Xos Q3 revenue falls to $5.55M amid going-concern doubt
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Rhea-AI Filing Summary
Xos, Inc. reported third-quarter 2026 revenue of $5.546 million, compared with $16.500 million a year earlier, and a net loss of $7.609 million versus net income of $2.144 million. For the first nine months, revenue was $21.511 million, compared with $40.772 million, while net loss was $19.418 million versus $15.504 million.
Operating cash flow was $6.778 million used in the nine months, compared with $2.966 million provided in 2025. Cash and equivalents were $12.064 million at September 30, 2026, and convertible-note principal was $14.0 million. Xos said these conditions raise substantial doubt about its ability to continue as a going concern. Scheduled principal payments are $2 million in 2026, $9 million in 2027 and $3 million in 2028.
During the quarter, Xos sold 637,409 shares through its at-the-market program at an average $4.67 per share for $2.8 million in net proceeds. The company also disclosed identified material weaknesses in internal control over financial reporting.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- None.
Negative
- Major pointManagement said conditions raise substantial doubt about the company’s ability to continue as a going concern.
- Major pointXos disclosed material weaknesses in internal control over financial reporting.
- Moderate pointThird-quarter revenue was $5.546 million, down from $16.500 million a year earlier.
- Moderate pointXos reported a $7.609 million quarterly loss, versus $2.144 million income.
- Moderate pointOperating cash flow was $6.778 million used, versus $2.966 million provided.
- Minor pointNine-month revenue was $21.511 million, compared with $40.772 million in 2025.
Filing Explained
The twelve-dollar conversion price and sixteen-dollar trigger leave conversion possible; six million eight hundred sixty-two thousand nine hundred sixty-six RSUs remain outstanding.
The $14.0 million convertible note remained outstanding at
The filing reports 6,862,966 RSUs outstanding at September 30; the RSUs are awards, not shares already included in the issued-share count. If outstanding RSUs are issued as common stock, they would increase the share count and reduce existing holders’ percentage ownership absent offsetting changes. During the quarter, 304,839 RSUs vested.
All public and private placement warrants expired unexercised on
Key Figures
Key Terms
going concern financial
material weaknesses in our internal control over financial reporting technical
at-the-market offering financial
registered direct offering financial
10-day VWAP financial
mandatory conversion feature financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were XOS’s revenue and net result in Q3 2026?
Why did XOS report substantial doubt about continuing as a going concern?
How much ATM offering capacity did XOS have remaining?
What are the conversion terms of XOS’s amended convertible note?
AI-generated analysis. How Rhea-AI works. Not financial advice.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
(Address of Principal Executive Offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of exchange on which registered |
The |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
☒ |
Smaller reporting company |
||
|
|
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
The registrant had outstanding
Table of Contents
TABLE OF CONTENTS
|
Page |
Part I - Financial Information |
6 |
Item 1. Financial Statements (Unaudited) |
7 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
37 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
50 |
Item 4. Controls and Procedures |
50 |
Part II - Other Information |
53 |
Item 1. Legal Proceedings |
53 |
Item 1A. Risk Factors |
53 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
53 |
Item 3. Defaults Upon Senior Securities |
53 |
Item 4. Mine Safety Disclosures |
53 |
Item 5. Other Information |
53 |
Item 6. Exhibits |
54 |
Signatures |
55 |
2
Table of Contents
Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Report”), including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this Report, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would” or the negative of such terms or other similar expressions. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995.
As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by forward-looking statements. Some factors that could cause actual results to differ include:
3
Table of Contents
A discussion of these and other factors affecting our business and prospects is set forth in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (the “SEC”) on March
4
Table of Contents
30, 2026 (as amended by Amendment No. 1 thereto, filed with the SEC on April 21, 2026, the “2025 Form 10-K”). We encourage investors to review these risk factors.
Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Report may not prove to be accurate. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.
Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.
