other incentives from U.S. federal, state and foreign governments. Our ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of our applications to participate in such programs.
Biggest changeOur ability to obtain funds or incentives from government sources in the future is subject to the existence of applicable governmental programs, the availability of funds under such programs and approval of our applications to participate in such programs. The application process for these funds and other incentives will likely be highly competitive.
Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the risks and uncertainties set forth herein as well as the other information in this Report, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below, or of additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, financial condition, growth prospects, liquidity and results of operations.
Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the risks and uncertainties set forth herein as well as the other information in this Report, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below, or of additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, growth prospects, financial condition, liquidity and results of operations.
Moreover, the charging bays at such stations or networks may (i) have limited availability, (ii) be unable to accommodate commercial electrical vehicles such as our products, and (iii) feature charging times that are unacceptable to our customers.
Moreover, the charging bays at such stations or networks may (i) have limited availability, (ii) be unable to accommodate commercial electrical vehicles such as our products, and/or (iii) feature charging times that are unacceptable to our customers.
We have incurred, and expect to continue incurring, significant expenses as we expand our business, and that our level of expenses will be significantly affected by customer demand for our products and services.
We have incurred, and expect to continue incurring, significant expenses as we expand our business, and we expect that our level of expenses will be significantly affected by customer demand for our products and services.
As a result, we restated the financial statements for the Affected Periods. As a result, we incurred unanticipated costs for accounting and legal fees in connection with the restatements, and the restatements may have the effect of eroding investor confidence in us and our financial reporting and accounting practices and processes and may raise reputational issues for our business.
As a result, we restated the financial statements for the Affected Periods. We incurred unanticipated costs for accounting and legal fees in connection with the restatements, and the restatements may have the effect of eroding investor confidence in us and our financial reporting and accounting practices and processes and may raise reputational issues for our business.
Any such regulatory consequences, litigation, claim or dispute, whether successful or not, could subject us to additional costs, divert the attention of our management, or impair our reputation. Each of these consequences could have a material adverse effect on our business, results of operations and financial condition.
Any such regulatory consequences, litigation, claim or dispute, whether successful or not, could subject us to additional costs, divert the attention of our management, or impair our reputation. Each of these consequences could have a material adverse effect on our business, reputation, results of operations and financial condition.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, seek additional capital or restructure or refinance our debt. These alternative measures may not be successful and may not permit us to meet our debt service obligations.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, seek additional capital or restructure or refinance our debt. These alternative measures may not be successful and may not permit us to meet debt service obligations.
Security incidents and attendant consequences may prevent or cause customers to stop using our products, deter new customers from using our products, and negatively impact our ability to grow and operate our business.
Security incidents and attendant consequences may prevent customers from, or cause customers to stop, using our products, deter new customers from using our products, and negatively impact our ability to grow and operate our business.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers, interruptions or stoppages in our business operations (including, interruptions or stoppages of data collection needed to train our algorithms, inability to process personal information or to operate in certain jurisdictions, limited ability to develop or commercialize our products, expenditure of time and resources to defend any claim or inquiry, adverse publicity, or substantial changes to our business model or operations).
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations (including, interruptions or stoppages of data collection needed to train our algorithms); inability to process personal information or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; and/or substantial changes to our business model or operations.
Our continued development and manufacture of our products are and will be subject to a number of risks, including with respect to: 20 • our ability to acquire and install the equipment necessary to manufacture the desired quantity of our products within the specified design tolerances; • long- and short-term durability of our products to withstand day-to-day wear and tear; • compliance with environmental, workplace safety and similar regulations; • engineering, designing, testing and securing delivery of critical systems and components on acceptable terms and in a timely manner; • delays in delivery of final systems and components by our suppliers; • shifts in demand for our current products and future derivatives built off the X-Platform™; • the compatibility of the X-Platform™ with future vehicle designs; • our ability to attract, recruit, hire and train skilled employees; • quality controls, particularly as we plan to expand our manufacturing capabilities; • delays or disruptions in our supply chain, like those we have recently experienced due to broader macroeconomic trends; • other delays and cost overruns; and • our ability to secure additional funding, if necessary.
Our continued development and manufacture of our products are and will be subject to a number of risks, including with respect to: • our ability to acquire and install the equipment necessary to manufacture the desired quantity of our products within the specified design tolerances; • long- and short-term durability of our products to withstand day-to-day wear and tear; • compliance with environmental, workplace safety and similar regulations; • engineering, designing, testing and securing delivery of critical systems and components on acceptable terms and in a timely manner; • delays in delivery of final systems and components by our suppliers; • shifts in demand for our current products and future derivatives built off the X-Platform; • the compatibility of the X-Platform with future vehicle designs; • our ability to attract, recruit, hire and train skilled employees; • quality controls, particularly as we plan to expand our manufacturing capabilities; • delays or disruptions in our supply chain, like those we have recently experienced due to broader macroeconomic trends; • other delays and cost overruns; and • our ability to secure additional funding, if necessary.
As a result, the market for our products could be affected by numerous factors, such as: • perceptions about electric vehicle, powertrain and battery pack features, quality, safety, performance, reliability and cost; • perceptions about the limited range over which electric vehicles may be driven on a single charge; • government regulations and economic incentives; 27 • the availability of tax and other government incentives to purchase and operate alternative fuel, hybrid and electric vehicles or future laws requiring increased use of such vehicles; • the decline of vehicle efficiency resulting from deterioration over time in the ability of a battery pack to hold a charge; • the availability of service and associated costs for alternative fuel, hybrid or electric vehicles; • competition, including from other types of alternative fuel, plug-in hybrid, electric and high fuel-economy internal combustion engine vehicles; • changes or improvements in the fuel economy of internal combustion engines, competitors’ vehicles and vehicle controls or competitors’ electrified systems; • fuel and energy prices, including volatility in the cost of fossil fuels, alternative fuels and electricity; • the timing of adoption and implementation of fully autonomous vehicles; • access to charging facilities and related infrastructure costs and standardization of electric vehicle charging systems; • electric grid capacity and reliability; and • macroeconomic factors.
As a result, the market for our products could be affected by numerous factors, such as: • perceptions about electric vehicle, powertrain and battery pack features, quality, safety, performance, reliability and cost; • perceptions about the limited range over which electric vehicles may be driven on a single charge; • government regulations and economic incentives; • the availability of tax and other government incentives to purchase and operate alternative fuel, hybrid and electric vehicles or future laws requiring increased use of such vehicles; • the decline of vehicle efficiency resulting from deterioration over time in the ability of a battery pack to hold a charge; • the availability of service and associated costs for alternative fuel, hybrid or electric vehicles; • competition, including from other types of alternative fuel, plug-in hybrid, electric and high fuel-economy internal combustion engine vehicles; • changes or improvements in the fuel economy of internal combustion engines, competitors’ vehicles and vehicle controls or competitors’ electrified systems; • fuel and energy prices, including volatility in the cost of fossil fuels, alternative fuels and electricity; • the timing of adoption and implementation of fully autonomous vehicles; • access to charging facilities and related infrastructure costs and standardization of electric vehicle charging systems; • electric grid capacity and reliability; and • macroeconomic factors.
The Warrant Agreement provides that (a) the terms of the Warrants may be amended without the consent of any holder for the purpose of (i) curing any ambiguity or correct any mistake, including to conform the provisions of the Warrant Agreement to the description of the terms of the Warrants and the Warrant Agreement set forth in the related prospectus, or defective provision or (ii) adding or changing any provisions with respect to matters or questions arising under the Warrant Agreement as the parties to the Warrant Agreement m ay deem necessary or desirable and that the parties deem to not adversely affect the rights of the registered holders of the Warrants under the Warrant Agreement and (b) all other modifications or amendments require the vote or written consent of at least 65% of the then outstanding Public Warrants; provided that any amendment that solely affects the terms of the Private Placement Warrants or any provision of the Warrant Agreement solely with respect to the Private Placement Warrants will also require at least 65% of the then outstanding Private Placement Warrants.
The Warrant Agreement provides that (a) the terms of the Warrants may be amended without the consent of any holder for the purpose of (i) curing any ambiguity or correct any mistake, including to conform the provisions of the Warrant Agreement to the description of the terms of the Warrants and the Warrant Agreement set forth in the related prospectus, or defective provision or (ii) adding or changing any provisions with respect to matters or questions arising under the Warrant Agreement as the parties to the Warrant Agreement m ay deem necessary or desirable and that the parties deem to not adversely affect the rights of the registered holders of the Warrants under the Warrant Agreement and (b) all other modifications or amendments require the vote or written consent of at least 65% of the then outstanding Public Warrants; provided that any amendment that solely affects the 44 terms of the Private Placement Warrants or any provision of the Warrant Agreement solely with respect to the Private Placement Warrants will also require at least 65% of the then outstanding Private Placement Warrants.
Our substantial indebtedness may: • limit our ability to use our cash flow or borrow additional funds for working capital, capital expenditures, acquisitions, investments or other general business purposes; • require us to use a substantial portion of our cash flow from operations to make debt service payments; • limit our flexibility to plan for, or react to, changes in our business and industry, or our ability to take specified actions to take advantage of certain business opportunities that may be presented to us; • result in dilution to our existing stockholders in the event the Convertible Note is settled in our shares of our Common Stock; • place us at a competitive disadvantage compared to our less leveraged competitors; and • increase our vulnerability to the impact of adverse economic and industry conditions.
