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What changed in Xos, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Xos, Inc.'s 2022 and 2023 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 2023 report.

+422 added−456 removedSource: 10-K (2024-03-29) vs 10-K (2023-03-31)

Top changes in Xos, Inc.'s 2023 10-K

422 paragraphs added · 456 removed · 307 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

53 edited+12 added−17 removed43 unchanged
Biggest changeOur proprietary fleet management software 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. 7 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 different customer use cases.
Biggest changeXos 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.
Pricing for these materials is governed by market conditions and may fluctuate due to various factors outside of our control, such as supply and demand and market speculation. We are currently securing all raw materials and components that are either available or becoming available in the global supply chain to support our operations.
Pricing for these raw materials is governed by market conditions and may fluctuate due to various factors outside of our control, such as supply and demand and market speculation. We are currently securing all raw materials and components that are either available or becoming available in the global supply chain to support 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 flex facility located in Byrdstown, Tennessee that utilizes the facilities of Fitzgerald Manufacturing Partners, LLC, the largest manufacturer of glider kits in the United States.
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.
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. 14 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.
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.
Government agencies around the world are expected to continue providing incentives for the purchase of electric vehicles, 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. Governmental regulations regarding the manufacture, sale and implementation of products and systems similar to ours are subject to future change.
Although our vehicles have zero tailpipe emissions, we are required to seek an EPA Certificate of Conformity for vehicles sold in states covered by the Clean Air Act’s standards or a CARB Executive Order for vehicles sold in California or any of the other states that have adopted the stricter California standards.
Although our vehicles have zero tailpipe emissions, we are required to seek an EPA Certificate of Conformity for vehicles sold in states covered by the U.S. Clean Air Act’s standards or a CARB Executive Order for vehicles sold in California or any of the other states that have adopted the stricter California standards.
We believe that we compete favorably with our competitors on the basis of these factors; however, our competitors may be able to deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their alternative fuel and electric vehicle programs.
We believe that we compete favorably with our competitors on the basis of these factors; however, our competitors may be able to deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their alternative fuel and electric vehicle and energy service programs.
Under HVIP, dealers and fleet operators may request vouchers from HVIP on a first-come first-served basis, up to the funding amount available for that year, to reduce the cost of purchasing hybrid and zero-emission medium- and heavy-duty trucks and buses.
Under HVIP, dealers and fleet operators may request vouchers from HVIP on a first-come first-serve basis, up to the funding amount available for that year, to reduce the cost of purchasing hybrid and zero-emission medium- and heavy-duty trucks and buses.
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 demand has been spurred by government incentives and regulations at federal, state and local levels.
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.
State Vehicle Incentives Numerous states, as well as certain private enterprises, offer incentive programs to encourage the adoption of alternative fuel vehicles, including tax exemptions, tax credits, exemptions, and special privileges. Most of these programs have eligibility requirements such as a certain fleet size, required diesel truck trade-in, and environmental regulation compliance.
State Vehicle Incentives Numerous states, as well as certain private enterprises, offer incentive programs to encourage the adoption of alternative fuel vehicles, including tax exemptions, tax credits, exemptions, and special privileges. Many such programs have eligibility requirements, such as a fleet size requirements, required diesel truck trade-in, and environmental regulation compliance.
The registration and sale of zero-emission vehicles (“ZEV”) in California could earn us ZEV credits that we 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 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.
On August 20, 2021, the transactions contemplated by the Agreement and Plan of Merger, as amended on May 14, 2021, by and among NextGen, Sky Merger Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary of NextGen (“Merger Sub”), and Xos, Inc., a Delaware corporation (now known as Xos Fleet, Inc., “Legacy Xos”), were consummated (the “Closing”), whereby Merger Sub merged with and into Legacy Xos, the separate corporate existence of Merger Sub ceased and Legacy Xos became the surviving corporation and a wholly owned subsidiary of NextGen (such transaction the “Merger” and, collectively with the Domestication, the “Business Combination”).
On August 20, 2021, the transactions contemplated by the Agreement and Plan of Merger, as amended on May 14, 2021, by and among NextGen, Sky Merger Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary of NextGen (“Merger Sub”), and Xos, Inc., a Delaware corporation (now known as Xos Fleet, Inc., “Legacy Xos”), were consummated (the “Closing”), whereby Merger Sub merged with and into Legacy Xos, the separate corporate existence of Merger Sub ceased and Legacy Xos became the surviving corporation and a wholly owned subsidiary of NextGen (such transaction the “Merger” and, collectively with the Domestication, the “Business Combination”,), and Xos became the publicly traded entity listed on Nasdaq.
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 specifically around battery, 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; • 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 11 In addition to large-scale national accounts with major 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 (ISPs), which fulfill last-mile routes for enterprise partners.
These competitors also compete with us in recruiting and retaining qualified research and development, sales, marketing and management personnel, as well as in acquiring technologies complementary to, or necessary for, our products. Additional mergers and acquisitions may result in even more resources being concentrated in 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 on our competitors.
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 receive up to $40,00 0 per vehicle in federal tax credits for the purchase of qualified electric vehicles in the U.S. through 2032 .
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.
Our body controls include cabin heater and air conditioning, shifter communication, power steering control, electronic parking brake system and certain other software critical for vehicle controls. • Instrument cluster and infotainment. We designed a fully digital instrument cluster specifically for last-mile commercial electric vehicles.
Our body controls include cabin heater and air conditioning, hydraulic system control, electronic parking brake system and certain other software critical for vehicle controls. • Instrument cluster and infotainment . We designed a fully digital instrument cluster specifically for last-mile commercial electric vehicles.
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. Employment Data As of December 31, 2022, we had 272 full-time employees, 25 contractors and 3 interns.
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.
We work to qualify multiple suppliers for key components where feasible in order to minimize potential production risks. We also mitigate risk by maintaining safety inventory for certain key components. Our products use various raw materials including aluminum, steel, cobalt, lithium, nickel and copper.
We work to qualify multiple suppliers for key components where feasible in order to minimize potential production risks. We also mitigate risk by maintaining safety inventory for certain key components. Our products use various raw materials, such as aluminum, steel, phosphate, lithium, iron and copper.
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, BYD Motors, Harbinger, Lightning e-Motors, The Lion Electric Company, SEA Electric, Motiv Power Systems, Blue Arc, and Proterra.
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.
Our Employee Experience Team and Sustainability and Innovation Committee are 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 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.
We recently introduced our 2023 Stepvan—our next-generation chassis designed to reduce per-unit production costs, increase technological capabilities and improve total cost of ownership (“TCO”) for fleet operators. The 2023 Stepvan will be available for a wide range of use cases, including parcel delivery, uniform rental, and cash-in-transit industries.
Xos Product Development : We are designing our next-generation chassis to reduce per-unit production costs, increase technological capabilities and improve total cost of ownership (“TCO”) for fleet operators. The next-generation chassis will continue to be designed for a wide range of use cases, including parcel delivery, uniform rental, and cash-in-transit industries.
The modularity of our MD X-Platform allows for numerous use cases and body configurations to meet customer needs.
The modularity of our MD X-Platform 10 allows for numerous use cases and body configurations to satisfy customer demands.
This software also contains connection modules that feature over-the-air update capabilities through our cloud intelligence platform and allow for remote diagnostics and maintenance services. Xosphere ™ is compatible with our 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 (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.
Competition We have experienced, and expect to continue to experience, competition from a number of companies, particularly as the commercial transportation sector increasingly shifts towards low-emission, zero-tailpipe emission and carbon neutral solutions. Existing commercial diesel vehicle OEMs, such as Freightliner, Ford, General Motors, Navistar, Paccar, and Volvo/Mack, are shifting their focus to developing zero-tailpipe emissions solutions for the customers.
Competition We have experienced, and expect to continue to experience, competition from a number of companies, particularly as the commercial transportation sector accelerates towards low-emission, zero-tailpipe emission and carbon neutral fleet solutions. Existing commercial diesel vehicle OEMs, such as Freightliner, Ford, General Motors, Navistar, Paccar, and Volvo/Mack, continue to invest in the development of zero-tailpipe emission solutions.
While our current vehicles fully comply and we expect that our vehicles in the future will fully comply with all applicable FMVSS with limited or no exemptions, FMVSS are subject to change from time to time.
Xos vehicles are designed to meet all applicable FMVSS standards in effect at the date of manufacture. While our current vehicles comply and we expect that our vehicles in the future will comply with all applicable FMVSS with limited or no exemptions, FMVSS are subject to change from time to time.
Vehicle Control Software We designed and developed on-board vehicle control software, which leverages basic third-party software and integrates our proprietary powertrain controls, body controls, instrument cluster and infotainment and Xosphere ™ software. 10 • Powertrain controls.
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 .
An estimated 40% 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.
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.
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.
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 received our Certificate of Conformity from the EPA and have submitted our documentation for the CARB executive order. We expect to receive approval from CARB in the second half of 2023. Vehicle Safety & Testing Our vehicles are subject to regulation by the National Highway Traffic Safety Administration (“NHTSA”), including all applicable Federal Motor Vehicle Safety Standards (“FMVSS”).
We have received the requisite EPA Certificate of Conformity and approval from CARB. Vehicle Safety & Testing Our vehicles are subject to regulation by the National Highway Traffic Safety Administration (“NHTSA”), including all applicable Federal Motor Vehicle Safety Standards (“FMVSS”). Numerous FMVSS apply to our vehicles specifying design, construction, and performance requirements.