5
Table of Contents
Part I - Financial Information
Glossary of Terms
Unless otherwise stated in this Report or the context otherwise requires, reference to:
6
Table of Contents
Item 1. Financial Statements
Index to Unaudited Condensed Consolidated Financial Statements
|
Page |
Condensed Consolidated Balance Sheets as of September 30, 2026 (Unaudited) and December 31, 2025 |
8 |
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2026 (Unaudited) and 2025 (Unaudited) |
9 |
Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2026 (Unaudited) and 2025 (Unaudited) |
10 |
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 (Unaudited) and 2025 (Unaudited) |
12 |
Notes to Condensed Consolidated Financial Statements (Unaudited) |
13 |
7
Table of Contents
Xos, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Unaudited
(in thousands, except par value)
|
|
September 30, |
|
|
December 31, 2025 |
|
||
Assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Operating lease right-of-use assets, net |
|
|
|
|
|
|
||
Other non-current assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Convertible debt, current |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Common stock warrant liability |
|
|
|
|
|
|
||
Other non-current liabilities |
|
|
|
|
|
|
||
Convertible debt, non-current |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Stockholders’ Equity |
|
|
|
|
|
|
||
Common stock $ |
|
|
|
|
|
|
||
Preferred stock $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ equity |
|
|
|
|
|
|
||
Total liabilities and stockholders’ equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
Table of Contents
Xos, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Unaudited
(in thousands, except per share amounts)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss from operations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gain on operating lease termination |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other (expense) income, net |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Change in fair value of derivative instruments |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
(Loss) income before provision for income taxes |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Provision (benefit) for income taxes |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
Table of Contents
Xos, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
Unaudited
(in thousands)
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Total |
|
||||||||
|
|
Shares |
|
|
Par Value |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|||||
Balance at December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Stock options exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Issuance of common stock for vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Shares withheld related to net share settlement of stock-based awards |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at March 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Stock based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Issuance of common stock for vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Shares withheld related to net share settlement of stock-based awards |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Stock based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Issuance of common stock for vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Shares withheld related to net share settlement of stock-based awards |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of common stock in at-the-market offering, net |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock for equipment lease termination |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock for settlement of accrued interest on convertible debt |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balance at September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
10
Table of Contents
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Total |
|
||||||||
|
|
Shares |
|
|
Par Value |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|||||
Balance at December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Stock based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Issuance of common stock for vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Shares withheld related to net share settlement of stock-based awards |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at March 31, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Stock options exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Issuance of common stock for vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Shares withheld related to net share settlement of stock-based awards |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of common stock in at-the-market offering, net |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Issuance of common stock in registered direct offering, net |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at June 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Stock based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Issuance of common stock for vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Shares withheld related to net share settlement of stock-based awards |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Issuance of common stock in at-the-market offering, net |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
11
Table of Contents
Xos, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Unaudited
(in thousands, unaudited)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
OPERATING ACTIVITIES: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash (used in) provided by |
|
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
|
||
Amortization of right-of-use assets |
|
|
|
|
|
|
||
Amortization of debt discounts and issuance costs |
|
|
|
|
|
|
||
Amortization of insurance premiums |
|
|
|
|
|
|
||
Inventory reserve |
|
|
( |
) |
|
|
( |
) |
Impairment of property and equipment |
|
|
|
|
|
|
||
Change in fair value of derivative instruments |
|
|
( |
) |
|
|
|
|
Gain on lease termination |
|
|
( |
) |
|
|
( |
) |
Stock-based compensation expense |