Our substantial indebtedness may: • limit our ability to use our cash flow or borrow additional funds for working capital, capital expenditures, acquisitions, investments or other general business purposes; • require us to use a substantial portion of our cash flow from operations to make debt service payments; • limit our flexibility to plan for, or react to, changes in our business and industry, or our ability to take specified actions to take advantage of certain business opportunities that may be presented to us; 33 • result in dilution to our existing stockholders in the event the Convertible Note is settled in our shares of Common Stock; • place us at a competitive disadvantage compared to our less leveraged competitors; and • increase our vulnerability to the impact of adverse economic and industry conditions.
We have the ability to redeem the outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.30 per warrant if, among other things, the last reported sale price of our 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 we send the notice of redemption to the warrant holders equals or exceeds $540.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like).
We have the ability to redeem the outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant if, among other things, the last reported sale price of our 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 we send the notice of redemption to the warrant holders equals or exceeds $540.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like).
Any such issuances of additional shares of our Common Stock or Preferred Stock: • may significantly dilute the equity interests of our investors; • may subordinate the rights of holders of our Common Stock if Preferred Stock is issued with rights senior to those afforded our Common Stock; • could cause a change in control if a substantial number of shares of our Common Stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and • may adversely affect prevailing market prices for our Common Stock and/or Warrants.
Any such issuances of additional shares of our Common Stock or Preferred Stock: • may significantly dilute the equity interests of our investors; • may subordinate the rights of holders of our Common Stock if Preferred Stock is issued with rights senior to those afforded our Common Stock; • could cause a change in control if a substantial number of shares of our Common Stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and 45 • may adversely affect prevailing market prices for our Common Stock and/or Warrants.
We expect to continue to incur losses in future periods as we: • continue to design, develop, manufacture and market our products; • expand our manufacturing capabilities, including costs associated with contracting the assembly of our products; • build up inventories of parts and components for our products; • manufacture an inventory of our products; • expand our design, development, installation and servicing capabilities; • increase our sales and marketing activities and develop our distribution infrastructure; and • increase our general and administrative functions to support our growing operations and to operate as a public company.
We expect to continue to incur losses in future periods as we: • continue to design, develop, manufacture and market our products; • expand our manufacturing capabilities, including costs associated with contracting the assembly of our products; • build up inventories of parts and components for our products; • manufacture an inventory of our products; • expand our design, development, installation and servicing capabilities; 29 • increase our sales and marketing activities and develop our distribution infrastructure; and • increase our general and administrative functions to support our growing operations and to operate as a public company.
If we are not able to remediate the material weaknesses, or if we identify any new material weaknesses in the future, we may be unable to maintain compliance with the requirements of securities laws, stock exchange listing rules, or debt instrument covenants regarding timely filing of information; we could lose access to sources of capital or liquidity; and investors may lose confidence in our financial reporting and our stock price may decline as a result.
If we are not able to remediate the material weaknesses, or if we identify any new material weaknesses in the future, then we may be unable to maintain compliance with the requirements of securities laws, stock exchange listing rules, or debt instrument covenants regarding timely filing of information; we could lose access to sources of capital or liquidity; and investors may lose confidence in our financial reporting and our stock price may decline as a result.
Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of manufacturing equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on our business, prospects, financial condition or operating results.
Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of manufacturing equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs, reputational damage and potential legal liabilities, all which could have a material adverse effect on our business, prospects, financial condition or operating results.
Our efforts to install, configure and implement dedicated charging solutions have been affected by numerous factors, such as; • the cost, availability, standardization and quality of commercial electric vehicle charging systems; • the availability of government incentives and our ability to navigate legal requirements, such as permits, associated with installing electric vehicle charging systems; 23 • our ability to hire skilled employees, or train new employees, that are qualified to install and/or service electric vehicle charging systems; and • electric grid capacity and reliability.
Our efforts to install, configure and implement dedicated charging solutions have been affected by numerous factors, such as; • the cost, availability, standardization and quality of commercial electric vehicle charging systems; • the availability of government incentives and our ability to navigate legal requirements, such as permits, associated with installing electric vehicle charging systems; • our ability to hire skilled employees, or train new employees, that are qualified to install and/or service electric vehicle charging systems; and • electric grid capacity and reliability.
Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal information to the United States.
Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject 39 to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal information to the United States.
Additionally, companies that transfer 39 personal information out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups. Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations.
Additionally, companies that transfer personal information out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups. Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations.
Our ability to utilize net operating loss carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including potential changes in connection with the Business Combination, the acquisition of ElectraMeccanica or other transactions. Similar rules may apply under state tax laws.
Our ability to utilize net operating loss carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result 31 of ownership changes, including potential changes in connection with the Business Combination, the acquisition of ElectraMeccanica or other transactions. Similar rules may apply under state tax laws.
In addition, because we are incorporated in Delaware, we are governed by the provisions of 48 Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.
Moreover, our financial results may not meet expectations of equity research analysts or investors, who may be focused primarily on quarterly financial results, which could cause the trading price of our Common Stock to fall substantially, either suddenly or over time. 30 Our business plans require a significant amount of capital.
Moreover, our financial results may not meet expectations of equity research analysts or investors, who may be focused primarily on quarterly financial results, which could cause the trading price of our Common Stock to fall substantially, either suddenly or over time. Our business plans require a significant amount of capital.
For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (the “CPRA”), (collectively, the “CCPA”), applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.
For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (collectively, the “CCPA”), applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.
On March 8, 2023, the Audit Committee of our Board of Directors, after discussion with management and with our independent registered public accounting firm, concluded that our previously issued unaudited condensed consolidated financial statements as of and for the quarters ended March 31, 2022, June 30, 2022 and September 30, 2022 (the “Affected Periods”) should no longer be relied upon due to (1) errors in recording results of a physical inventory count, which caused inventories to be overstated and cost of goods sold to be understated, and (2) errors in the improper recording of duplicate inventory receipts as well as improper and inaccurate recording of prepaid inventories, which caused inventories, prepaid inventories (included within Prepaid expenses and other current assets) and accrued expenses (included within Other current liabilities) to be overstated.
On March 8, 2023, the Audit Committee of our Board of Directors, after discussion with management and with our independent registered public accounting firm, concluded that our previously issued unaudited condensed consolidated financial statements as of and for the quarters ended March 31, 2022, June 30, 2022 and September 30, 2022 (the “Affected Periods”) should no longer be relied upon due to (1) errors in recording results of a physical inventory count, which caused inventories to be overstated and cost of goods sold to be understated, and (2) the improper recording of duplicate inventory receipts as well as improper and inaccurate recording of prepaid inventories, which caused inventories, prepaid inventories (included within Prepaid expenses and other current assets in our consolidated balance sheets) and accrued expenses (included within Other current liabilities) to be overstated.
The useful life of any equipment that would be retired early as a result would be shortened, causing the depreciation on such equipment to be accelerated, and our results of operations could be negatively impacted. Our delay in providing sufficient charging solutions for our vehicles has resulted in the delay of the delivery of vehicles to customers.
The useful life of any equipment that would be retired early as a result would be shortened, causing the depreciation on such equipment to be accelerated, and our results of operations could be negatively impacted. 25 Our delay in providing sufficient charging solutions for our vehicles has resulted in the delay of the delivery of vehicles to customers.
Semler or Sordoni were to discontinue their services to us due to death, 26 disability or any other reason, we would be significantly disadvantaged. Additionally, the unexpected loss of or failure to retain one or more of our key personnel and senior management members could adversely affect our business.
Semler or Sordoni were to discontinue their services to us due to death, disability or any other reason, we would be significantly disadvantaged. Additionally, the unexpected loss of or failure to retain one or more of our key personnel and senior management members could adversely affect our business.
There can be no assurance that we will achieve positive cash flow in the near future or at all. 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.
There can be no assurance that we will achieve or maintain positive cash flow in the near future or at all. 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.
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 and may adversely affect investor confidence, our reputation, our ability to raise additional capital, and our business operations and financial condition.
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 and it may adversely affect investor confidence, our reputation, our ability to raise additional capital, and our business operations and financial condition.
Any future determination to pay dividends will be at the discretion of our Board of Directors (our “Board”) and will depend on our financial condition, results of operations, capital requirements, restrictions 44 contained in future agreements and financing instruments, business prospects and such other factors as our Board deems relevant.
Any future determination to pay dividends will be at the discretion of our Board of Directors (our “Board”) and will depend on our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our Board deems relevant.
The actual impact of this provision will depend on multiple factors, including the amount of research and development expenses we will incur, whether we achieve sufficient income to fully utilize such deductions and whether we conduct our research and development activities inside or outside the United States.
The actual impact of this provision will depend on multiple factors, including the amount of research and development expenses we will incur, whether we achieve sufficient 38 income to fully utilize such deductions and whether we conduct our research and development activities inside or outside the United States.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss; and other similar harms.