Item 1. Business Overview Xos is a leading fleet electrification solutions provider committed to the decarbonization of commercial transportation. We design and manufacture Class 5-8 battery-electric commercial vehicles that travel on last-mile, back-to-base routes of up to 200 miles per day. We also offer charging infrastructure products and services to support electric vehicle fleets.
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.
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.
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 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. Our modular proprietary chassis accommodates a wide range of commercial use applications and vehicle body upfits.
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.
Emissions Credit Programs California has greenhouse gas emissions standards that closely follow the standards of the U.S. Environmental Protection Agency (“EPA”).
Eligibility for and the magnitude of incentives varies based on individual charging capabilities and other factors. Emissions Credit Programs California has greenhouse gas emissions standards that closely follow the standards of the U.S. Environmental Protection Agency (“EPA”).
Sales & Marketing Direct Sales Our sales efforts consist of both inside sales representatives and field-based personnel who work to educate fleets on the wide-ranging benefits of our zero-tailpipe emission trucks and efficient methods to transition to electric fleets.
Sales & Marketing Direct Sales Our sales efforts consist of sales representatives and field-based personnel who educate fleets on the wide-ranging benefits of our zero-tailpipe emission commercial vehicles as well as rapid and cost-efficient Xos products and services used to electrify commercial fleets.
We have also entered into robust partnerships with established distributors such as Thompson Truck Centers to facilitate sales to commercial fleets. During the year ended December 31, 2022, one customer accounted for 42% 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, 2023, two customers accounted for 54% and 10%, respectively, of the Company’s revenues .
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, 2022, we had 26 pending or approved U.S. trademark applications.
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.
Powered by Xos™ Our Powered by Xos™ business provides mix-use powertrain solutions for off-highway, industrial and other commercial equipment. 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.
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.
In particular, unpatented trade secrets in the fields of research, development and engineering are an important aspect of our business by ensuring that our technology remains confidential.
In particular, unpatented trade secrets in the fields of research, development and engineering are an important aspect of our business by ensuring that our technology remains confidential. We also pursue patent protection when we believe we have developed a patentable invention and the benefits of obtaining a patent outweigh the risks of making the invention public through patent filings.
Our vehicle range capability allows Xos vehicles to meet the demands of rigorous last-mile routes. Each X-Platform is constructed with high-strength steel, which is designed to provide enhanced durability relative to other options on the market.
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.
Suggestion boxes and focus groups collect additional information on employee sentiment and needs, and we communicate the resulting actions taken with our employee population.
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.
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. Xos Product Development : We are continuously developing cutting-edge technology for our battery-electric vehicles.
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.
Dealer Sales To supplement our direct sales organization we partner with various distributors and dealers with long-established fleet relationships in key markets. Such partnerships add sales expertise and deep industry knowledge, as well as access to hundreds of technicians to support customers with best-in-class parts and service support.
Dealer Sales To supplement our direct sales organization, Xos partners with select distributors and dealers with long-established fleet relationships in key markets. Such partnerships further supplement our in-depth sales expertise and industry knowledge and offer access to skilled technicians to provide Xos customers vehicle maintenance and service support across the U.S. and Canada.
Today our most common customer configurations uses the MD X-Platform include the following: • Stepvan: Stepvan configurations are most popular among our parcel delivery, linen, and food & beverage customers. • Armored Trucks: Armored truck configurations using our MD X-Platform are popular with our customers specializing in armored cash transport and logistics. 8 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”).
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.
Such modularity provides us with a competitive advantage in the commercial transportation sector in which commercial fleet operators deploy vehicles across an array of applications and environments. Each X-Platform is able to accommodate a sufficient number of X-Packs to provide up to 270 miles of range across our current vehicle product variants.
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.
Such modular design for the X-Pack and X-Platform enables fleet operators to upfit our chassis with their preferred vehicle body and tailor battery range to satisfy their specific commercial application (e.g., upfitting with a specific vehicle body and/or tailoring battery range).
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.
Energy & Infrastructure In order to accelerate the adoption of electric trucks across all sectors, Xos has a dedicated sales force with specialized expertise in charging and infrastructure installations to facilitate fleet transition to electric vehicles. Our energy sales representatives are able to assist customers throughout the entire construction process, including managing projects, permitting, and securing available funding when applicable.
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.
Charger types on offer include: (i) 30kW and 60kW EV portable chargers, (ii) 30kW and 60kW EV wall-mount chargers; (iii) 30kW and 60kW EV pedestal EV chargers (iv) 150kW cabinet EV chargers; and (v) 300kW cabinet EV chargers. The DC Fast Chargers can be configured with different features to meet different use cases and budgets.
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.
Xos Energy Solutions™ provides customers with full service project management, electric vehicle chargers and charging equipment, and solutions for charging infrastructure installation. This service is available to customers whether they use Xos trucks, competitor trucks, or a mixed fleet. Xosphere™ We have developed a fleet management platform called Xosphere ™ that interconnects vehicle, maintenance, charging, and service data.
Xos 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.
One common application of our Powered by Xos™ powertrain solutions is industrial electric forklifts. Xos Energy Solutions™ Xos Energy Solutions™ is our comprehensive charging infrastructure through which we offer charging equipment, mobile energy storage, and turnkey infrastructure services to help traditional fleets accelerate electric fleet transition by maximizing incentive capture and reducing implementation lead times and costs.
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.
Fleet-as-a-Service is intended to increase the lifetime revenue of each vehicle sold by Xos. We plan to continue to expand on this offering through both in-house developments and offerings through industry-leading partners. 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.
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.
The flex facility is designed to manufacture up to 5,000 vehicles per year once fully tooled. In addition to our flex manufacturing facility in Tennessee, we maintain a battery production line in Los Angeles to produce batteries for specific use cases and research and development.
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.
HVIP represents the most utilized of the subsidy programs due to its ease of access and amount of funding per vehicle. Infrastructure Incentives 13 A number of states and municipalities also offer incentive programs to encourage the installation of charging infrastructure for electric vehicles. The magnitude of incentives varies based on individual charging capabilities.
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.
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This allows customers to connect across Xos products to optimize their fleet. 9 Fleet-as-a-Service Our Fleet-as-a-Service offering facilitates the transition from traditional internal combustion engine (“ICE”) vehicles to battery-electric vehicles and provides fleet operators with a comprehensive set of solutions and products by which to transition and operate an electric fleet.
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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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Our Fleet-as-a-Service offering includes, but is not limited to (i) charging solutions via Xos Energy Services™; (ii) vehicle telematics and over-the-air (OTA) updates via Xosphere ™ ; (iii) service; (iv) risk mitigation products; and (v) and financing through our partners. Fleet-as-a-Service integrates services into a bundled service package to reduce cost and improve efficiency in fleet electrification.
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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”).
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X-Pack Xos maintains the ability to design and engineer battery systems in house and integrate battery systems from third-party partners. We have developed proprietary battery pack technology purpose-built for last-mile commercial use cases. Our Xos battery packs (“X-Packs”) feature “cut-to-length” modular architecture to provide flexibility and satisfy customers’ preferred range and payload capacity needs.
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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.
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Fleet owners and operators can monitor chargers through the Xosphere™ fleet management platform to remotely observe performance, maintain charging profiles and optimize TCO. Xos Hub™ We also offer the Xos Hub™, a mobile energy storage and charging system. Utilizing our X-Pack battery technology, the Xos Hub™ enables charging of up to five vehicles at a time with standard CCS1 connectors.
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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.
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Our mobile Xos Hub™ can be transported to various locations and are intended to extend the range of electric routes. The Xos Hub™ also allows fleet operators a means to quickly deploy electric trucks without first implementing other charging infrastructure.
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Powered by Xos™ Our Powered by Xos™ business provides mix-use powertrain solutions for off-highway, industrial and other commercial equipment and specialty vehicles, such as school buses, medical and dental clinics, blood donation vehicles, and mobile command vehicles.
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We expect the Xos Hub™ to begin scaling production by the third quarter of 2023 and continue to believe that mobile, flexible methods of charging like the Xos Hub™ will play a key role in accelerating fleet electrification.
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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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Powered by Xos With our deep level of battery and powertrain technology, Xos actively pursues opportunities to supply OEM’s with powertrain kits as first-fit solutions to electrify industrial and off-highway equipment such as cranes, forklifts, and related equipment.
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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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Service & Maintenance We con tinue to grow our service network with added Xos field service technicians, third party service partners, including W.W. Williams and Hwy 7 & 50, and full line dealer partnerships with the addition of Foley Equipment and Ventura Truck Sales (Gabrielli).
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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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This growth continues to support our ability to provide customers with comprehensive after-sales services to ensure maximum uptime and minimal operational disruption. Manufacturing & Supply Chain Manufacturing We utilize a flexible manufacturing approach that leverages manufacturing partnerships to develop smaller and adaptable facilities relative to the large-scale greenfield manufacturing plants popular amongst traditional automotive manufacturers.
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The Xos Hub™ allows fleet operators the ability to rapidly deploy electric vehicles without an immediate need to install permanent charging infrastructure.
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Our flex manufacturing approach is structured such that the manufacturing partner provides real property facilities and vehicle assembly services while we coordinate other aspects of the manufacturing process, including supply chain logistics, battery assembly and manufacturing engineering.
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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.
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The smaller footprint of a flex facility and our utilization of existing facilities and labor allows us to establish each flex facility in under one year. We are able to upstart our facilities in lockstep 12 with our order book and address market demand in real-time ahead of competitors with longer lead-time manufacturing strategies.
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Service & Maintenance We continue to grow our service network with added Xos field service technicians nationwide.