|
|
|
|
|
|
||
Allowance for credit losses |
|
|
( |
) |
|
|
|
|
Other non-cash items |
|
|
( |
) |
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
Other assets |
|
|
|
|
|
|
||
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Other liabilities |
|
|
( |
) |
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||
INVESTING ACTIVITIES: |
|
|
|
|
|
|
||
Proceeds from the disposal of assets held for sale and other assets |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
|
|
Net cash provided by investing activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Payments on convertible notes |
|
|
( |
) |
|
|
|
|
Payment for short-term insurance financing note |
|
|
( |
) |
|
|
( |
) |
Taxes paid related to net share settlement of stock-based awards |
|
|
( |
) |
|
|
( |
) |
Principal payment of equipment leases |
|
|
( |
) |
|
|
( |
) |
Proceeds from short-term insurance financing note |
|
|
|
|
|
|
||
Proceeds from issuance of common stock in at-the-market offering, net |
|
|
|
|
|
|
||
Proceeds from issuance of common stock in registered direct offering, net |
|
|
|
|
|
|
||
Stock options exercised |
|
|
|
|
|
|
||
Net cash provided by financing activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net (decrease) increase in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of non-cash activities |
|
|
|
|
|
|
||
Operating lease termination |
|
$ |
( |
) |
|
$ |
( |
) |
Right-of-use assets obtained in exchange for operating lease liabilities |
|
$ |
|
|
$ |
|
||
Equipment lease termination |
|
$ |
|
|
$ |
( |
) |
|
Settlement of accrued interest with shares of Xos common stock |
|
$ |
|
|
$ |
( |
) |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
12
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Note 1 — Description of Business
Xos, Inc., together with its wholly owned subsidiaries (collectively, the “Company” or “Xos”) is a leading fleet electrification solutions provider committed to the decarbonization of commercial transportation. Xos designs and manufactures Classes 5 and 6 battery-electric commercial vehicles designed to travel on last-mile, back-to-base routes of up to 200 miles per day. Xos also offers charging infrastructure products and services through Xos Energy Solutions™ to support electric vehicle fleets. The Company’s proprietary fleet management software, Xosphere™, integrates vehicle operation and vehicle charging aimed at providing commercial fleet operators a more seamless and cost-efficient vehicle ownership experience than traditional internal combustion engine counterparts. Xos developed the X-Platform (its proprietary, purpose-built vehicle chassis platform) specifically for the medium-duty commercial vehicle segment with a focus on last-mile commercial fleet operations. Xos seeks to offer customers a suite of commercial products and services to facilitate electric fleet operations and seamlessly transition their traditional combustion-engine fleets to battery-electric vehicles.
Business Combination
Xos, Inc. was initially incorporated on July 29, 2020, as a Cayman Islands exempted company under the name “NextGen Acquisition Corporation” (“NextGen”). On August 20, 2021, the transactions contemplated by the Agreement and Plan of Merger, as amended on May 14, 2021, by and among NextGen, Sky Merger Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary of NextGen (“Merger Sub”), and Xos, Inc., a Delaware corporation (now known as Xos Fleet, Inc., “Legacy Xos”), were consummated (the “Closing”), whereby Merger Sub merged with and into Legacy Xos, the separate corporate existence of Merger Sub ceased and Legacy Xos became the surviving corporation and a wholly owned subsidiary of NextGen (such transaction the “Merger” and, collectively with the Domestication, the “Business Combination”), and Xos became the publicly traded entity listed on Nasdaq.
Risks and Uncertainties
In recent years, the United States and other significant markets have experienced cyclical downturns and worldwide economic conditions remain uncertain. Global general economic and political conditions, such as recession, inflation, uncertain credit conditions and global financial markets, including potential future bank failures, health crises, supply chain disruption, fuel prices, international currency fluctuations, changes to trade policies and tariffs (or the perception that such changes may occur), and geopolitical events such as local and national elections, corruption, political instability and acts of war or military conflict, or terrorism, make it difficult for our customers and us to accurately forecast and plan future business activities, and could cause our customers to slow spending on our products and services or impact their ability to make timely payments. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption. In addition, there is a risk that our current or future suppliers, service providers, manufacturers or other partners may not survive such difficult economic times, which would directly affect our ability to attain our operating goals on schedule and on budget. The ultimate impact of current economic conditions on the Company is uncertain, but it may have a material negative impact on the Company’s business, operating results, cash flows, liquidity and financial condition.
Additionally, ongoing geopolitical events, such as the military conflicts between Russia and Ukraine, conflicts and tensions in the Middle East, including those involving Israel and Iran, and economic relations with China and related sanctions and export control restrictions, may increase the severity of supply chain disruptions and further hinder our ability to source inventory for our vehicles. These geopolitical issues continue to evolve and the ultimate impact on the Company is uncertain, but any prolonged or escalating conflict or tension may have a material negative impact on the Company’s business, operating results, cash flows, liquidity and financial condition.
Although the Company has used the best current information available to it in its estimates, actual results could materially differ from the estimates and assumptions developed by management.