If we (or a third-party upon which we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss; and other similar harms.
We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties on whom we rely on may fail to comply with such obligations, which could negatively impact our business operations.
We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third-parties on which we rely on may fail to comply with such obligations, which could negatively impact our business operations.
However, we have limited experience to date selling and servicing our products internationally and such expansion would require us to make significant expenditures, including the hiring of local employees 40 and establishing facilities, in advance of generating any revenue.
However, we have limited experience to date selling and servicing our products internationally and such expansion would require us to make significant expenditures, including the hiring of local employees and establishing facilities, in advance of generating any revenue.
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.
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 32 or detected on a timely basis.
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. Tooling our manufacturing facilities for production of our vehicles and our future expansion plans are complicated and present significant challenges.
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. 23 Tooling our manufacturing facilities for production of our vehicles and our future expansion plans are complicated and present significant challenges.
We have entered and may continue to enter into agreements, purchase orders, letters of intent and memorandums of understanding or similar agreements for the sale of our products that include various cancellation rights in favor of the customer.
We have entered and may continue to enter into agreements, purchase orders, letters of intent and memorandums of understanding (“MOUs”) or similar agreements for the sale of our products that include various cancellation rights in favor of the customer.
The rapidly evolving market for last-mile and return-to-base electric vehicles is new and untested and is characterized by rapidly changing technologies, price competition, numerous competitors, evolving government regulation and industry standards and uncertain customer demands and behaviors.
The rapidly evolving market for last-mile and return-to-base electric vehicles is new and untested and is characterized by rapidly changing 20 technologies, price competition, numerous competitors, evolving government regulation and industry standards and uncertain customer demands and behaviors.
However, our rights to indemnification may be unavailable or insufficient to cover our costs and losses. Furthermore, disputes may arise with our licensors regarding the intellectual property subject to, and any of our rights and obligations under, any license or other commercial agreement.
However, our rights to indemnification may be unavailable or insufficient to cover our costs and losses. Furthermore, disputes may arise with our 42 licensors regarding the intellectual property subject to, and any of our rights and obligations under, any license or other commercial agreement.
If we do not continue to establish, maintain and strengthen our brand, we may lose the opportunity to build a critical mass of customers, and our business, prospects, financial condition and operating results may be materially and adversely affected.
If we do not establish, maintain and strengthen our brand, we may lose the opportunity to build a critical mass of customers, and our business, prospects, financial condition and operating results may be materially and adversely affected.
In the absence of such cash flows and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet 33 our debt service and other obligations.
In the absence of such cash flows and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations.
If a large number of products are the subject of a recall, or if needed replacement parts are not in adequate supply, we may not be able to deploy recalled products for a significant period of time.
If a large number of products are the subject of a recall, or if needed replacement 27 parts are not in adequate supply, we may not be able to deploy recalled products for a significant period of time.
Our success, and our ability to increase revenue and operate profitably, depends in part on our ability to identify target customers and to convert early trial deployments with commercial fleets into meaningful orders or additional deployments in the future.
Our success, and our ability to increase revenue and operate profitably, depends in part on our ability to identify target customers and to convert early trial deployments with commercial fleets into orders or additional deployments in the future.
Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.
Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition and results of operations.
For example, legislation known as the Tax Cuts and Jobs Act of 2017 (“TCJA”), the Coronavirus Aid, Relief, and Economic Security Act and the Inflation Reduction Act of 2022 enacted many significant changes to the U.S. tax laws.
For example, legislation known as the Tax Cuts and Jobs Act of 2017 (“TCJA”), the Coronavirus Aid, Relief, and Economic Security Act and the Inflation Reduction Act enacted many significant changes to the U.S. tax laws.
However, the measures we take to obtain, maintain, protect and enforce our intellectual property, including preventing unauthorized use by third parties, may not be effective for various reasons, including the following: • as noted below, any patent applications we submit may not result in the issuance of patents; • the scope of our patents that may subsequently issue may not be broad enough to protect our proprietary rights; • our issued patents may be challenged or invalidated by third parties; • our employees or business partners may breach their confidentiality, non-disclosure and non-use obligations to us; • third parties may independently develop technologies that are the same or similar to ours; • the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make enforcement impracticable; and • current and future competitors may circumvent or otherwise design around our patents.
However, the measures we take to obtain, maintain, protect and enforce our intellectual property, including preventing unauthorized use by third-parties, may not be effective for various reasons, including the following: • as noted below, any patent applications we submit may not result in the issuance of patents; • the scope of any of our existing or future patents may not be broad enough to protect our proprietary rights; • our issued patents may be challenged or invalidated by third-parties; • our employees or business partners may breach their confidentiality, non-disclosure and non-use obligations to us; • third-parties may independently develop technologies that are the same or similar to ours; • the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make enforcement impracticable; and • current and future competitors may circumvent or otherwise design around our patents.
If we, our third-party outsourcing partners or our suppliers are unable to obtain or comply with any of the licenses, approvals, certifications or other authorizations necessary to carry out our operations in the jurisdictions in which we currently operate, or those jurisdictions in which we plan to operate, our business, prospects, financial condition and operating results could be 35 materially and adversely affected.
If we, our third-party outsourcing partners or our suppliers are unable to obtain or comply with any of the licenses, approvals, certifications or other authorizations necessary to carry out our operations in the jurisdictions in which we currently operate, or those jurisdictions in which we plan to operate, then our business, prospects, financial condition and operating results could be materially and adversely affected.
In addition, we have the ability to redeem the outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $3.00 per warrant if, among other things, the last reported sale price of our 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 we send the notice of redemption to the warrant holders equals or exceeds $300.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like).
In addition, we have the ability to redeem the outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant if, among other things, the last reported sale price of our 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 we send the notice of redemption to the warrant holders equals or exceeds $300.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like).
Because we will incur the costs and expenses from these efforts before we receive any incremental revenues with respect thereto, our losses in future periods may be significant. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenues, which would further increase our losses.
Because we will incur the costs and expenses from these efforts before we receive any incremental revenue with respect thereto, our losses in future periods may be significant. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenue, which would further increase our losses.
Promoting and positioning our brand will likely depend significantly on our ability to provide high-quality products and engage with our customers as intended, and we have limited experience in these areas. In addition, our ability to develop, maintain and strengthen the Xos brand will depend heavily on the success of our customer development and branding efforts.
Promoting and positioning our brand will likely depend significantly on our ability to provide high-quality products and engage with our existing and potential customers as intended, and we have limited experience in these areas. In addition, our ability to develop, maintain and strengthen the Xos brand will depend heavily on the success of our customer development and branding efforts.
If we are unable to meet customers’ performance requirements or industry specifications, identify target customers, convert early trial deployments in commercial fleets into meaningful orders or obtain additional deployments in the future, our business, prospects, financial condition and operating results may be materially and adversely affected.
If we are unable to meet customers’ performance requirements or industry specifications, identify target customers, convert early trial deployments in commercial fleets into material orders or obtain additional deployments in the future, our business, prospects, financial condition and operating results may be materially and adversely affected.
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on our internal control over financial reporting.
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on our internal control over financial reporting.
Any delay in the design, development, manufacturing and release of our products could materially damage our brand, business, prospects, financial condition and operating results. We may not be able to accurately plan our production, which may result in carrying excess and obsolete raw material inventory.
Any delay in the design, development, manufacturing and release of our products could materially damage our brand, business, prospects, financial condition and operating results. We may not be able to accurately plan our production, which may result in us carrying excess and/or obsolete raw material inventory.
We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, attacks enhanced or facilitated by AI and other similar threats.
We and the third-parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing 36 attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other IT assets, adware, telecommunications failures, earthquakes, fires, floods, attacks enhanced or facilitated by AI and other similar threats.
In Canada, the Personal Information Protection and Electronic Documents Act (“PIPEDA”) and various related provincial laws, as well as Canada’s Anti-Spam Legislation (“CASL”), may apply to our operations. In the ordinary course of business, we may transfer personal information from Europe and other jurisdictions to the United States or other countries.
In Canada, the Personal Information Protection and Electronic Documents Act and various related provincial laws, as well as Canada’s Anti-Spam Legislation, may apply to our operations. In the ordinary course of business, we may transfer personal information from Europe and other jurisdictions to the United States or other countries.
We expect our future expansion to include: • expanding the management team; • hiring and training new personnel; • leveraging consultants to assist with company growth and development; • expanding our product offering across products, as well as services such as Xos Energy Services™ and Xosphere™; • controlling expenses and investments in anticipation of expanded operations; 24 • establishing or expanding design, research and development, manufacturing, sales and service facilities; • implementing and enhancing administrative infrastructure, systems and processes; and • expanding into new markets.
We expect our future expansion to include: • expanding the management team; • hiring and training new personnel; 26 • leveraging consultants to assist with company growth and development; • expanding our product offering across products, as well as services such as energy services and Xosphere™; • controlling expenses and investments in anticipation of expanded operations; • establishing or expanding design, research and development, manufacturing, sales and service facilities; • implementing and enhancing administrative infrastructure, systems and processes; and • expanding into new markets.