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Our nimble flex facilities can also be strategically positioned in geographies near customers and suppliers — both domestic and international — and reduce logistics complexity and shipping costs. Our current flex facility is located in Byrdstown, Tennessee and utilizes the facilities of Fitzgerald Manufacturing Partners, LLC.
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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.
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Numerous FMVSS apply to our vehicles specifying design, construction, and performance requirements. Xos vehicles meet all applicable FMVSS standards in effect at the date of manufacture.
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Additionally, due to the recent introduction of our 2023 Stepvan, we expect deliveries to be weighted towards the second half of fiscal 2022. Intellectual Property Our ability to protect our material intellectual property is important to our business.
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We also pursue patent protection when we believe we have developed a patentable invention and the benefits of obtaining a patent outweigh the risks of making the invention public through patent filings. 15 As of December 31, 2022, we had five awarded U.S. patents.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAlthough there are currently various mechanisms that may be used to transfer personal information from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, 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. 39 If there is no lawful manner for us to transfer personal information from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal information necessary to operate our business.
Biggest changeIf there is no lawful manner for us to transfer personal information from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal information necessary to operate our business.
The performance characteristics of our products may vary due to factors outside of our control, which could harm our ability to develop, market and deploy our products. The performance characteristics of our products, including expected range, may vary due to factors outside of our control.
The performance characteristics of our products may vary due to factors outside of our control, which could harm our ability to develop, market and deploy our products. The performance characteristics of our products, including the expected range, may vary due to factors outside of our control.
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 will 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 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.
If we elect to settle our conversion obligation with respect to the Convertible Note in shares of Common Stock or a combination of cash and shares of Common Stock, any sales in the public market of Common Stock issuable upon such conversion could adversely affect prevailing market prices of Common Stock.
If we elect to settle our conversion obligation with respect to the Convertible Note in shares of our Common Stock or a combination of cash and shares of our Common Stock, any sales in the public market of our Common Stock issuable upon such conversion could adversely affect prevailing market prices of our Common Stock.
However, unauthorized actors may attempt to gain access to modify, alter and use such networks, vehicles and systems to gain control of or to change our vehicles’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the vehicle.
However, unauthorized actors may attempt to gain access to modify, alter and use such networks, vehicles and systems to gain control of or change our vehicles’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the vehicle.
However, we have limited experience to date selling and servicing our products 40 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.
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.
We may issue a substantial number of additional shares of Common Stock or Preferred Stock, including under our equity incentive plan.
We may issue a substantial number of additional shares of our Common Stock or Preferred Stock, including under our equity incentive plan.
Any such issuances of additional shares of Common Stock or Preferred Stock: • may significantly dilute the equity interests of our investors; • may subordinate the rights of holders of 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 • may adversely affect prevailing market prices for our Common Stock and/or Warrants.
Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of Common Stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that holders of Common Stock would receive a premium for their shares of Common Stock in an acquisition. Item 1B.
Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our Common Stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that holders of our Common Stock would receive a premium for their shares of our Common Stock in an acquisition. Item 1B.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; 48 • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of the holders of at least a majority of the voting power of the then-outstanding shares of capital stock; • provide that vacancies on our board of directors may be filled only by the affirmative vote of a majority of directors then in office, even though less than a quorum; and • require the approval of our board of directors or the holders of at least 66 2/3% of the voting power of all of the then-outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving three-year staggered terms; • prohibit cumulative voting in the election of directors; • provide that our directors may be removed for cause only upon the vote of the holders of at least a majority of the voting power of the then-outstanding shares of capital stock; • provide that vacancies on our board of directors may be filled only by the affirmative vote of a majority of directors then in office, even though less than a quorum; and • require the approval of our board of directors or the holders of at least 66 2/3% of the voting power of all of the then-outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation.
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.
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.
If any of our flex manufacturing facilities are not tooled in conformity with our requirements, repair or remediation may be required and could require us to take vehicle production offline, delay plans for increasing production capacity, or construct alternate facilities, which could materially limit our manufacturing capacity, delay planned increases in manufacturing volumes, delay the start of production of new product lines, or adversely affect our ability to timely sell and deliver our electric vehicles to customers.
If any of our manufacturing facilities are not tooled in conformity with our requirements, repair or remediation may be required and could require us to take vehicle production offline, delay plans for increasing production capacity, or construct alternate facilities, which could materially limit our manufacturing capacity, delay planned increases in manufacturing volumes, delay the start of production of new product lines, or adversely affect our ability to timely sell and deliver our electric vehicles to customers.
If we are not able to remediate the material weakness, 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, 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.
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; 41 • 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 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.
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; 28 • 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; 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.
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.
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.
Furthermore, we cannot ensure that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate in a timely manner or at all the control deficiencies that led to our material weakness in our internal controls over financial reporting or that they will prevent or avoid potential future material weaknesses due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.
Furthermore, we cannot ensure that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate in a timely manner or at all the control deficiencies that led to our material weaknesses in our internal controls over financial reporting or that they will prevent or avoid potential future material weaknesses due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.
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.
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.
Future mergers and acquisitions activity may result in even more resources being concentrated in our competitors. In addition, we also compete with manufacturers of vehicles with internal combustion engines. There are no assurances that customers will choose our vehicles over those of our competitors, or over internal combustion engine vehicles. We expect additional competitors to enter the industry as well.
Future mergers and acquisitions activity may result in even more resources being concentrated on our competitors. In addition, we also compete with manufacturers of vehicles with internal combustion engines. There are no assurances that customers will choose our vehicles over those of our competitors, or over internal combustion engine vehicles. We expect additional competitors to enter the industry as well.
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 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, our business, prospects, financial condition and operating results could be 35 materially and adversely affected.
The impact of changes in fair value on earnings may have an adverse effect on the market price of our securities. 45 We may issue a substantial number of additional shares of Common Stock or Preferred Stock, including under our equity incentive plan. Any such issuances would dilute the interest of our stockholders and likely present other risks.
The impact of changes in fair value on earnings may have an adverse effect on the market price of our securities. We may issue a substantial number of additional shares of our Common Stock or Preferred Stock, including under our equity incentive plan. Any such issuances would dilute the interest of our stockholders and likely present other risks.
If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences. Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty.
If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences. Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating uncertainty.
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.
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.
Because our vehicles and powertrains are based on a different technology platform than traditional internal combustion engines, individuals with sufficient training and experience in alternative fuel technologies may not be available to hire, and as a result, we may need to expend significant time 25 and expense training newly hired employees.
Because our vehicles and powertrains are based on a different technology platform than traditional internal combustion engines, individuals with sufficient training and experience in alternative fuel technologies may not be available to hire, and as a result, we may need to expend significant time and expense training newly hired employees.
The availability and effectiveness of our Xosphere ™ services depend on the 37 continued operation of information technology and communications systems. There are inherent risks associated with developing, improving, expanding and updating our current systems, such as the disruption of our data management, procurement, production execution, finance, supply chain and sales and service processes.
The availability and effectiveness of our Xosphere ™ services depend on the continued operation of information technology and communications systems. There are inherent risks associated with developing, improving, expanding and updating our current systems, such as the disruption of our data management, procurement, production execution, finance, supply chain and sales and service processes.
If we are unable to obtain sufficient semiconductors or other key components or materials that have experienced or may experience shortages, or if we 23 cannot find other methods to mitigate the impact of any such shortage, then our financial condition and results of operations may be materially and adversely affected.
If we are unable to obtain sufficient semiconductors or other key components or materials that have experienced or may experience shortages, or if we cannot find other methods to mitigate the impact of any such shortage, then our financial condition and results of operations may be materially and adversely affected.
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.
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.
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.
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.
If gasoline or other petroleum-based fuel prices remain at deflated levels for extended periods of time, the demand for electric 29 vehicles may decrease, which would have an adverse effect on our business, prospects, financial condition and operating results.
If gasoline or other petroleum-based fuel prices remain at deflated levels for extended periods of time, the demand for electric vehicles may decrease, which would have an adverse effect on our business, prospects, financial condition and operating results.
These external factors, as well as any operation of our products other than as intended, may affect performance of our products, including range and longevity. In addition, our products may contain defects in design and manufacturing that may cause them not to perform as expected or may require repair.
These external factors, as well as any operation of our products other than as intended, may affect the performance of our products, including range and longevity. In addition, our products may contain defects in design and manufacturing that may cause them not to perform as expected or may require repair.
In addition, remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.
In addition, remote work has become more common and has increased risks to our information technology systems and data, as more of our employees 36 utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.
In addition, most states require that we have a p hysical dealership location in the state before we can be licensed as a dealer. 35 The application of these state laws to our operations continues to be difficult to predict.
In addition, most states require that we have a p hysical dealership location in the state before we can be licensed as a dealer. The application of these state laws to our operations continues to be difficult to predict.
We cannot assure that our existing material weakness will be remediated or that additional material weaknesses will not exist or otherwise be discovered, any of which could adversely affect our reputation, financial condition, and results of operations.
We cannot assure that our existing material weaknesses will be remediated or that additional material weaknesses will not exist or otherwise be discovered, any of which could adversely affect our reputation, financial condition, and results of operations.
We have recorded a full valuation allowance related to our 32 net operating loss carryforwards and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.
We have recorded a full valuation allowance related to our net operating loss carryforwards and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.
Though we are taking steps to remediate the material weakness, 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 weakness 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.