Liquidity
As an early-stage company, the Company has incurred net losses and cash outflows since its inception. The Company may continue to incur net losses and cash outflows in accordance with its operating plan as the Company continues to scale its operations to meet anticipated demand and establish its product and service offerings. As a result, the Company’s ability to access capital is critical and until the Company can generate sufficient revenue to cover its operating expenses, working capital and capital expenditures, the
13
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Company will need to raise additional capital in order to fund and scale its operations. The Company may raise additional capital through a combination of debt financing, other non-dilutive financing and/or equity financing, including through asset-based lending and/or receivable financing and collecting on its outstanding receivables. The Company’s ability to raise or access capital when needed is not assured and, if capital is not available to the Company when, and in the amounts needed, the Company could be required to delay, scale back or abandon some or all of its development programs and other operations, which could materially harm its business, prospects, financial condition and operating results. Global general economic conditions continue to be unpredictable and challenging in many sectors, with disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the effects of potential recessions, rising inflation rates, potential bank failures, supply chain disruption, fuel prices, international currency fluctuations, changes to trade policies and tariffs, and geopolitical events such as local and national elections, corruption, political instability and acts of war or military conflicts including repercussions of the wars between Russia and Ukraine and in Israel, conflicts with Iran and tensions with China, or terrorism.
As of September 30, 2026, the Company’s principal sources of liquidity were its cash and cash equivalents aggregating to $
As an early-stage growth company, the Company's ability to access capital is critical. However, there can be no assurance such capital will be available to the Company when needed, on favorable terms or at all. The consolidated financial information does not include any adjustments that might result from the outcome of this uncertainty. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.
The Company intends to employ various strategies to obtain the required funding for future operations, which may include capital raising strategies such as debt financing, other non-dilutive financing and/or equity financing, including through asset-based lending and/or receivable financing and collecting on its outstanding receivables. The Company may sell additional shares of its Common Stock pursuant to the ATM Offering (as defined below in Note 9 — Equity), subject to certain limitations on the amount of proceeds that may be raised. The Company also had the SEPA (as defined below in Note 9 — Equity), although its ability to access the SEPA was contingent upon specified conditions, including having a post-effective amendment to the Registration Statement on Form S-1, filed with the SEC on July 27, 2023 and declared effective. Moreover, the SEPA expired on February 11, 2026.
On August 9, 2022, the Company entered into a note purchase agreement (as amended on September 28, 2022, the “Note Purchase Agreement”) with Aljomaih Automotive Co. (“Aljomaih”) under which the Company agreed to sell and issue to Aljomaih a convertible promissory note with a principal amount of $
14
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Based on the Company’s strategies to raise funds as described above and Xos’s cash and cash equivalents as of September 30, 2026, the Company believes there is substantial doubt about such resources providing sufficient liquidity for the next twelve months following the date of the issuance of the unaudited condensed consolidated financial statements in this Report. Management is presently exploring options to increase liquidity to resolve this concern and facilitate further growth. As a result, it is not probable that Xos’s plans alleviate the substantial doubt about the Company’s ability to continue as a going concern for at least one year from the issuance of the unaudited condensed consolidated financial statements in this Report based on plans Management has been able to execute through the date of the issuance of the unaudited condensed consolidated financial statements in this Report, although additional actions are under review. Absent the Company being able to collect on its outstanding accounts receivable, obtain a sufficient level of new capital in the near-term and/or obtain replacement financing for, or further extend the maturity of, existing debt, the Company could be required to seek protection under Chapters 7 or 11 of the United States Bankruptcy Code. This could potentially cause the Company to cease operations.
Supply Chain Disruptions
The Company’s supply chain remains subject to component availability constraints, changing trade policies, and evolving regulatory and customer sourcing requirements. Batteries, power electronics, harnesses, and structural materials remain areas of focus as the Company works to improve supply continuity, manage costs, and support existing products and new energy storage applications.
Tariffs under Sections 232 and 301 continue to affect certain imported components. Effective July 24, 2026, additional Section 301 tariffs were imposed on imports from multiple trading partners following investigations into their failure to prohibit and effectively enforce restrictions on imports produced with forced labor. Applicability depends on country of origin, product classification, and available exemptions. These measures, together with other applicable duties and potential changes in trade policy, create uncertainty in landed costs and procurement planning. The Company continues reviewing supplier tariff charges, classifications, sourcing alternatives, and commercial terms to manage this exposure.