Developments in technology or alternative technologies, such as advanced diesel, ethanol, hybrids, fuel cells, or compressed natural gas, or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business and prospects in ways we do not currently anticipate.
Developments in technology or alternative technologies, such as advanced diesel, ethanol, hybrids, fuel cells, or compressed natural gas, or improvements in the fuel economy or emissions profile of the internal combustion engine, may materially and adversely affect our business and prospects in ways we do not currently anticipate.
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
In addition to experiencing a security incident, third-parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our market position.
While we believe that we can establish alternate supply relationships and can obtain or engineer replacement components for our limited source components, we may be unable to do so in the short term, or at all, at prices, quantities or quality levels that are favorable to us.
While we believe that we can establish alternate supply relationships and can obtain or engineer replacement components for our limited source components, we may be unable to do so in the short term, or at all, at prices, volumes or quality levels that are favorable to us.
The loss of any one of our significant customers, a reduction in the purchases of our products by such customers or the cancellation of significant purchases by any of these customers would reduce our revenues and could harm our ability to achieve or sustain expected results of operations, and a delay of significant purchases, even if only temporary, would reduce our revenues in the period of the delay.
The loss of any one of our significant customers, a reduction in the purchases of our products by such customers or the cancellation of significant purchases by any of these customers would reduce our revenue and could harm our ability to achieve or sustain expected results of operations, and a delay of significant purchases, even if only temporary, would reduce our revenue in the period of the delay.
These developments further complicate compliance efforts, and increase legal risk and compliance costs for us, the third parties upon whom we rely, and our customers. Outside the United States, an increasing number of laws, regulations, and industry standards govern data privacy and security.
These developments further complicate compliance efforts, and increase legal risk and compliance costs for us, the third-parties upon which we rely, and our customers. Outside the United States, an increasing number of laws, regulations, and industry standards govern data privacy and security.
If we were to experience delays, disruptions, capacity constraints or quality control problems in manufacturing operations, product shipments could be delayed or rejected and our customers could consequently elect to change product demand. These disruptions could negatively impact our revenues, competitive position and reputation.
If we were to experience delays, disruptions, capacity constraints or quality control problems in manufacturing operations, product shipments could be delayed or rejected and our customers could consequently elect to change product demand. These disruptions could negatively impact our revenue, competitive position and reputation.
Our vehicles have been delivered to certain customers on an early trial deployment basis, where such customers have the ability to evaluate whether these vehicles meet such customers’ performance and other requirements before committing to meaningful orders or additional deployments in the future.
Our vehicles have been delivered to certain customers on an early trial deployment basis, where such customers have the ability to evaluate whether these vehicles meet such customers’ performance and other requirements before committing to material orders or additional deployments in the future.
Certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive information. Applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents.
Certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our IT systems and sensitive information. Applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents.
The price of our Common Stock, as well as the Warrants, may fluctuate due to a variety of factors, including: • changes in the industries in which we and our customers operate; • developments involving our competitors; • changes in laws and regulations affecting our business; • variations in our operating performance and the performance of our competitors in general; • actual or anticipated fluctuations in our quarterly or annual operating results; • publication of research reports by securities analysts about us or our competitors or our industry; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC, particularly with respect to fluctuations in our growth expectations and outlook; • additions and departures of key personnel; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our Common Stock available for public sale; and • general economic and political conditions, such as the effects of health crises, recessions, interest rates, local and national elections, fuel prices, international currency fluctuations, corruption, political instability and acts of war or military conflict, including repercussions of the military conflict between Russia and Ukraine and in Israel, or terrorism.
The price of our Common Stock, as well as the Warrants, may fluctuate due to a variety of factors, including: • changes in the industries in which we and our customers operate; • developments involving our competitors; • changes in laws and regulations affecting our business; • variations in our operating performance and the performance of our competitors in general; • actual or anticipated fluctuations in our quarterly or annual operating results; • publication of research reports by securities analysts about us or our competitors or our industry; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC, particularly with respect to fluctuations in our growth expectations and outlook; • additions and departures of key personnel; • commencement of, or developments in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our Common Stock available for public sale; and • general economic and political conditions, such as the effects of health crises, recessions, inflation, interest rates, local and national elections, fuel prices, international currency fluctuations, corruption, political instability and acts of war or military conflict, including repercussions of the military conflict between Russia and Ukraine and in the Middle East and tensions with China, or terrorism.
Additionally, our revenues from period to period may fluctuate as we identify and investigate areas of demand, adjust volumes and add new product derivatives based on market demand and margin opportunities, develop and introduce new products or introduce existing products to new markets.
Additionally, our revenue from period to period may fluctuate as we identify and investigate areas of demand, adjust volumes and add new product derivatives based on market demand and margin opportunities, develop and introduce new products or introduce existing products to new markets.
A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our products. We may expend significant resources or modify our business activities to try to protect against security incidents.
A security incident or other interruption could disrupt our ability (and that of third-parties upon which we rely) to provide our products. We may expend significant resources or modify our business activities to try to protect against security incidents.
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.
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, if ever.
While we cannot predict the extent to which the United States or other countries will impose quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of our products in the future, a “trade war” of this nature or other governmental action related to tariffs or international trade agreements could have an adverse impact on demand for our services, sales and clients and affect the economies of the United States and various countries, having an adverse effect on our business, financial condition and results of operations.
While we cannot predict the extent to which the United States or other countries will impose quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of our products, components, raw materials or other supplies in the future, a “trade war” of this nature or other governmental action related to tariffs or international trade agreements could have an adverse impact on demand for our services, sales and clients and affect the economies of the United States and various countries, having an adverse effect on our business, financial condition and results of operations.
Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely.
Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and IT systems, and those of the third-parties upon which we rely.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our IT environment and security program.
Given the global nature of our supply chain and customer base, global political, economic, and other conditions, including geopolitical risks such as the current conflicts between Russia and Ukraine and in Israel and related sanctions, may adversely affect our business and results of operations in ways we cannot foresee at the outset or at this point.
Given the global nature of our supply chain and customer base, global political, economic, and other conditions, including geopolitical risks such as the current conflicts between Russia and Ukraine and in Israel, tensions with China and related sanctions, may adversely affect our business and results of operations in ways we cannot foresee at the outset or at this point.
We derive a significant portion of our revenues from a small number of customers; if revenues derived from these customers decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected.
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.
Maintaining such confidence may be particularly complicated by certain factors, including those that are largely outside of our control, such as our limited operating history, customer unfamiliarity with our products, any delays in scaling manufacturing, delivery and service operations to meet demand, competition, uncertainty regarding the future of electric vehicles (including our vehicles), our manufacturing and sales performance compared with market expectations and any negative publicity with respect to us, our competitors or the industry.
Maintaining such confidence may be particularly challenging due to certain factors, including those that are largely outside of our control, such as our limited operating history, customer unfamiliarity with our products, any delays in scaling manufacturing, delivery and service operations to meet demand, competition, uncertainty regarding the future of electric vehicles (including our vehicles), our manufacturing and sales performance compared with market expectations and any negative publicity with respect to us, our competitors or the industry.
An inability to generate positive cash flow for the near term may adversely affect our ability to raise needed capital for our business on reasonable terms, diminish supplier or customer willingness to enter into transactions with us, and have other adverse effects that may decrease our long-term viability.
An inability to generate and maintain positive cash flow for the near term may adversely affect our ability to raise needed capital for our business on reasonable terms or at all, diminish supplier or customer willingness to enter into transactions with us, and/or have other adverse effects that may decrease our long-term viability.
Though we are taking steps to remediate the material weaknesses, we cannot be assured that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weaknesses or avoid potential future material weaknesses.
Though we are taking steps to remediate the material weaknesses, we cannot be assured that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weaknesses or avoid potential future material weaknesses or the perception thereof.
Our vehicles contain complex information technology systems and built-in data connectivity to accept and install periodic remote updates to improve or update functionality. We utilize in-vehicle services and functionality through the Xosphere ™ that utilize data connectivity to monitor performance and timely capture opportunities to enhance on-the-road performance and for safety and cost-saving preventative maintenance.
Our vehicles contain complex IT systems and built-in data connectivity to accept and install periodic remote updates to improve or update functionality. We utilize in-vehicle services and functionality through the Xosphere ™ that utilize data connectivity to monitor performance and timely capture opportunities to enhance on-the-road performance and for safety and cost-saving preventative maintenance.
In response to a determination that we have infringed upon or misappropriated a third party’s intellectual property rights, we may be required to do one or more of the following: • cease development, sales or use of our products that incorporate the asserted intellectual property; • pay substantial damages; • obtain a license from the owner of the asserted intellectual property right, which license may not be available on reasonable terms or available at all; or • re-design one or more aspects or systems of our products.
In response to a determination, or in settlement of allegations, that we have infringed upon or misappropriated a third-party’s intellectual property rights, we may be required to do one or more of the following: 41 • cease development, sales or use of our products that incorporate the asserted intellectual property; • pay substantial damages; • obtain a license from the owner of the asserted intellectual property right, which license may not be available on reasonable terms or available at all; and/or • re-design one or more aspects or systems of our products.