The value received upon exercise of the Warrants (i) may be less than the value the warrant holders would have received if they had exercised their Warrants at a later time where the underlying share price is higher and (ii) may not compensate the holders for the value of the Warrants, including because the number of shares received of our Common Stock is capped at 0.361 shares per Warrant (subject to adjustment) irrespective of the remaining life of the warrants.
The value received upon exercise of the Warrants (i) may be less than the value the warrant holders would have received if they had exercised their Warrants at a later time where the underlying share price is higher and (ii) may not compensate the holders for the value of the Warrants, including because the number of shares received of our Common Stock is capped at 0.012 shares per Warrant (subject to adjustment) irrespective of the remaining life of the Warrants.
If we earn taxable income, such limitations could result in increased future income tax liability to us and our future cash flows could be adversely affected.
If we earn taxable income, such 31 limitations could result in increased future income tax liability to us and our future cash flows could be adversely affected.
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 $18.00 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 $0.30 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).
In addition, from time to time, products may be evaluated and reviewed by third parties. Any negative reviews or reviews which compare us unfavorably to competitors could adversely affect customer perception about our products. If we fail to manage our growth effectively, we may not be able to further design, develop, manufacture and market our products successfully.
In addition, from time to time, products may be evaluated and reviewed by third parties. Any negative reviews or reviews which compare us unfavorably to competitors could adversely affect customer perception of our products. If we fail to manage our growth effectively, we may not be able to further design, develop, manufacture and market our products successfully.
Servicing electric vehicles is different than servicing vehicles with internal combustion engines and requires specialized skills, including high voltage training and servicing techniques. We have partnered with a third party to perform certain servicing services on our vehicles, but our current or future third-party vehicle servicers may initially have limited experience in servicing vehicles like ours.
Servicing electric vehicles is different than servicing vehicles with internal combustion engines and requires specialized skills, including high voltage training and servicing techniques. We have partnered with third parties to perform certain servicing services on our vehicles, but our current or future third-party vehicle servicers may initially have limited experience in servicing vehicles like ours.
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 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 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.
For a discussion of management’s evaluation of our disclosure controls and procedures and the material weakness identified, see Part II, Item 9A, “Controls and Procedures” of this Report. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness.
For a discussion of management’s evaluation of our disclosure controls and procedures and the material weaknesses identified, see Part II, Item 9A, “Controls and Procedures” of this Report. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weaknesses.
While we have designed, implemented and tested security measures intended to prevent unauthorized access to our information technology networks, vehicles and related systems.
We have designed, implemented and tested security measures intended to prevent unauthorized access to our information technology networks, vehicles and related systems.
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 or the Convertible Debentures (collectively the “Convertible Debt”) 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; • 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.
As a result of the material weakness described above and other related matters raised or that may in the future be identified, we face potential for adverse regulatory consequences, including investigations, penalties or suspensions by the SEC or Nasdaq, litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and material weakness in our internal control over financial reporting and the preparation of our consolidated financial statements.
As a result of the material weaknesses described above and other related matters raised or that may in the future be identified, we face potential for adverse regulatory consequences, including investigations, penalties or suspensions by the SEC or Nasdaq, litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over financial reporting and the preparation of our consolidated financial statements.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar), litigation (including class-action claims), additional reporting requirements and/or oversight, bans on processing personal information, and orders to destroy or not use personal information.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar), litigation (including class-action claims), mass arbitration demands, additional reporting requirements and/or oversight, bans on processing personal information, and orders to destroy or not use personal information.
Additionally, such dealer relationships may limit our ability to enter into similar agreements with other dealers in certain markets or effect sales in certain markets other than through the dealer assigned to such market. Our ability to terminate any dealership agreement may be limited due to state and local laws and regulations.
Additionally, such dealer relationships may limit our ability to enter into similar agreements with other dealers in certain markets or affect sales in certain markets other than through the dealer assigned to such market. Our ability to terminate any dealership agreement may be limited due to state and local laws and regulations.
Additionally, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for processing personal information.
For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for processing personal information.
Management, with the oversight of the Audit Committee of our Board of Directors, is implementing remediation steps to improve our disclosure controls and procedures and our internal controls over financial reporting, including further documenting and implementing control procedures to address the identified risks of material misstatements, 33 and implementing monitoring activities over such control procedures.
Management, with the oversight of the Audit Committee of our Board of Directors, is implementing remediation steps to improve our disclosure controls and procedures and our internal controls over financial reporting, including further documenting and implementing 32 control procedures to address the identified risks of material misstatements, and implementing monitoring activities over such control procedures.
To further remediate the material weakness, management, including the Chief Executive Officer and Chief Financial Officer, have reaffirmed and re-emphasized the importance of internal controls, control consciousness and a strong control environment. We also expect to continue to review, optimize and enhance our financial reporting controls and procedures.
To further remediate the material weaknesses, management, including the Chief Executive Officer and Chief Financial Officer, have reaffirmed and re-emphasized the importance of internal controls, control consciousness and a strong control environment. We also expect to continue to review, optimize and enhance our financial reporting controls and procedures.
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 $10.00 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 $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 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 34 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 33 our debt service and other obligations.
We recently restated our financial statements for several prior periods, which resulted in unanticipated costs and may adversely affect investor confidence, our stock price, our ability to raise capital in the future and our reputation.
We previously restated our financial statements for several prior periods, which resulted in unanticipated costs and may adversely affect investor confidence, our stock price, our ability to raise capital in the future and our reputation.
We identified a material weakness in our internal control over financial reporting, and we may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements.
We identified material weaknesses in our internal control over financial reporting, and we may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements.
Moreover, our financial results may not meet expectations of equity research analysts, ratings agencies 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.
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.
Given the global nature of our supply chain and customer base, global political, economic, and other conditions, including geopolitical risks such as the current conflict between Russia and Ukraine 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 and related sanctions, may adversely affect our business and results of operations in ways we cannot foresee at the outset or at this point.
Our delay in providing sufficient charging solutions for our vehicles has resulted in the delay of the delivery of vehicles to customers. Demand for our vehicles and customer’s willingness to take delivery of and vehicle components depends in large part on the availability of charging infrastructure.
Our delay in providing sufficient charging solutions for our vehicles has resulted in the delay of the delivery of vehicles to customers. Demand for our vehicles and the customer’s willingness to take delivery depends in large part on the availability of charging infrastructure.
There are no assurances that we will be able to retain existing or secure future business with customers. 19 Our mix of offerings, such as Fleet-as-a-Service, Xos Energy Services™, and Xosphere™, is novel in the industry and has yet to be tested in the long term.
There are no assurances that we will be able to retain existing or secure future business with customers. 19 Our mix of offerings, such as Xos Energy Services™ and Xosphere™, is novel in the industry and has yet to be tested in the long term.
Furthermore, manufacturing technology may evolve rapidly, and we may decide to update our manufacturing processes more quickly than expected. Moreover, as we scale the commercial production of our vehicles, our experience may cause us to discontinue the use of already installed equipment in favor of different or additional equipment.
Furthermore, manufacturing technology may evolve rapidly, and we may decide to update our manufacturing processes more quickly than expected. Moreover, as we scale the commercial production of our vehicles, our experience has caused, and may in the future cause, us to discontinue the use of already installed equipment in favor of different or additional equipment.
Demand for these offerings may not ultimately meet expectations and/or Fleet-as-a-Service products and services in development may never become commercially available, either of which may have a material adverse effect on our business, prospects, financial condition and operating results.
Demand for these offerings may not ultimately meet expectations and/or products and services in development may never become commercially available, either of which may have a material adverse effect on our business, prospects, financial condition and operating results.
We have entered into non-binding memoranda of understanding and letters of intent (“MOUs”) with certain key manufacturers, suppliers and development partners to form strategic alliances with such third parties, and may in the future enter into additional strategic alliances or joint ventures or minority equity investments, in each case with various third parties for the manufacture of our products and for Fleet-as-a-Service.
We have entered into non-binding memoranda of understanding and letters of intent (“MOUs”) with certain key manufacturers, suppliers and development partners to form strategic alliances with such third parties, and may in the future enter into additional strategic alliances or joint ventures or minority equity investments, in each case with various third parties for the manufacture of our products.
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 our services like Fleet-as-a-Service, Xos 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.
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.
Substantial increases in the prices for components or materials utilized in the manufacture of our products, such as those charged by suppliers of battery cells, semiconductors or other key components or materials, would increase our operating costs, and could reduce our margins if the increased costs cannot be recouped through increased vehicle, powertrain or battery pack sales or Fleet-as-a-Service revenue.
Substantial increases in the prices for components or materials utilized in the manufacture of our products, such as those charged by suppliers of battery cells, semiconductors or other key components or materials, would increase our operating costs, and could reduce our margins if the increased costs cannot be recouped through increased vehicle, powertrain or battery pack sales.
Obtaining the required approvals and licenses could result in increased delay and costs, and failure to do so may disrupt our business strategy.
Obtaining the required approvals and licenses could result in increased delays and costs, and failure to do so may disrupt our business strategy.
This material weakness 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.
In addition, the existence of the Convertible Debt may encourage short selling by market participants because the conversion of the Convertible Debt could be used to satisfy short positions, or anticipated conversion of the Convertible Debt into shares of Common Stock could depress the price of Common Stock.
In addition, the existence of the Convertible Note may encourage short selling by market participants because the conversion of the Convertible Note could be used to satisfy short positions, or anticipated conversion of the Convertible Note into shares of our Common Stock could depress the price of our Common Stock.
Conversion of the Convertible Debt may dilute the ownership interest of our stockholders or may otherwise depress the price of our Common Stock. The conversion of some or all of the Convertible Debt may dilute the ownership interests of our stockholders.