The Company has taken measures to mitigate these impacts including expanding sourcing options, renegotiating pricing and delivery terms, and managing inventory levels of critical components. However, ongoing supply chain disruptions, tariff measures, and supplier constraints may continue to affect the Company’s cost structure, production schedules, and ability to source components on commercially reasonable terms.
Note 2 — Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements
The following is a summary of the significant accounting policies consistently applied in the preparation of the accompanying unaudited condensed consolidated financial statements:
Basis of Presentation
The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. They do not include all of the information and footnotes required by U.S. GAAP for complete audited financial statements. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
In the opinion of management, all adjustments (primarily consisting of normal accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the years ended December 31, 2025 and 2024 presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 30, 2026, as amended by Amendment No. 1 thereto on Form 10-K/A filed with the SEC on April 21, 2026.
15
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenues and expenses during the reporting periods. The areas with significant estimates and judgments include, among others, inventory valuation, incremental borrowing rates for assessing operating and financing lease liabilities, useful lives of property and equipment, stock-based compensation, and product warranty liability. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to the Company’s financial statements.
Reclassifications
Certain prior period balances have been reclassified to conform to the current period presentation in the unaudited condensed consolidated financial statements and the accompanying notes, including (i) classification of amounts comprising employee-related costs and stock-based compensation as described in Note 17 — Segment Reporting, (ii) classification of amounts comprising contract liabilities as described in Note 6 — Selected Balance Sheet Data, and (iii) classification of amounts comprising gains on operating lease terminations as described in the unaudited condensed consolidated statements of operations and in Note 17 — Segment Reporting. These reclassifications have no effect on previously reported total assets, total liabilities or net loss.
Revision of Previously Issued Financial Statements
The Company has identified an immaterial prior period revision with respect to the improper recording of vendor accrued purchases within other current liabilities, in its previously reported financial statements for the periods ended December 31, 2024, March 31, 2025, June 30, 2025, September 30, 2025, December 31, 2025, and March 31, 2026.
In accordance with Staff Accounting Bulletin ("SAB") 99, Materiality, and SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements, the Company evaluated the materiality of the errors from qualitative and quantitative perspectives, and concluded that the errors were immaterial to any prior annual and interim financial statements. Notwithstanding this conclusion, management has revised the accompanying unaudited condensed consolidated financial statements for the affected periods, and related notes included herein to correct the errors. Refer to Note 19 — Revision of Previously Reported Information in the unaudited condensed consolidated financial statements for further details.
Warranty Liability
The Company provides customers with a product warranty that assures that the products meet standard specifications and are free from defects for periods typically between and
The reconciliation of the change in the Company’s product warranty liability balances during the three and nine months ended September 30, 2026 and 2025 consisted of the following (in thousands):
16
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Warranty liability, beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Reduction in liability (payments) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Increase in liability |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warranty liability, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Concentrations of Credit and Business Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $
During the three months ended September 30, 2026, three customers accounted for
Accounts receivable totaled $
Concentration of Supply Risk
The Company is dependent on its suppliers, the majority of which are single-source suppliers, and the inability of these suppliers to deliver necessary components of its products according to the schedule and at prices, quality levels and volumes acceptable to the Company, or its inability to efficiently manage these components, could have a material adverse effect on the Company’s results of operations and financial condition.
As of September 30, 2026, two vendors accounted for
During the three months ended September 30, 2026 and 2025, one vendor accounted for
Segment Information
The Company operates under
The CODM assesses performance of the segment and decides how to allocate resources based on revenue, gross profit, employee-related costs and net loss presented on a consolidated basis, for purposes of allocating resources and evaluating financial performance. The Company has
17
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Recent Accounting Pronouncements Issued and Adopted:
In July 2025, the FASB issued Accounting Standards Update ("ASU") No. 2025-05, Financial Instruments – Credit Losses (Topic 326), to allow entities to elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset when estimating expected credit losses for current accounts receivable and current contract assets. These amendments are effective for the Company for annual and interim periods in 2026 applied prospectively, with early adoption permitted. We adopted this ASU on a prospective basis effective January 1, 2026 and elected the practical expedient permitted under this ASU. The impact of the adoption of the amendments in this update was not material to the Company’s unaudited condensed consolidated financial statements.