We expect competition in our industry to intensify from our existing and future competitors as consumer demand for electric and alternative fuel vehicles increases and regulatory scrutiny on the motor vehicle industry intensifies. Our growth is dependent upon the last-mile and return-to-base segment’s willingness to adopt electric vehicles.
We expect additional competitors to enter the industry as well. We expect competition in our industry to intensify from our existing and future competitors as consumer demand for electric and alternative fuel vehicles increases and regulatory scrutiny on the motor vehicle industry intensifies. Our growth is dependent upon the last-mile and return-to-base segment’s willingness to adopt electric vehicles.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Director of IT, who reports to our COO, is primarily responsible for assessing and managing our material risks from cybersecurity threats. Our Director of IT has over 15 years of experience in cybersecurity matters for a range of public and private companies, including leadership roles in IT at three previous public companies.
Biggest changeOur COO, is primarily responsible for assessing and managing our material risks from cybersecurity threats and confers with our IT department in executing our cybersecurity policies and processes, including our incident response processes. Our COO has nine years of experience in assessing and managing cybersecurity risks for the Company and its predecessor.
Item 1C. Cybersecurity Risk Management and Strategy We have established policies and processes designed to assess, identify and manage material risk from cybersecurity threats, and have integrated these processes into our overall risk management systems and processes.
Item 1C. Cybersecurity Risk Management and Strategy 48 We have established policies and processes designed to assess, identify and manage material risk from cybersecurity threats, and have integrated these processes into our overall risk management systems and processes.
Through the use of manual and automated tools, analysis of reports of threats and threat actors, evaluations of threats reported to us, and internal and external audits, we routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein.
Through the use of manual and automated tools, analyses of reports of threats and threat actors, evaluations of threats reported to us, and internal and external audits, we routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein.
As part of our overall risk management system, we monitor and test our safeguards and train our employees on these safeguards, in collaboration with our IT department and management. Personnel at various levels and departments are made aware of our cybersecurity policies through routine training sessions and assessments.
As part of our overall risk management system, we monitor and test our safeguards and tra in our employees on these safeguards, in collaboration with our IT department and management. Personnel at various levels and departments are made aware of our cybersecurity policies through routine training sessions and assessments.
Our management maintains an active dialogue with the Board and Audit Committee on risk management matters, which includes cybersecurity.
Our management, including the COO, maintains an active dialogue with the Board and Audit Committee on risk management matters, which includes cybersecurity.
Risk Factors in this Annual Report on Form 10-K, including “If our information technology systems, those of third parties upon which we rely, or our data are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.” Governance One of the key functions of our Board is informed oversight of our risk management process, including risks from cybersecurity threats.
Risk Factors in this Report, including “If our IT systems, those of third-parties upon which we rely, or our data are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.” Governance One of the key functions of our Board is informed oversight of our risk management process, including risks from cybersecurity threats.
We have not encountered cybersecurity challenges that have materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition. For additional information regarding risks from cybersecurity threats, please refer to Item 1A.
We have not encountered cybersecurity threats, incidents or challenges that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition. For additional information regarding risks from cybersecurity threats, please refer to Part I Item 1A.
We also engage third party service providers to assist us in monitoring and testing our cybersecurity safeguards and compliance, such a cybersecurity software providers, professional services firms (including legal counsel) and firms that conduct security audits and perform user phishing tests and training.
We also engage third-party service providers to assist us in monitoring and testing our cybersecurity safeguards and compliance, such as cybersecurity software providers, professional services firms and firms that conduct security audits and perform user phishing tests and training.
Our cybersecurity incident response processes are designed to escalate certain cybersecurity incidents to members of management and/or the Board, depending on the circumstances. 49 The Audit Committee and Board receive periodic briefings from the Director of IT regarding our company’s cybersecurity risks and activities, including any recent cybersecurity incidents and related responses, cybersecurity systems testing and activities of third parties.
Our cybersecurity incident response processes are designed to escalate certain cybersecurity incidents to the COO and other members of management and/or the Board, depending on the circumstances. The Audit Committee and the Board receive periodic briefings regarding our cybersecurity risks and activities, including any recent cybersecurity incidents and related responses , cybersecurity systems testing and activities of third-parties.
Following these risk assessments, we re-design, implement, and maintain reasonable safeguards designed to minimize identified risks; reasonably address any identified gaps in existing safeguards; and regularly monitor the effectiveness of our safeguards.
Following these risk assessments, we re-design, implement, and maintain reasonable safeguards designed to minimize identified risk s; reasonably address any identified gaps in existing safeguards; and regularly monitor the effectiveness of our safeguards. Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with our Chief Operating Officer (COO), who coordinates with our IT and legal departments.
Removed
Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with our Director of Information Technology (IT), who reports to our Chief Operating Officer (COO), as well as our legal department.
Removed
Our Director of IT oversees our cybersecurity policies and processes, including our incident response processes.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe our existing facilities are generally well maintained and adequate for our current requirements and that we will be able to obtain additional or alternative space at other locations to support our continuing expansion. We currently do not own any real property.
Biggest changeWe became the lessor of a 235,094 square foot manufacturing facility in Mesa, Arizona and a 17,980 square foot service and distribution center in Huntington Beach, California, under leases expiring in 2033 and 2027, respectively. 49 We believe our existing facilities are generally well maintained and adequate for our current requirements and that we will be able to obtain additional or alternative space at other locations to support our continuing expansion.
Additionally, we lease three properties in Byrdstown, Tennessee, subject to leases that expire in 2026 and 2027, where we store raw materials and manufacture and assemble our products.
Additionally, we lease two properties in Byrdstown, Tennessee, subject to leases that expire in 2026 and 2027, where we store raw materials and manufacture and assemble our products. On June 20, 2024, we entered into an agreement to sublease a portion of our Los Angeles office space, effective as of July 1, 2024.
Added
We assumed two lease facilities in connection with the ElectraMeccanica acquisition, which we do not intend to use for our ongoing operations.
Added
We currently do not own any real property.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 50 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 51 Item 6. Reserved 51 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 51 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 64 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 50 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 51 Item 6. Reserved 51 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 51 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 65 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Common Stock and Warrants As of March 26, 2024, there were 55 holders of record of our Common Stock and 18,833,298 Public Warrants outstanding held by 2 holders of record. Each Public Warrant entitles the registered holder to purchase one share of our Common Stock at a price of $345 per share, subject to certain adjustments.
Biggest changeEach Public Warrant entitles the registered holder to purchase one thirtieth of one share of our Common Stock at a price of $345 per whole share, subject to certain adjustments.
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Added
Holders of Common Stock and Warrants As of March 26, 2025, there were 55 holders of record of our Common Stock and 18,833,298 Public Warrants outstanding held by 2 holders of record.
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers There were no unregistered sales of equity securities during the year ended December 31, 2024 other than as reported in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 filed with the SEC.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResearch and Development Expenses Research and development (“R&D”) expenses consist primarily of costs incurred for the design and development of our vehicles and battery systems, which include: • 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; • 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 55 Table of Contents • payroll expense for employees primarily engaged in R&D activities, including allocation of stock-based compensation expense.
Biggest changeResearch 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 We expect our R&D costs to decrease for the foreseeable future primarily due to lower headcount driven by our RIF.
Additionally, since the Private Placement Warrants are substantially the same as the Public Warrants, we determined the fair value of our Private Placement Warrants based on the Public Warrant trading price. The Private Warrants are classified as Level 2 financial instruments. See Note 1 1 — Derivative Instruments for additional information.
Additionally, since the Private Placement Warrants are substantially the same as the Public Warrants, we determined the fair value of our Private Placement Warrants based on the Public Warrant trading price. The Private Warrants are classified as Level 2 financial instruments. See Note 1 2 — Derivative Instruments for additional information.
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 Common Stock, for total consideration of 1,766,388 shares of Common Stock.
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 our Common Stock, for total consideration of 1,766,388 shares of Common Stock.
Direct labor costs relate to the wages of those individuals responsible for the assembly of vehicles, powertrain units 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.
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.
The earn-out triggers included a change of control provision within five years of the Closing, and achieving certain volume weighted average share prices (“VWAPs”) within five years of the Closing. These conditions result in the instrument failing indexation guidance and are properly reflected as a liability as of December 31, 2023.
The earn-out triggers included a change of control provision within five years of the Closing, and achieving certain volume weighted average share prices (“VWAPs”) within five years of the Closing. These conditions result in the instrument failing indexation guidance and are properly reflected as a liability as of December 31, 2024 and December 31, 2023.
In assessing the realizability of deferred income tax assets, ASC 740 requires a more likely than not standard be met. If we determine that it is more likely than not that deferred income tax assets will not be realized, a valuation allowance must be established.
In assessing the realizability of deferred income tax assets, ASC 740, Income Taxes , requires a more likely than not standard be met. If we determine that it is more likely than not that deferred income tax assets will not be realized, a valuation allowance must be established.
The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating and estimating tax positions and tax benefits, which may require periodic adjustments and may not accurately forecast actual outcomes. See Note 1 6 – Income Taxes for additional information.