Conversion of the Convertible Note may dilute the ownership interest of our stockholders or may otherwise depress the price of our Common Stock. The conversion of some or all of the Convertible Note may dilute the ownership interests of our stockholders.
Even if we and our third-party contract manufacturing partners are successful in developing high volume manufacturing capability and processes, we do not know whether we will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond our control such as problems with suppliers and vendors or force majeure events, meets our product commercialization and manufacturing schedules and satisfies the requirements of customers and potential customers.
Even if we are successful in developing high volume manufacturing capabilities and processes, we do not know whether we will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond our control such as problems with suppliers and vendors or force majeure events, meets our product commercialization and manufacturing schedules and satisfies the requirements of customers and potential customers.
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; • actions by stockholders, including the sale by the PIPE Investors of any of their shares of our Common Stock; • 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 the COVID-19 pandemic, 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 recent military conflict between Russia and Ukraine, 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 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 federal net operating loss carryovers have an indefinite carryforward period, and the state net operating loss carryovers may expire between 2036 and 2042.
The federal net operating loss carryovers have an indefinite carryforward period, and the state net operating loss carryovers may expire between 2036 and 2043.
The restatements may negatively impact the trading price of our securities and made it more difficult for us to raise capital on acceptable terms, or at all.
The restatements may have negatively impacted the trading price of our securities and made it more difficult for us to raise capital on acceptable terms, or at all.
Economic uncertainty and associated macroeconomic conditions, including high volatility and uncertainty in the capital markets including as a result of inflation and interest rate spikes and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, supply chain disruption and geopolitical events, such as the war between Russia and Ukraine, make it difficult for our customers and us to accurately forecast and plan future business activities, and could cause our customers to slow spending on our products and services like Fleet-as-a-Service, Xos Energy Services™, and Xosphere™.
Economic uncertainty and associated macroeconomic conditions, including high volatility and uncertainty in the capital markets including as a result of inflation and interest rate spikes and potential future disruptions in access to bank deposits or lending commitments due to bank failures, supply chain disruption and geopolitical events, such as the war between Russia and Ukraine and in Israel, make it difficult for our customers and us to accurately forecast and plan future business activities, and could cause our customers to slow spending on our products and services.
If we are unable to scale to wide-scale deliveries and realize increased adoption of our Fleet-as-a-Service products, we expect to continue to incur operating and net losses. Even if we can successfully develop our products and attract additional customers, there can be no assurance that we will be financially successful.
If we are unable to scale to wide-scale deliveries and realize increased adoption of our service offerings, we expect to continue to incur operating and net losses. 29 Even if we can successfully develop our products and attract additional customers, there can be no assurance that we will be financially successful.
We believe that we will continue to incur operating and net losses each quarter until at least the time we begin wide-scale deliveries of our products and realize increased adoption of our Fleet-as-a-Service products.
We believe that we will continue to incur operating and net losses each quarter until at least the time we begin wide-scale deliveries of our products and realize increased adoption of our service offerings.
If our third-party contract manufacturing partners 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 revenues, competitive position and reputation.
We have been and may continue to be impacted by macroeconomic conditions, rising inflation rates, uncertain credit and global financial market, including the recent and potential bank failures, supply chain disruption and geopolitical events, such as the war between Russia and Ukraine.
We have been and may continue to be impacted by macroeconomic conditions, rising inflation rates, uncertain credit and global financial market, including potential bank failures, supply chain disruption and geopolitical events, such as the wars between Russia and Ukraine and in Israel.
Labor discord or disruption, geopolitical events, social unrest, war, military conflict, including repercussions of the recent military conflict between Russia and Ukraine, terrorism, political instability, acts of public violence, boycotts, hostilities and social unrest and other health pandemics, such as COVID-19, that lead to avoidance of public places or cause people to stay at home could harm our business.
Labor discord or disruption, geopolitical events, social unrest, war, military conflict, including repercussions of the military conflict between Russia and Ukraine and in Israel, terrorism, political instability, acts of public violence, boycotts, hostilities and social unrest and other health pandemics that lead to avoidance of public places or cause people to stay at home could harm our business.
We may experience recalls in the future, which could adversely affect our brand and could adversely affect our business, prospects, financial condition and operating results. Our products may not perform consistent with customers’ expectations or on par with those of our competitors.
We have experienced product recalls and may experience future product recalls, which could adversely affect our brand and could adversely affect our business, prospects, financial condition and operating results. Our products may not perform consistent with customers’ expectations or on par with those of our competitors.
We and our contract manufacturing partners rely on complex machinery for the manufacture of our products, which involves a significant degree of risk and uncertainty in terms of operational performance and costs.
We rely on complex machinery for the manufacture of our products, which involves a significant degree of risk and uncertainty in terms of operational performance and costs. We rely on complex machinery for the manufacture and assembly of our products, which involves a significant degree of uncertainty and risk in terms of operational performance and costs.
At each reporting period, (1) the accounting treatment of the Warrants will be re-evaluated for proper accounting treatment as a liability or equity, and (2) the fair value of the liability of the Public Warrants and Private Placement Warrants will be remeasured and the change in the fair value of the liability will be recorded as other income (expense) in our income statement.
At each reporting period, (1) the accounting treatment of the Warrants will be re-evaluated for proper accounting treatment as a liability or equity, and (2) the fair value of the liability of the Public Warrants and Private Placement Warrants will be remeasured and the change in the fair value of the liability will be 45 recorded as other expense, net in our statement of operations and comprehensive loss.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not currently a party to any legal proceedings, the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition or results of operations. Item 4. Mine Safety Disclosures Not applicable. 49 PART II
Biggest changeWe are not currently a party to any legal proceedings, the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition or results of operations. Item 4. Mine Safety Disclosures Not applicable. 50 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 49 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 50 Item 6. Reserved 50 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 50 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 63 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 64 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−5 removed3 unchanged
Biggest changePayment of future cash dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of then-existing debt instruments and other factors our Board of Directors deems relevant.
Biggest changePayment of future cash dividends, if any, will be at the discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of then-existing debt instruments and other factors our Board of Directors deems relevant. Recent Sales of Unregistered Securities None.
The actual number of stockholders is greater than this number of record holders and i ncludes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. Dividend Policy We have never declared or paid any cash dividends on our Common Stock or any other securities.
The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. Dividend Policy We have never declared or paid any cash dividends on our Common Stock or any other securities.
Holders of Common Stock and Warrants As of March 23, 2023, there were 61 holders of record of our Common Stock and 18,833,298 Public Warrants outstanding held by 21 holders of record. Each Public Warrant entitles the registered holder to purchase one share of our Common Stock at a price of $11.50 per share, subject to certain adjustments.
Holders 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.
Removed
Recent Sales of Unregistered Securities On August 9, 2022, we entered into a securities purchase agreement with YA II PN, Ltd. (“Yorkville”), under which we agreed to sell and issue to Yorkville up to $35.0 million in principal amount of convertible debentures, convertible into shares of our Common Stock, subject to certain conditions and limitations (the “Convertible Debentures”).
Removed
On August 11, 2022 and September 21, 2022, we issued Convertible Debentures to Yorkville in the aggregate principal amount of $35.0 million, for cash proceeds of $34.3 million. During the three months ended September 30, 2022, Yorkville converted $0.2 million of unpaid principal and $14,794 of interest into 201,671 shares of our Common Stock.
Removed
During the three months ended December 31, 2022, Yorkville converted $1.8 million of unpaid principal and $107,137 of interest into 1,876,661 shares of our Common Stock.
Removed
On November 16, 2022, we issued 21,000 restricted shares of our Common Stock to FON Consulting, LLC pursuant to the terms of a prior services agreement by and between the Company and FORCE Family Office, Inc. (“FORCE”) (the “Services Agreement”). Pursuant to the Services Agreement, FORCE provided consulting services to increase brand awareness for the Company and held information events.
Removed
In addition to cash compensation for FORCE’s services, 21,000 shares of our Common Stock were issued to FORCE and vested pursuant to performance metrics set forth in the Services Agreement. The issuances of securities in the above transactions were made in reliance on the exemption from registration in Section 4(a)(2) under the Securities Act.

Item 7. Management's Discussion & Analysis

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

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Biggest changeResults of Operations Comparison of the Years Ended December 31, 2022 and 2021 The following table sets forth our historical operating results for the periods indicated ( dollars in thousands ): Years Ended December 31, 2022 2021 $ Change % Change Revenues $ 36,376 $ 5,048 $ 31,328 nm (1) Cost of goods sold 66,405 7,410 58,995 nm (1) Gross loss (30,029) (2,362) (27,667) nm (1) Operating expenses General and administrative 41,093 27,197 13,896 51 % Research and development 30,679 20,077 10,602 53 % Sales and marketing 9,547 3,519 6,028 171 % Total operating expenses 81,319 50,793 30,526 60 % Loss from operations (111,348) (53,155) (58,193) 109 % Other (expense) income, net (4,835) 38 (4,873) nm (1) Change in fair value of derivative instruments 14,184 18,498 (4,314) (23) % Change in fair value of earn-out shares liability 28,682 72,505 (43,823) (60) % Write off of subscription receivable — (379) 379 (100) % Realized loss on debt extinguishment — (14,104) 14,104 (100) % Income (loss) before provision for income taxes (73,317) 23,403 (96,720) nm (1) Provision for income taxes 8 2 6 300 % Net income (loss) $ (73,325) $ 23,401 $ (96,726) nm (1) ____________ (1) Percentage changes greater than or equal to 400% are not meaningful and noted as nm in the table above. 56 Table of Contents Revenues Our total revenue increased by $31.3 million, from $5.0 million in the year ended December 31, 2021 to $36.4 million in the year ended December 31, 2022.