Recent Accounting Pronouncements Issued and not yet Adopted:
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses including purchases of inventory, employee compensation, depreciation and intangible asset amortization in commonly presented expense captions such as cost of sales, selling, general and administrative expense, and research and development. As clarified, these amendments are effective for the Company for annual periods in 2027, applied prospectively, with early adoption permitted, and interim periods beginning in 2028. The Company intends to adopt the amendments in this update prospectively in 2027 for annual periods and in 2028 for interim periods. The impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations, as the requirements only require more detailed disclosures in the footnotes to the Company’s consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, to update the accounting for software developed for internal use to better align with software development as it has evolved from a sequential development method to incremental and iterative development methods. The amendments in this update require an entity to begin capitalizing internal-use software costs when management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. These amendments are effective for the Company for annual and interim periods in 2028, applied either prospectively, retrospectively, or by a modified approach, with early adoption permitted. As the Company does not currently have a material amount of software developed for internal use, the impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, to update the disclosure requirements for interim reporting periods. The amendments in this update require additional disclosure of events since the end of the prior annual reporting period that have a material impact on the entity. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, applied either prospectively, with early adoption permitted, or by a retrospective approach. The Company intends to adopt the amendments in this update prospectively for interim periods in 2028. The impact of the adoption of the amendments in this update is not expected to be material to the Company’s unaudited condensed consolidated financial position and results of operations, as the requirements only require more detailed disclosures in the Company’s interim unaudited condensed consolidated financial statements and accompanying footnotes.
In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements, to address thirty-three items that clarify, correct errors, or make minor improvements to existing topics. Generally, the amendments in this update are not intended to result in significant changes for most entities. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2026, applied either prospectively, with early adoption permitted, or by a retrospective approach on an issue-by-issue basis. The Company is currently evaluating the provisions of this amendment and does not expect this amendment to have a material impact on our consolidated financial statements.
In May 2026, the FASB issued ASU No. 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818), to establish authoritative guidance for the accounting of environmental credits and environmental credit obligations, including recognition, measurement, presentation, and disclosure requirements, in an effort to reduce diversity in practice and increase consistency of application across reporting entities. The amendments in this update are effective for annual reporting periods beginning after December
18
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
15, 2027, and interim reporting periods within those annual reporting periods, applied on a retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets on the balance sheet) as of the beginning of the annual reporting period of adoption, without recasting for any financial statement information before the period of adoption, with early adoption permitted. The Company is currently evaluating the provisions of this amendment and does not expect this amendment to have a material impact on our consolidated financial statements.
The Company is still evaluating all other applicable recently issued accounting pronouncements to evaluate the impact of the adoption of such pronouncements on its consolidated financial statements or notes thereto.
Note 3 — Revenue Recognition
Disaggregated revenues by major source for the three and nine months ended September 30, 2026 and 2025 consisted of the following (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Product and service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stepvans & vehicle incentives(1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Powertrains & hubs(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other product revenue(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total product revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ancillary revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 4 — Lease Receivable
For deferred equipment agreements that contain embedded operating leases, upon lease commencement, the Company defers and records the equipment cost of operating lease assets within property and equipment, net of accumulated depreciation. These operating lease assets are subsequently amortized to cost of goods sold over the lease term on a straight-line basis.