The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating and estimating tax positions and tax benefits, which may require periodic adjustments and may not accurately forecast actual outcomes. See Note 1 7 – Income Taxes for additional information.
Our stripped chassis is our vehicle offering that consists of our X-Platform electric vehicle base and X-Pack battery systems, which customers can upfit with their preferred vehicle body.
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.
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. Overview Xos is a leading fleet electrification solutions provider committed to the decarbonization of commercial transportation.
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. Overview We are a leading fleet electrification solutions provider committed to the decarbonization of commercial transportation.
We elected to early adopt Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). See Note 7 — Earn-out Shares Liability for additional information.
We elected to early adopt Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). See Note 9 — Earn-out Shares Liability for additional information.
When evaluating whether projected future taxable income will support the realization of deferred tax assets, we consider both its historical financial performance and general economic conditions. In addition, we consider the time frame over which it would take to utilize the deferred tax assets prior to their expiration.
When evaluating whether projected future taxable income will support the realization of deferred tax assets, we consider both our historical financial performance and general economic conditions. In addition, we consider the time frame over which it would take to utilize the deferred tax assets prior to their expiration.
General and Administrative Expenses General and administrative (“G&A”) expenses consist 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.
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.
The Xosphere™ is aimed at minimizing electric fleet TCO 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.
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.
Recent Accounting Pronouncements See Note 2 — Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements and our 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.
Recent Accounting Pronouncements See Note 2 — Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements and our 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. 64 Table of Contents
ASC 606, Revenue from Contracts with Customers , requires us to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We determine revenue recognition by applying the following steps: 1.
ASC 606, Revenue from Contracts with Customers , requires us to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We determine revenue recognition by applying the following steps: 1.
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. 53 Table of Contents 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 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 first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained upon examination by the Internal Revenue Service (IRS) or other taxing authorities, including resolution of related appeals or litigation processes.
The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained upon examination by the IRS or other taxing authorities, including resolution of related appeals or litigation processes.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provides information which Xos’ management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition.
Item 7. 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.
Net cash provided by investing activities was $50.6 million for the year ended December 31, 2023, due to net proceeds from sale of investments in marketable debt securities of $50.7 million and proceeds from the disposal of assets held for sale of $1.3 million, offset by property and equipment additions of $1.4 million.
Net cash used in investing activities was $50.6 million for the year ended December 31, 2023, due to net proceeds from sale of investments in marketable debt securities of $50.7 million and proceeds from the disposal of assets held for sale of $1.3 million, partially offset by property and equipment additions of $1.4 million.
Change in Fair Value of Derivatives Change in fair value of derivative instruments relates to Common Stock warrant liability assumed as part of the Business Combination and the conversion feature on the convertible notes issued in prior years and derivative features of the Convertible Debentures issued on August 11, 2022 and September 21, 2022.
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 and the conversion feature on the convertible notes issued in prior years and derivative features of the Convertible Debentures (as defined below) issued on August 11, 2022 and September 21, 2022.
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 consolidated statements of operations and comprehensive loss, allocated to G&A.
Upon property and equipment retirement or disposal, the cost of the 55 Table of Contents asset disposed, and the related accumulated depreciation from the accounts and any gain or loss is reflected in the consolidated statements of operations and comprehensive loss, allocated to G&A.
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.
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 61 Table of Contents reported amounts of revenues and expenses during the reporting periods.
The Company’s 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.
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.
Standby Equity Purchase Agreement On March 23, 2022, we entered into a Standby Equity Purchase Agreement (the "SEPA") with 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 its shares of Common Stock at our request any time until February 11, 2026, subject to certain conditions.
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.
Earn-out shares liability were initially recorded as fair value in the Business Combination and are adjusted to fair value at each reporting date using Level 3 inputs with changes in fair value recorded in change in fair value of earn-out shares liability in the consolidated statements of operations and comprehensive loss.
Earn-out shares liability was initially recorded as fair value in the Business Combination and is adjusted to fair value at each reporting date using Level 3 inputs with changes in fair value recorded in change in fair value of earn-out shares liability in the consolidated statements of operations and comprehensive loss.
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.
Key Factors Affecting Operating Results 53 Table of Contents 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.
See Note 8 — Convertible Notes in the accompanying consolidated financial statements for more information regarding the Convertible Debentures and Convertible Note.
See Note 10 — Convertible Notes in the accompanying consolidated financial statements for more information regarding the Convertible Debentures and Convertible Note.
For more information about our basis of operations, refer to Note 1 — Description of Business in the accompanying 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.
For more information about our basis of operations, refer to Note 1 - Description of Business in the accompanying notes to the consolidated financial statements for more information. 54 Table of Contents Components of Results of Operations Revenue To date, we have primarily generated revenue from the sale of electric step vans, stripped chassis vehicles and battery systems.
The X-Platform and X-Pack were both 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).
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).
Until we can generate sufficient revenue from product sales, we expect to finance a substantial portion of our operations through commercialization and production with proceeds from the Business Combination, the SEPA, the Convertible Note (as defined below) and any future capital raising efforts.
Until we can generate sufficient revenue from product sales, we expect to finance a substantial portion of our operations through commercialization and production with proceeds from the Business Combination, the SEPA, the Convertible Note, the ElectraMeccanica acquisition and any future capital raising efforts.
Contingent Earn-out Shares Liability Earn-out shares represent a freestanding financial instrument classified as liabilities on the accompanying consolidated balance sheet as we determine that these financial instruments are not indexed to our own equity in accordance with ASC 815, Derivatives and Hedging .
Contingent Earn-out Shares Liability Earn-out shares represent a freestanding financial instrument classified as liabilities on the accompanying consolidated balance sheets as we determine that these financial instruments are not indexed to our own equity in accordance with ASC 815, .
Overhead items including rent, insurance, utilities, and other items are included as G&A expenses. G&A expenses also include 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.
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.
Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or their 63 Table of Contents permitted transferees.
The increase in revenues for the year ended December 31, 2023, was driven by increased deliveries of our stepvans coupled with an increase in average selling price associated with sales of our updated stepvan platform produced and delivered in the current year.
The increase in revenues for the year ended December 31, 2024, was driven by increased deliveries of our hub and powertrain units coupled with an increase in average selling price associated with sales of our updated stepvan platform produced and delivered in the current year.
The change was primarily due to decreases of (i) $7.2 million in allocation of personnel costs driven by lower headcount in engineering, (ii) $1.2 million in equipment and material purchases due to fewer research and development projects in development year over year and (iii) $3.7 million in net other costs, driven by reductions of consulting and design fees, in addition to equipment and vehicle purchases used solely for research and development purposes.
The change was primarily due to decreases of (i) $4.3 million in allocation of personnel costs driven by lower headcount in engineering, (ii) $3.0 million in equipment and material purchases due to fewer research and development projects in development year over year, (iii) $1.3 million in net other costs, driven by reductions of consulting and design fees, in addition to equipment and vehicle purchases used solely for research and development purposes and (iv) $0.4 million in stock-based compensation expense.
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. 63 Table of Contents Derivative Liability We account for convertible debt pursuant to ASC 815, Derivatives and Hedging.
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. Derivative Liabilities We account for convertible debt pursuant to ASC 815 .
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. 58 Table of Contents Provision for Income Taxes The Company recorded income tax provisions of $21,000 and $8,000 during the years ended December 31, 2023 and 2022, respectively.
The decrease in change in fair value in both periods is primarily attributable to differences in our stock price and the resulting valuation for the applicable reporting period. 58 Table of Contents Provision for Income Taxes The Company recorded income tax provisions of $37,000 and $21,000 during the years ended December 31, 2024 and 2023, respectively.
Our operating cash flows are also affected by our working capital needs to support growth in inventory and fluctuations in accounts payable and other current assets and liabilities.
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.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating losses and tax credit carryforwards.
Income Taxes We apply the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating losses and tax credit carryforwards.
Convertible Debt On August 11, 2022 and September 21, 2022, we issued convertible debentures (as subsequently amended, the “Convertible Debentures”) to Yorkville in the aggregate principal amount of $35.0 million, with a maturity date of November 11, 2023, which may be extended to February 11, 2024.
Convertible Debt On August 11, 2022 and September 21, 2022, we issued convertible debentures (as subsequently amended, the “Convertible Debentures”) to Yorkville in the aggregate principal amount of $35.0 million, with a maturity date of November 11, 2023, which was extended to February 11, 2024 pursuant to the terms of that certain Securities Purchase Agreement.
For shipping and handling charges, revenue is recognized at the time the products are delivered to or picked up by the customer. For leasing, revenue is recognized on a straight line basis over the term of the lease agreement.
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.
(f/k/a Rivordak, Inc.). 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.
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.
Costs for shipping and handling activities that occur after control of the product transfers to the customer are recognized at the time of sale and presented in cost of goods sold.
We recognize revenue for shipping and handling charges at the time control is transferred for the related product. Costs for shipping and handling activities that occur after control of the product transfers to the customer are recognized at the time of sale and presented in cost of goods sold.
Pursuant to the Convertible Debentures, being less than a certain floor price (the “Floor Price”) for five consecutive trading days, we were required to make, and made, Prepayments during the year ended December 31, 2023 consisting of $32.8 million of principal payments, $1.6 million of redemption premium payments and $1.5 million of accrued interest payments.