Biggest changeChanges 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.
We expect that our G&A will start to decrease for the foreseeable future primarily due lower headcount driven by our reduction in workforce.
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 our research and development costs to decrease for the foreseeable future primarily due lower headcount driven by our reduction in workforce.
We expect our research and development costs to decrease for the foreseeable future primarily due to lower headcount driven by our reduction in workforce.
Other Income (Expense), Net Other income (expense), net primarily includes interest income from our investments in marketable debt securities, available-for-sale, interest paid on our equipment leases and interest expense related to our financing obligations, including the amortization for debt discount and issuance costs.
Other Expense, Net Other expense, net primarily includes interest income from our investments in marketable debt securities, available-for-sale, interest paid on our equipment leases and interest expense related to our financing obligations, including the amortization for debt discount and issuance costs.
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.
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.
Cash Flows from Financing Activities Net cash provided by financing activities was $64.7 million for the year ended December 31, 2022, primarily consisting of the $54.3 million proceeds from the issuance of the Convertible Debt offset by $(0.4) million of related debt issuance costs, $6.3 million proceeds from equipment financing transactions, $2.0 million proceeds from net short-term insurance financing note activity and $4.3 million proceeds from issuance of Common Stock under the SEPA.
Net cash provided by financing activities was $64.7 million for the year ended December 31, 2022, primarily consisting of the $54.3 million proceeds from the issuance of the Convertible Debt offset by $0.4 million of related debt issuance costs, $6.3 million proceeds from equipment financing transactions, $2.0 million proceeds from net short-term insurance financing note activity and $4.3 million proceeds from issuance of Common Stock under the SEPA.
While our significant accounting policies are described in the notes to our financial statements (see Note 2 – Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the accompanying audited financial statements), we believe that the following accounting policies require a greater degree of judgment and complexity.
While our significant accounting policies are described in the notes to our financial statements (see Note 2 – Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the accompanying financial statements), we believe that the following accounting policies require a greater degree of judgment and complexity.
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 income (loss), allocated to cost of goods sold.
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 cost of goods sold.
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 income (loss), allocated to G&A.
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.
Sales and Marketing Expenses Sales and marketing (“S&M”) expenses consist primarily of expenses 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 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.
Business Combination and Public Company Costs On August 20, 2021, the transactions contemplated by the Agreement and Plan of Merger, as amended on May 14, 2021, by and among NextGen, Sky Merger Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary of NextGen (“Merger Sub”), and Xos, Inc., a Delaware corporation (now known as Xos Fleet, Inc., “Legacy Xos”), were consummated (the 52 Table of Contents “Closing”), whereby Merger Sub merged with and into Legacy Xos, the separate corporate existence of Merger Sub ceased and Legacy Xos became the surviving corporation and a wholly owned subsidiary of NextGen (such transaction the “Merger” and, collectively with the transfer by way of continuation and deregistration of NextGen from the Cayman Islands and the continuation and domestication of NextGen as a corporation incorporated in the State of Delaware (the “Domestication”), the “Business Combination”).
Business Combination and Public Company Costs On August 20, 2021, the transactions contemplated by the Agreement and Plan of Merger, as amended on May 14, 2021, by and among NextGen, Sky Merger Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary of NextGen (“Merger Sub”), and Xos, Inc., a Delaware corporation (now known as Xos Fleet, Inc., “Legacy Xos”), were consummated (the “Closing”), whereby Merger Sub merged with and into Legacy Xos, the separate corporate existence of Merger Sub ceased and Legacy Xos became the surviving corporation and a wholly owned subsidiary of NextGen (such transaction the “Merger” and, collectively with the transfer by way of continuation and deregistration of NextGen from the Cayman Islands and the continuation and domestication of NextGen as a corporation incorporated in the State of Delaware (the “Domestication”), the “Business Combination”).
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.
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.
Our most significant estimates and judgments involve valuation of stock-based compensation, including the fair value of our Common Stock, and the valuation of the convertible notes payable, the SAFE, and derivative liability.
Our most significant estimates and judgments involve valuation of stock-based compensation, including the fair value of our Common Stock, and the valuation of the convertible notes payable and derivative liability.
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 — Recapitalization and Contingent 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 7 — Earn-out Shares Liability for additional information.
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.
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.
Research 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, • payroll expense for employees primarily engaged in R&D activities, including allocation of stock-based compensation expense.
Research 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.
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, 2022.
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.
Inventory is valued using average costing, as that method accurately reflects the frequency of our inventory purchases. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on operating capacity.
Inventory is valued using average costing, as that method accurately reflects the frequency of our inventory purchases. In the case of manufactured inventories and work in process, cost includes an appropriate share of production overheads based on operating capacity.
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 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. 63 Table of Contents Derivative Liability We account for convertible debt pursuant to ASC 815, Derivatives and Hedging.
Xos Energy Solutions™ provides customers with full service project management, electric vehicle chargers and charging equipment, and solutions for charging infrastructure installation. This service is available to customers whether they use Xos trucks, competitor trucks, or a mixed fleet. We have also developed a fleet management platform called Xosphere ™ that interconnects vehicle, maintenance, charging, and service data.
Xos Energy Solutions™ offers customers full service project management, electric vehicle chargers and charging equipment, and solutions for charging infrastructure installation. This service is available to customers whether they use Xos trucks, competitor trucks, or a mixed fleet. We have also developed a fleet management platform called Xosphere™ that interconnects vehicle, maintenance, charging, and service data.
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 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.
As of December 31, 2022, aggregate principal amounts of $33.0 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.
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.
Interest along with amortization of purchase premiums and accretion of discounts from the purchase date through the estimated maturity date, including consideration of variable maturities and contractual call provisions, are included in other income (expenses), net in the consolidated statements of net and comprehensive income (loss).
Interest along with amortization of purchase premiums and accretion of discounts from the purchase date through the estimated maturity date, including consideration of variable maturities and contractual call provisions, are included in other expense, net in the consolidated statements of operations and comprehensive income loss.
As many of these products and services are in development, we will re quire substantial additional capital to continue developing our products and services to bring them to full commercialization as well as fund our operations for the foreseeable future.
As many of these products are in development, we will require substantial additional capital to continue developing our products and services and bring them to full commercialization as well as fund our operations for the foreseeable future.
In addition, we also offer service offerings, such as Fleet-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 and Fleet-As-A-Service product offerings.
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.
Net cash used in operating activities was $128.0 million for the year ended December 31, 2022, primarily consisting of a cash-basis net loss of $96.3 million from normal operations of the Company (after non-cash adjustments of $22.9 million), and $31.7 million in working capital movements, primarily relating to inventory cost build-up as production continues to ramp up.
Net cash used in operating activities was $128.0 million for the year ended December 31, 2022, primarily consisting of a cash-basis net loss of $96.3 million from normal operations of the Company (after non-cash adjustments of $22.9 million), and $31.7 million in working capital movements, primarily relating to inventory cost build-up and increase in prepayments as production ramps up.
Convertible Debt Further, on August 11, 2022 and September 21, 2022, we issued convertible debentures (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 may be extended to February 11, 2024.
Direct labor costs relate to the wages of those individuals responsible for the assembly of vehicles delivered to customers. Cost of goods sold also includes depreciation expense on property and equipment related to cost of goods sold activities, calculated 54 Table of Contents 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 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.
Earn-out shares liability were initially recorded as fair value in the Business Combination and are adjusted to fair value at each reporting date with changes in fair value recorded in change in fair value of earn-out shares liability in the consolidated statements of operations and comprehensive income (loss).
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.
Our short-term uses of cash are for working capital and to pay interest on our debt and our long-term uses of cash are for working capital and to pay the principal of our indebtedness.
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.
See Note 8 — Convertible Notes and Note 20 — Subsequent Events in the accompanying consolidated financial statements for more information regarding the Convertible Debentures and Convertible Notes.
See Note 8 — Convertible Notes in the accompanying consolidated financial statements for more information regarding the Convertible Debentures and Convertible Note.
The series of restrictions imposed and the speed and nature of the recovery in response to the pandemic has placed a burden on our supply chain management, including but not limited to the following areas: • Semiconductor chip shortage : The global silicon semiconductor industry has experienced a shortage in supply and difficulties in ability to meet customer demand.
The speed and nature of the recovery in response to the pandemic has been slow, placing a burden on our supply chain management, including but not limited to the following areas: • Semiconductor chip shortage : The global silicon semiconductor industry has experienced a shortage in supply and difficulties in ability to meet customer demand.
We will continue to incur net losses and cash outflows in accordance with our operating plan as we continue to expand our research and development activities with respect to our vehicles and battery systems, scale our operations to meet anticipated demand and establish our Fleet-as-a-Service offering.
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.
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 below and in the section entitled “Risk Factors”.
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.
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.
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.
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 $43.8 million from $72.5 million in the year ended December 31, 2021 , to $28.7 million in the year ended December 31, 2022 .
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 .
We design and manufacture Class 5-8 battery-electric commercial vehicles that travel on last-mile, back-to-base routes of up to 200 miles per day. We also offer charging infrastructure products and services to support electric vehicle fleets.
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.
For shipping and handling charges, revenue is recognized at the time the products are delivered to or picked up by the customer. 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.
Xos Energy Solutions™ is our comprehensive charging infrastructure through which we offer charging equipment, mobile energy storage, and turnkey infrastructure services to help traditional fleets accelerate electric fleet transition by maximizing incentive capture and reducing implementation lead times and costs.
Xos Energy Solutions™ is our comprehensive charging infrastructure through which Xos offers mobile and permanent multi-application charging equipment, mobile energy storage, and turnkey energy infrastructure services to accelerate transitions to electric fleets by maximizing incentive capture and reducing implementation lead times and costs.
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.
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.
Standby Equity Purchase Agreement On March 23, 2022, we entered into a Standby Equity Purchase Agreement (the "SEPA") with Yorkville, 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 during the 36 months following the execution of the SEPA, subject to certain conditions.
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.
Research and Development Research and development expenses increased by $10.6 million, or 53%, from $20.1 million in the year ended December 31, 2021 to $30.7 million in the year ended December 31, 2022.
Research and Development Research and development expenses decreased by $11.1 million, or 36%, from $30.7 million in the year ended December 31, 2022 to $19.6 million in the year ended December 31, 2023.
Revenue contracts are identified when an enforceable agreement has been made with a customer. 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.
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.
At the end of each reporting period, we evaluate whether our inventories are damaged, obsolete, or have material changes in price or other causes, and if so, a loss is recognized in the period in which it occurs. Inventory write-downs are also based on 61 Table of Contents reviews for any excess or obsolescence.
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.
Change in Fair Value of Contingent Earn-out Shares Liability The contingent earn-out shares liability was established as part of the Business Combination. Changes in the fair value relate to remeasurement to fair value as of each subsequent balance sheet date.
Change in Fair Value of Contingent Earn-out Shares Liability The contingent earn-out shares liability was established as part of the Business Combination.
Change in Fair Value of Derivatives The gain on the change in fair value of derivative instruments decreased by $4.3 million, from $18.5 million in the year ended December 31, 2021 to $14.2 million in the year ended December 31, 2022.
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.
Supply Chain Management As described more fully below, there are certain areas in our supply chain management that have been disrupted due to global economic conditions and the prolonged effect of the COVID-19 pandemic. Our ability to find alternative solutions to meet customer demands will affect our financial performance.
The sales of our vehicles and services to our existing and future customers will be an important indicator of our performance. Supply Chain Management As described more fully below, certain areas of our supply chain have been disrupted due to global economic conditions. Our ability to find alternative solutions to meet customer demands will affect our financial performance.
For the year ended December 31, 2021, we have generated $4.9 million in revenue (or 97% of revenue) from vehicle and powertrain sales and $0.1 million (or 3% of revenue) from ancillary revenue.
For the year-ended December 31, 2023, we have generated $42.2 million in revenue (or 95% of revenue) from vehicle and powertrain sales, $1.2 million (or 3% of revenue) from Fleet-as-a-Service revenue, and $1.1 million (or 2% of revenue) from ancillary revenue.
Any deposits from customers represent contract liabilities. 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 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.
Successful Commercialization of our Products and Services We expect to derive future revenue from sales of our products and Fleet-as-a-Service offering.
Successful Commercialization of our Products and Services We expect to derive future revenue from sales of our vehicles, battery systems and other product and service offerings.
Components of Results of Operations Revenues To date, we have primarily generated revenues from the sale of electric step van, stripped chassis vehicles and battery systems. 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 X-Pack battery systems, which customers can upfit with their preferred vehicle body.
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). Through our Powered by Xos™ business we also provide mix-use powertrain solutions for off-highway, industrial and other commercial equipment such as forklifts.
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 flex facility is designed to manufacture an estimated 5,000 vehicles per year once fully tooled. For the year-ended December 31, 2022, we have generated $34.1 million in revenue (or 94% of revenue) from vehicle and powertrain sa les, $0.6 million (or 2% of revenue) from Fleet-as-a-Service revenue, and $1.7 million (or 4% of revenue) from ancillary revenue.
For the year ended December 31, 2022, we have generated $34.1 million in revenue (or 94% of revenue) 52 Table of Contents from vehicle and powertrain sales, $0.6 million (or 2% of revenue) from Fleet-as-a-Service, and $1.7 million (or 4% of revenue) from ancillary revenue.
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 income (loss), allocated to S&M. 55 Table of Contents We expect these expenses to decrease for the foreseeable future primarily due lower headcount driven by our reduction in workforce.
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 S&M.
This shortage has led to an increase in lead-times of production of semiconductor chips and components since the beginning of 2020. • Battery cells: The battery cell industry is facing a shortage in supply which is causing suppliers to limit customer allocations. • Supply limitation on vehicle bodies and aluminum : Vehicle body suppliers are currently experiencing elevated pricing or a shortage of key materials such as aluminum. 53 Table of Contents Despite supply chain disruptions, we have continued to source inventory for our vehicles and our purchasing team has been working with vendors to find alternative solutions to areas where there are supply chain constraints.
This shortage has led to an increase in lead-times of production of semiconductor chips and other highly engineered components since the beginning of 2020. • Battery cells: The battery cell industry is facing a shortage in supply which is causing suppliers to both limit customer allocations and provide no cost relief. • Supply limitation on vehicle bodies and aluminum : Vehicle body suppliers are currently experiencing elevated pricing or a shortage of key materials such as aluminum.
Net cash provided by investing activities was $82.7 million for the year ended December 31, 2022, primarily consisting of property and equipment additions of $14.1 million, offset by net sales of investments in marketable debt securities, available-for-sale of $96.8 million.
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.
Investments in Marketable Debt Securities, Available-for-Sale We maintain a portfolio of investments in a variety of fixed and variable rate debt securities, including U.S. treasuries, corporate debt, asset-backed securities and other, non-U.S. government and supranational bonds and certificate of deposit. We consider our investments in marketable debt securities to be available-for-sale, and accordingly, are recorded at their fair values.
See Note 2 – Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements for additional information. Investments in Marketable Debt Securities, Available-for-Sale We maintain a portfolio of investments in a variety of fixed and variable rate debt securities, including U.S. treasuries, corporate debt, asset-backed securities and other, non-U.S. government and supranational bonds and certificate of deposit.
Net cash used in operating activities was $88.9 million for the year ended December 31, 2021, primarily consisting of a cash-basis net loss of $49.4 million from normal operations of the Company (after non-cash adjustments of $72.8 million), and $39.5 million in working capital movements, primarily relating to inventory cost build-up and increase in prepayments as production ramps up.
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.
See Note 10 – Investments in Marketable Debt Securities, Available-for-Sale for additional information. 62 Table of Contents Public and Private Placement Warrants The Public Warrants and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815.
We review quarterly its investment portfolio of all securities in an unrealized loss position to determine if an impairment charge exists. See Note 9 – Investments in Marketable Debt Securities, Available-for-Sale for additional information. Public and Private Placement Warrants The Public Warrants and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815.
Until we can generate sufficient revenue from product sales, we expect to finance our operations through commercialization and production with proceeds from the Business Combination and through the sale of equity, debt financings or other capital sources.
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.
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.
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.
Identifying the contract with a customer; 2. Identifying the performance obligations in the contract; 3. Determining the transaction price; 4. Allocating the transaction price to the performance obligations; and 5. Recognizing revenue as the performance obligations are satisfied. We recognize revenue consisting of product and vehicle parts sales, inclusive of shipping and handling charges, net of estimates for customer returns.
Recognizing revenue as the performance obligations are satisfied. 61 Table of Contents We recognize revenue consisting of product and vehicle parts sales, inclusive of shipping and handling charges, net of estimates for customer returns. Revenue contracts are identified when an enforceable agreement has been made with a customer.
Sales and Marketing Sales and marketing expense increased by $6.0 million, or 171%, from $3.5 million in the year ended December 31, 2021 to $9.5 million in the year ended December 31, 2022.
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.
We determine the appropriate classification of investments in marketable debt securities at the ti me of purchase.
We consider our investments in marketable debt securities to be available-for-sale, and accordingly, are recorded at their fair values. We determine the appropriate classification of investments in marketable debt securities at the ti me of purchase.
Contractual Obligations and Commitments We did not have any material contractual obligations or other commitments as of December 31, 2022, other than what is disclosed in Note 15 - Commitments and Contingencies and Note 6 - Leases in this Form 10-K. 60 Table of Contents Critical Accounting Policies and Estimates Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
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.
Our proprietary fleet management software integrates vehicle operation and vehicle charging to provide commercial fleet operators a more seamless and cost-efficient vehicle ownership experience than traditional internal combustion engine counterparts. We currently manufacture a Class 5-6 MD X-Platform with multiple body options to address different customer use cases, including parcel delivery, linen, food & beverage, and armored cash transport.
We currently manufacture a Class 5-6 MD X-Platform with multiple body options to address different customer use cases, including parcel delivery, linen, food & beverage, and armored cash transport. In May 2022 we launched our Class 7-8 HD X-Platform.
Tightness in supply availability could lead to previously unforeseen cost and delivery pressures on certain material and logistical costs in 2023. As the Company accelerates execution of its strategic plans, we will endeavor to be strategic in our cost action plans, including working with various vendors and service providers to provide us cost-effective arrangements.
As the Company accelerates execution of its strategic plans, we will endeavor to be strategic in our cost action plans, including working with various vendors and service providers to provide us cost-effective arrangements. Basis of Presentation The accompanying consolidated financial statements include the accounts of Xos and its wholly owned subsidiaries, Xos Fleet, Inc., and Xos Services, Inc.