Pursuant to the Convertible Debentures, as a result of the daily volume-weighted average price of our Common Stcok being less than a certain floor price (the “Floor Price”) for five consecutive trading days, we were required to make, and made, prepayments on the Convertible Debentures during the year end ed December 31, 2023 consisting of $32.8 million of principal payments, $1.6 million of redemption premium payments and $1.5 million of accrued interest payments.
We have plans to secure and intend to e mploy various strategies to raise additional capital, such as through the SEPA and other capital raising strategies such as a combination of debt financing, other non-dilutive financing and/or equity financing, including through asset-based lending and/or receivable financing.
We have plans to secure and intend to e mploy various strategies to raise additional capital, which may include the SEPA 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.
We expect that our G&A will start to decrease for the foreseeable future primarily due to lower headcount driven by our reduction in workforce.
We expect that our G&A expense will decrease for the foreseeable future primarily due to lower headcount driven by our RIF.
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 decrease in change in fair value in both periods is primarily attributable to differences in our stock price and the resulting valuation for the applicable reporting period.
Also on August 11, 2022, we issued a convertible promissory note (as subsequently amended and restated, the “Convertible Note”) to Aljomaih Automotive Co. (“Aljomaih”) with a principal amount of $20.0 million and a maturity date of August 11, 2025.
Also on August 11, 2022, we issued a convertible promissory note (as subsequently amended and restated, the “Convertible Note”) to Aljomaih Automotive Co. (“Aljomaih”) with a principal amount of $20.0 million and a maturity date of August 11, 2025. See Note 10 - Convertible Notes in the accompanying consolidated financial statements for more information.
Change in Fair Value of Contingent Earn-out Shares Liability The gain on the change in fair value of contingent earn-out shares liability decreased by $28.2 million, or 98% from $28.7 million in the year ended December 31, 2022 to $0.5 million in the year ended December 31, 2023 .
Change in Fair Value of Contingent Earn-out Shares Liability The gain on the change in fair value of contingent earn-out shares liability decreased by $0.5 million, or 93% from $0.5 million in the year ended December 31, 2023 to $39,000 in the year ended December 31, 2024.
Our X-Platform (our proprietary, purpose-built vehicle chassis platform) and X-Pack (our proprietary battery system) provide modular features that allow us to accommodate a wide range of last-mile applications and enable us to offer clients at a lower total cost of ownership compared to traditional diesel fleets.
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 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.
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. Revenue also consists of sales-type leases which are accounted for under ASC 842, Leases .
Net cash used in investing activities was $82.7 million for the year ended December 31, 2022, primarily consisting of property and equipment additions of $14.1 million and net purchase of investments in marketable debt securities, available-for-sale of $96.8 million. 60 Table of Contents Cash Flows from Financing Activities Net cash used in financing activities was $38.4 million for the year ended December 31, 2023, primarily consisting of (i) payments for convertible notes (including prepayment premium) of $34.4 million, (ii) equipment lease principal payments of $3.0 million, (iii) taxes paid relating to net-settlement of stock-based awards of $1.1 million, and (iv) outflow from net short-term insurance financing note activity of $1.1 million.
Net cash used in financing activities was $38.4 million for the year ended December 31, 2023, primarily consisting of (i) payments for convertible notes (including prepayment premium) of $34.4 million, (ii) equipment lease principal payments of $3.0 million, (iii) taxes paid relating to net-settlement of stock-based awards of $1.1 million, and (iv) outflow from net short-term insurance financing note activity of $1.1 million.
The decrease in cost of goods sold is directly attributable to decreases of (i) $3.1 million in direct materials, (ii) $1.8 million in direct labor, (iii) $7.7 million in inventory reserves and associated write-downs of 57 Table of Contents inventory to its net realizable value, (iv) $6.8 million in unfavorable physical inventory count and other adjustments, (v) $0.2 million due to recognition of return reserves for the year ended December 31, 2023 and (vi), $1.8 million in freight incurred for customer deliveries.
The increase in cost of goods sold is attributable to increases of (i) $2.3 million in inventory 57 Table of Contents reserves and associated write-downs of inventory to its net realizable value, (ii) $2.3 million in unfavorable physical inventory count and other adjustments, (iii) $2.0 million in direct materials, (iv) $0.6 million related to overhead, and (v) $0.3 million due to recognition of return reserves for the year ended December 31, 2024.
Contractual Obligations and Commitments We did not have any material contractual obligations or other commitments as of December 31, 2023, other than what is disclosed in Note 1 4 - Commitments and Contingencies and Note 6 - Leases in this Form 10-K.
Contractual Obligations and Commitments We did not have any material contractual obligations or other commitments as of December 31, 2024, other than what is disclosed in Note 1 5 - Commitments and Contingencies and Note 8 - Leases in this Report.
General and Administrative General and administrative expense decreased by $3.4 million, or 8%, from $41.1 million in the year ended December 31, 2022 to $37.7 million in the year ended December 31, 2023, attributable to decreases of (i) $2.3 million in headcount and personnel cost for legal, finance, accounting, information technology and general and administrative functions, (ii) $2.3 million in insurance costs driven by cost efficiencies associated with a new broker for 2023 plan renewal, (iii) $0.5 million in professional fees, including ElectraMeccanica transaction related expenses, and (iv) $1.1 million in other operating expenses, including travel, recruiting, and facility costs.
General and Administrative General and administrative expense decreased by $2.6 million, or 7%, from $37.7 million in the year ended December 31, 2023 to $35.1 million in the year ended December 31, 2024, attributable to decreases of (i) $1.9 million in professional fees (ii) $1.1 million in headcount and personnel cost for legal, finance, accounting, IT and general and administrative functions, (iii) $1.0 million in insurance costs driven by cost efficiencies associated with a new broker and (iv) $1.0 million in other operating expenses, including travel, recruiting, and computer equipment.
The change was primarily due to decreases of (i) $2.7 million in allocation of personnel costs driven by lower headcount and (ii) $1.0 million related to reduction in consulting fees, public relations costs, tradeshows costs and general marketing expenses. These decreases were offset by an increase of $0.5 million in stock-based compensation expense.
The change was primarily due to decreases of (i) $1.7 million in allocation of personnel costs driven by lower headcount, (ii) $0.4 million related to reduction in public relations costs and tradeshows costs and (iii) $0.2 million in stock-based compensation expense.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Risk Factors”.
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 Part I Item 1A “Risk Factors” of this Report.
These estimates are inherently uncertain given our relatively short history of sales, and changes to our historical or projected warranty experience may cause material changes to the warranty reserve in the future. Claims incurred under our standard product warranty programs are recorded based on open claims.
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 our relatively short history of sales, and changes to our historical or projected warranty experience may cause material changes to the warranty reserve in the future.
During the year ended December 31, 2023, we delivered 283 units, (277 stepvans including leases, 5 powertrains and 1 hub), compared to 275 units (257 stepvans and 18 powertrains) in the year ended December 31, 2022.
During the year ended December 31, 2024, we delivered 297 units, (244 stepvans, including leases, 19 powertrains and 34 hubs, including leases), compared to 283 units (277 stepvans, 5 powertrains, and 1 hub) in the year ended December 31, 2023.
Cash Flows Summary The following table provides a summary of cash flow data for the years ended December 31, 2023 and 2022 ( in thousands ): Years Ended December 31, 2023 2022 Net cash used in operating activities $ (39,286) $ (127,960) Net cash provided by investing activities 50,630 82,710 Net cash (used in) provided by financing activities (38,379) 64,749 Net (decrease) increase in cash, cash equivalents and restricted cash $ (27,035) $ 19,499 Cash Flows from Operating Activities Our cash flows from operating activities are significantly affected by the growth of our business.
Cash Flow Data The following table provides a summary of cash flow data for the years ended December 31, 2024 and 2023 ( in thousands ): Years Ended December 31, 2024 2023 Net cash used in operating activities $ (48,795) $ (39,286) Net cash provided by investing activities 51,176 50,630 Net cash used in financing activities (3,025) (38,379) Net decrease in cash, cash equivalents and restricted cash $ (644) $ (27,035) Cash Flow from Operating Activities Our cash flow from operating activities is significantly affected by the growth of our business.
Other Expense, Net Other expense, net increased by $7.2 million, or 149%, from $4.8 million in the year ended December 31, 2022 to $12.0 million in the year ended December 31, 2023.
Other Expense, Net Other expense, net decreased by $7.5 million, or 62%, from $12.0 million in the year ended December 31, 2023 to $4.6 million in the year ended December 31, 2024.
Performance obligations are identified in the contract for each distinct products provided within the contract. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract. Any deposits from customers represent contract liabilities.
Revenue contracts are identified when an enforceable agreement has been made with a customer. Performance obligations are identified in the contract for each distinct product provided within the contract. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract.
Net cash used in operating activities was $39.3 million for the year ended December 31, 2023, primarily consisting of a cash-basis net loss of $53.8 million from normal operations of the Company (after non-cash adjustments of $22.1 million), and $14.5 million in favorble net working capital changes, primarily relating to inventory usage due to significant production and deliveries of stepvans in the second-half of 2023.