Revenue for the years ended December 31, 2022 and 2021 consisted of the following ( dollars in thousands ): Years Ended December 31, 2022 2021 $ Change % Change Product and service revenue Stepvans & vehicle incentives $ 31,829 $ 2,735 $ 29,094 nm (1) Powertrains 2,226 2,152 74 3 % Fleet-as-a-Service 606 — 606 100 % Total product and service revenue 34,661 4,887 29,774 nm (1) Ancillary revenue 1,715 161 1,554 nm (1) Total revenues $ 36,376 $ 5,048 $ 31,328 nm (1) Cost of Goods Sold Cost of goods sold increased by $59.0 million, from $7.4 million in year ended December 31, 2021 to $66.4 million in the year ended December 31, 2022.
Revenue for the years ended December 31, 2023 and 2022 consisted of the following ( dollars in thousands ): Years Ended December 31, 2023 2022 $ Change % Change Product and service revenue Stepvans & vehicle incentives $ 41,385 $ 31,829 $ 9,556 30 % Powertrains 795 2,226 (1,431) (64 %) Fleet-as-a-Service 1,206 606 600 99 % Total product and service revenue 43,386 34,661 8,725 25 % Ancillary revenue 1,137 1,715 (578) (34 %) Total revenues $ 44,523 $ 36,376 $ 8,147 22 % Cost of Goods Sold Cost of goods sold decreased by $20.6 million, or 31%, from $66.4 million in year ended December 31, 2022 to $45.8 million in the year ended December 31, 2023.
In connection with the foregoing, the term set forth in the SEPA will be extended for a corresponding number of days. We used the net proceeds received from sales of Common Stock pursuant to the SEPA for working capital and general corporate purposes and expect similar use of proceeds going forward.
As of December 31, 2023, the remaining commitment available under the SEPA was $119.5 million. We used the net proceeds received from sales of Common Stock pursuant to the SEPA for working capital and general corporate purposes and expect similar use of proceeds going forward.
The growth was primarily due to changes of (i) $10.0 million in allocation of personnel costs driven by higher headcount in engineering, including the allocation of stock-based compensation expense and (ii) $0.6 million attributable in net other costs, driven by increases in consulting fees and purchases of material and software used solely for research and development purposes, offset by reductions in costs incurred for purchases of equipment and research and development related freight costs .
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.
As a result, we strive to maintain robust access to capital in order to fund and scale our operation s. We may raise additional capital through a combination of debt financing, other non-dilutive financing and/or equity financing, including through asset-based lending and/or receivable financing.
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.
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 exclusively within North America. For more information about our basis of operations, refer to Note 1 — Description of Business in the accompanying consolidated financial statements for more information.
(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.
General and Administrative General and administrative expense increased by $13.9 million, or 51%, from $27.2 million in the year ended December 31, 2021 to $41.1 million in the year ended December 31, 2022, attributable to changes of (i) $6.5 million in headcount and personnel cost for supply chain, sales, legal, accounting, information technology and general and administrative functions necessary to support our business growth, (ii) $3.6 million in insurance costs driven by an overall coverage increase and full year impact of amortization expense for D&O insurance, (iii) $2.1 million in consulting and professional services expenses related to the implementation of our new ERP system and financial processes as well as legal, accounting and auditing fees, (iv) $0.4 million in investment for equipment and technology driven by an increase in our headcount and increased usage of SaaS as part of our business operations and (v) $1.3 million in other operating expenses including depreciation, travel and recruiting.
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.
The change in fair value for the year ended December 31, 2022 is primarily attributable to the change in our stock price and the resulting valuation at the respective reporting period related to the private placement and public warrants of $6.8 million and derivative liabilities related to the Convertible Debentures of $7.4 million .
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.
As of March 28, 2 023, our executive officers and directors and their respective affiliates as a group beneficially owned approximately 52 % of the outstanding Common Stock, and as a result, we believe that we will obtain such approval. 59 Table of Contents Cash Flows Summary The following table provides a summary of cash flow data for the years ended December 31, 2022 and 2021 ( in thousands ): Years Ended December 31, 2022 2021 Net cash used in operating activities $ (127,960) $ (88,895) Net cash provided by (used in) investing activities 82,710 (155,143) Net cash provided by financing activities 64,749 252,855 Net increase in cash, cash equivalents and restricted cash $ 19,499 $ 8,817 Cash Flows from Operating Activities Our cash flows from operating activities are significantly affected by the growth of our business primarily related to research and development and selling, general, and administrative activities.
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.
The increase in revenues for the year ended December 31, 2022, was primarily driven by increased deliveries of our st epvans. During the year ended December 31, 2022, we delivered 275 units, (257 stepvans and 18 powertrains), compared to 44 units (22 stepvans and 22 powertrains) in the year ended December 31, 2021.
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.
The growth was primarily due to increases of (i) $5.2 million in allocation of personnel costs driven by higher headcount, including the allocation of stock-based compensation expense and (ii) $0.8 million related to public relations costs, participation in tradeshows and general marketing efforts to enhance brand recognition. 57 Table of Contents Other (Expense) Income, Net Other income (expense), net increased by $(4.9) million to $(4.8) million net other expense in the year ended December 31, 2022.
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 increase in cost of goods sold is directly attributable to the increase in our revenues as well as increases of (i) $5.7 million in the inventory reserves and associated write-downs, (ii) $7.9 million of unfavorable physical inventory count and other adjustments and (iii) $45.4 million in direct materials, direct labor, and manufacturing overhead.
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.
Pursuant to the Convertible Debentures, as a result of the daily volume-weighted average price of the common stock of the Company (the “daily VWAP”) being less than the Floor Price for five consecutive trading days, we were required to make, and made, Prepayments to Yorkville in the amount of $3.7 million on January 3, 2023 and $3.2 million on January 10, 2023.
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.
The increase in other expense is driven by an increase in interest expense of $4.6 million primarily related to the Convertible notes and Convertible Debentures, including amortization of related discounts and issuance costs and various equipment leases, accretion/amortization expense related to on our investments in marketable debt securities, available-for-sale of $0.8 million, and impairment on assets held for sale of $0.7 million.
The change was attributable to increases of (i) $5.8 million in net interest expense related to the Convertible Note and Convertible Debentures, including amortization of related discounts and issuance c osts, (ii ) $1.6 million of redemption premiums related to prepayments on Convertible Debentures and (iii) $0.8 million for impairment on assets held for sale.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+2 added−3 removed1 unchanged
Biggest changeInflation Risk We monitor inflation and the effects of changing prices. Inflation increases the cost of goods and services used. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset these higher costs through price increases or mitigate the impact through alternative solutions.
Biggest changeIf our costs were to become subject to significant inflationary pressures, we may not be able to fully offset these higher costs through price increases or mitigate the impact through alternative solutions. Our inability to do so could harm our business, financial condition and results of operations. 64 Table of Contents
Quantitative and Qualitative Disclosures About Market Risk We are exposed to a variety of market and other risks, including the effects of changes in interest rates, inflation, and foreign currency exchange rates, as well as risks to the availability of funding sources, hazard events, and specific asset risks. 63 Table of Contents Interest Rate Risk The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to a variety of market and other risks, including the effects of changes in interest rates, inflation, and foreign currency exchange rates, as well as risks to the availability of funding sources, hazard events, and specific asset risks.
We do not use derivatives or similar instruments to manage our interest rate risk. We seek to invest in high quality investments. The weighted average rating (exclusive of cash and cash equivalents) was A as of December 31, 2022. Maturities are maintained consistent with our short-, medium- and long-term liquidity objectives.
We do not use derivatives or similar instruments to manage our interest rate risk. We seek to invest in high quality investments. Maturities are maintained consistent with our short-, medium- and long-term liquidity objectives. Inflation Risk We monitor inflation and the effects of changing prices. Inflation increases the cost of goods and services used.
The primary objective of our investment activity is to maintain the safety of principal, and to provide for future liquidity requirements while maximizing yields without significantly increasing risk. While some investments may be securities of companies in foreign countries, all investments are denominated and payable in U.S. Dollars. We do not enter into investments for trading or speculative purposes.
While some investments may be securities of companies in foreign countries, all investments are denominated and payable in U.S. Dollars. We do not enter into investments for trading or speculative purposes.
Removed
We maintain a portfolio of investments in a variety of fixed and variable debt rate securities, including, U.S. treasuries, corporate debt, asset-backed securities, non-U.S. government and supranational bonds and certificate of deposit . As of December 31, 2022, the fair value of investments in marketable debt securities, available-for-sale was $50.6 million .
Added
Interest Rate Risk The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. We maintain a portfolio of investments in a variety of fixed and variable debt rate securities, including, corporate debt and asset-backed securities .
Removed
The following table sets forth the impact on the fair value of our investments as of December 31, 2022 from changes in interest rates based on the weighted average duration of the debt securities in our portfolio ( in thousands ): Approximate Change in Fair Value of Investments Change in Interest Rate Increase (Decrease) 2% Decrease $ 318 1% Decrease $ 159 1% Increase $ (159) 2% Increase $ (318) Foreign Currency Risk There was no material foreign currency risk for the years ended December 31, 2022 and 2021.
Added
As of December 31, 2023, the fair value of investments in marketable debt securities, available-for-sale wa s $0.0 million. The primary objective of our investment activity is to maintain the safety of principal, and to provide for future liquidity requir ements while maximizing yields without significantly increasing risk.
Removed
Our inability to do so could harm our business, financial condition and results of operations. 64 Table of Contents

Other XOSWW 10-K year-over-year comparisons