Net cash used in operating activities was $39.3 million for the year ended December 31, 2023, primarily consisting of a cash-basis net loss of $53.8 million from normal operations of the Company (after non-cash adjustments of $22.1 million), partially offset by $14.5 million in working capital movements, primarily relating to inventory usage due to significant production and deliveries of stepvans in the second-half of 2023. 60 Table of Contents Cash Flow from Investing Activities Cash flow from investing activities primarily relates to capital expenditures activities, as well as the sale and maturity of marketable securities, available for sale (applicable to 2023) and cash acquired in connection with the acquisition of ElectraMeccanica (applicable to 2024).
We will continue to incur net losses and cash outflows in accordance with our operating plan as we continue research and development activities with respect to our vehicles and battery systems and scale our operations to meet anticipated demand.
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.
Xos designs and manufactures Class 5-8 battery-electric commercial vehicles that 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.
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.
Change in Fair Value of Derivatives The gain on the change in fair value of derivative instrume nts decreased by $13.5 million, or 95% from $14.2 million in the year ended December 31, 2022 to $0.7 million in the year ended December 31, 2023.
Change in Fair Value of Derivatives The gain on the change in fair value of derivative instruments decreased by $0.4 million, or 59% from $0.7 million in the year ended December 31, 2023 to $0.3 million in the year ended December 31, 2024.
We expect these expenses to decrease for the foreseeable future primarily due to lower headcount driven by our reduction in workforce.
We expect our S&M expense to decrease for the foreseeable future primarily due to lower headcount driven by our RIF.
The decrease in direct labor encompasses both employee and subcontractor labor costs and also reflects the realization of improvements in the production process and design of the new stepvan platform.
The increase in overhead costs is primarily attributable to the absorption of inbound freight for units produced and sold in 2024. The decrease in direct labor encompasses both employee and subcontractor labor costs and also reflects the realization of improvements in the production process and design of the new stepvan platform.
Xos developed the X-Platform (its proprietary, purpose-bui lt vehicle chassis platform) and the X-Pack (its proprietary battery system) specifically for the medium- and heavy-duty commercial vehicle segment with a focus on last-mile commercial fleet operations.
We developed the X-Platform (our proprietary, purpose-bui lt 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.
Sales and Marketing Expenses Sales and marketing (“S&M”) expenses consist primarily of e xpenses related to our marketing of vehicles and brand initiatives, which includes: • travel expenses of our sales force who are primarily responsible for introducing our platform and offerings to potential customers; • web design, marketing and promotional items, and consultants who assist in the marketing of the Company; • payroll expense for employees primarily engaged in S&M activities, including allocation of stock-based compensation expense; and • depreciation expense on property and equipment related to S&M activities, calculated over the estimated useful life of the property and equipment on a straight-line basis.
Sales and Marketing Expense Sales and marketing (“S&M”) expense consists primarily of e xpenses 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.
We recognize revenue by transferring the promised products to the customer, with the revenue recognized at the point in time the customer takes control of the products as agreed in the contracts, normally when delivered to the carrier. We recognize revenue for shipping and handling charges at the time control is transferred for the related product.
Any deposits from customers represent contract liabilities. We recognize revenue by transferring the promised product to the customer, with the revenue recognized at the point in time the customer takes control of the product as agreed in the applicable contract, normally when delivered to the carrier.
In addition, we also offer service offerings, such as Fleet- 54 Table of Contents as-a-Service, which is a full suite of service offerings that includes Xos Energy Solutions™, our energy solutions offering and Xosphere™, our fleet management platform. Revenue consists of product sales, inclusive of shipping and handling charges, net of estimates for customer allowances, Fleet-as-a-Service product offerings, and leasing.
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.
These decreases were offset by an increase of $1.0 million in stock-based compensation expense. Sales and Marketing Sales and marketing expense decreased by $3.2 million, or 33%, from $9.5 million in the year ended December 31, 2022 to $6.4 million in the year ended December 31, 2023.
These decreases were offset by increases of (i) $1.9 million in facility costs and (ii) $0.5 million in stock-based compensation expense. Research and Development Research and development expenses decreased by $9.0 million, or 46%, from $19.6 million in the year ended December 31, 2023 to $10.6 million in the year ended December 31, 2024.
As of December 31, 2023, aggregate principal amounts of $0.0 million and $20.0 million were outstanding on the Convertible Debentures and the Convertible Note, respectively. We have used the net proceeds from the Convertible Debentures and the Convertible Note for operational liquidity, working capital and general and administrative expenses and expect similar use of proceeds going forward.
We have used the net proceeds from the Convertible Debentures and the Convertible Note for operational liquidity, working capital and general and administrative expenses and expect similar uses of any remaining proceeds going forward.
Our short-term uses of cash are for working capital and our long-term uses of cash are for working capital and to pay the principal of our indebtedness.
Liquidity and Capital Resources General As of December 31, 2024, our principal sources of liquidity were our cash and cash equivalents of $11.0 million. Our short-term uses of cash are for working capital and our long-term uses of cash are for working capital and to pay the principal of our indebtedness.
However, our access to capital under the SEPA is not available as of the date of this Report and will not be available until we file with the SEC (i) ElectraMeccanica's financial statements for the fiscal years ended December 31, 2023 and December 31, 2022 and (ii) a post-effective amendment to the Registration Statement on Form S-1 filed on July 27, 2023.
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.
Changes in the fair value relate to remeasurement to fair value as of each subsequent balance sheet date. 56 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table sets forth our historical operating results for the periods indicated ( dollars in thousands ): Years Ended December 31, 2023 2022 $ Change % Change Revenues $ 44,523 $ 36,376 $ 8,147 22 % Cost of goods sold 45,813 66,405 (20,592) (31) % Gross loss (1,290) (30,029) 28,739 (96) % Operating expenses General and administrative 37,698 41,093 (3,395) (8) % Research and development 19,589 30,679 (11,090) (36) % Sales and marketing 6,388 9,547 (3,159) (33) % Total operating expenses 63,675 81,319 (17,644) (22) % Loss from operations (64,965) (111,348) 46,383 (42) % Other expense, net (12,047) (4,835) (7,212) 149 % Change in fair value of derivative instruments 671 14,184 (13,513) (95) % Change in fair value of earn-out shares liability 519 28,682 (28,163) (98) % Loss before provision for income taxes (75,822) (73,317) (2,505) 3 % Provision for income taxes 21 8 13 163 % Net loss $ (75,843) $ (73,325) $ (2,518) 3 % Revenues Our total revenue increased by $8.1 million, or 22%, from $36.4 million in the year ended December 31, 2022 to $44.5 million in the year ended December 31, 2023.
Changes in the fair value relate to remeasurement to fair value as of each subsequent balance sheet date. 56 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 The following table sets forth our historical operating results for the periods indicated ( dollars in thousands ): Years Ended December 31, 2024 2023 $ Change % Change Revenues $ 55,961 $ 44,523 $ 11,438 26 % Cost of goods sold 51,996 45,813 6,183 13 % Gross profit (loss) 3,965 (1,290) 5,255 (407) % Operating expenses General and administrative 35,083 37,698 (2,615) (7) % Research and development 10,627 19,589 (8,962) (46) % Sales and marketing 4,129 6,388 (2,259) (35) % Total operating expenses 49,839 63,675 (13,836) (22) % Loss from operations (45,874) (64,965) 19,091 (29) % Other expense, net (4,561) (12,047) 7,486 (62) % Change in fair value of derivative instruments 274 671 (397) (59) % Change in fair value of earn-out shares liability 39 519 (480) (92) % Loss before provision for income taxes (50,122) (75,822) 25,700 (34) % Provision for income taxes 37 21 16 76 % Net loss $ (50,159) $ (75,843) $ 25,684 (34) % Revenues Our total revenue increased by $11.4 million, or 26%, from $44.5 million in the year ended December 31, 2023 to $56.0 million in the year ended December 31, 2024.
Warranty Liability 62 Table of Contents We provide customers with a product warranty that assures that the products meet standard specifications and are free for periods typically between 2 to 5 years.
Warranty Liability We provide customers with a product warranty that assures that the products meet standard specifications and are free for periods typically between 2 to 5 years. We accrue a warranty reserve for the products sold, which includes our best estimate of the projected costs to repair or replace items under warranties and recalls, if identified.
Once inventory is written-down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Income Taxes We apply the asset and liability method of accounting for income taxes.
At the end of each reporting period, we determine the estimated selling price of our inventory based on market conditions. Once inventories are written-down, a new, lower cost basis for those inventories is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.
At the end of each reporting period, we evaluate whether our inventories are damaged or obsolete, and if so, a loss is recognized in the period in which it occurs. Inventory write-downs are also based on reviews for any excess or obsolescence determined primarily by comparing quantities on hand to current and future demand forecasts.
Inventory write-downs are also based on reviews for any excess or obsolescence determined primarily by comparing quantities on hand to current and future demand forecasts. We reserve for any excess or obsolete inventories when it is believed that the net realizable value of inventories is less than the carrying value.

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