For deferred equipment agreements that contain embedded sales-type leases, the Company recognizes lease revenue and costs, as well as a lease receivable, at the time the lease commences. Lease revenue related to both operating and sales-type leases for the three months ended September 30, 2026 and 2025 was approximately $
19
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
sales-type leases for the nine months ended September 30, 2026 and 2025 was approximately $
(in thousands) |
|
Balance Sheet Location |
|
September 30, |
|
|
December 31, |
|
||
Lease receivable |
|
|
|
$ |
|
|
$ |
|
||
Less: current portion of lease receivable |
|
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
Lease receivable, non-current |
|
Other non-current assets |
|
$ |
|
|
$ |
|
||
As of September 30, 2026, estimated future maturities of customer sales-type lease receivable and operating lease payments for each of the following fiscal years are as follows:
|
|
Future Lease Receivables/Payments |
|
|||||
Fiscal year |
|
Sales-Type Leases |
|
|
Operating Leases |
|
||
Remainder of 2026 |
|
$ |
|
|
$ |
|
||
2027 |
|
$ |
|
|
$ |
|
||
2028 and thereafter |
|
$ |
|
|
$ |
|
||
Total lease receivables/payments |
|
$ |
|
|
$ |
|
||
Note 5 — Inventories
Inventory amounted to $
|
|
September 30, |
|
|
December 31, |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventories |
|
$ |
|
|
$ |
|
||
Inventories as of September 30, 2026 and December 31, 2025 were comprised of raw materials, work in process and finished goods related to the production of stepvans, powertrains, hubs, and other products for sale and finished goods inventory including vehicles in transit to fulfill customer orders, new vehicles, new vehicles awaiting final pre-delivery quality review inspection, and Xos Energy Solutions products available for sale. The capitalized labor and overhead cost remaining in work in process and finished goods inventory is $
Inventories are stated at the lower of cost or net realizable value. Cost is computed using average cost. Inventory write-downs are based on reviews for excess and obsolescence determined primarily by current and future demand forecasts. During the three months ended September 30, 2026 and 2025, the Company recorded a reduction in our inventory reserves of $
20
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Note 6 — Selected Balance Sheet Data
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets as of September 30, 2026 and December 31, 2025 consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Prepaid inventories |
|
$ |
|
|
$ |
|
||
Prepaid expenses and other(1) |
|
|
|
|
|
|
||
Lease receivable |
|
|
|
|
|
|
||
Financed insurance premiums |
|
|
|
|
|
|
||
Assets held for sale(2) |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Other Non-Current Assets
Other non-current assets as of September 30, 2026 and December 31, 2025 consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Security deposits(1) |
|
$ |
|
|
$ |
|
||
Duty drawback receivable(2) |
|
|
|
|
|
|
||
Lease receivable, non-current |
|
|
|
|
|
|
||
Other non-current assets |
|
|
|
|
|
|
||
Total other non-current assets |
|
$ |
|
|
$ |
|
||
21
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Other Current Liabilities
Other current liabilities as of September 30, 2026 and December 31, 2025 consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Accrued expenses and other(1) |
|
$ |
|
|
$ |
|
||
Contract liabilities, current(2) |
|
|
|
|
|
|
||
Accrued interest(3) |
|
|
|
|
|
|
||
Accrued payroll(4) |
|
|
|
|
|
|
||
Customer deposits(5) |
|
|
|
|
|
|
||
Warranty liability |
|
|
|
|
|
|
||
Short-term insurance financing notes |
|
|
|
|
|
|
||
Operating lease liabilities, current |
|
|
|
|
|
|
||
Finance lease liabilities, current |
|
|
|
|
|
|
||
Total other current liabilities |
|
$ |
|
|
$ |
|
||
Revenue recognized from the customer deposits and contract liabilities balance for the three months ended September 30, 2026 and 2025 was $
Other Non-Current Liabilities
Other non-current liabilities as of September 30, 2026 and December 31, 2025 consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Accrued interest expense and other |
|
$ |
|
|
$ |
|
||
Contract liabilities, non-current(1) |
|
|
|
|
|
|
||
Operating lease liabilities, non-current(2) |
|
|
|
|
|
|
||
Finance lease liabilities, non-current |
|
|
|
|
|
|
||
Total other non-current liabilities |
|
$ |
|
|
$ |
|
||
Note 7 — Earn-out Shares Liability
The Company had a contingent obligation to issue
22
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
The Earn-out Shares were to be issued in tranches based on the following conditions:
Pursuant to the guidance under ASC 815, Derivatives and Hedging, the right to Earn-out Shares was classified as a Level 3 fair value measurement liability, and the increase or decrease in the fair value during the reporting period is recognized in the unaudited condensed consolidated statement of operations accordingly. The fair value of the Earn-out Shares liability was estimated using the Monte Carlo simulation of the stock prices based on historical and implied market volatility of a peer group of public companies.
For each of the periods ended September 30, 2026 and December 31, 2025, the fair value of the Earn-out Shares liability was estimated to be $
The allocated fair value to the Earn-out RSU component, which was covered by ASC 718, Compensation — Stock Compensation, was recognized as stock-based compensation expense over the vesting period commencing on the grant date of the award.
As of September 30, 2026, the Company had
Note 8 — Convertible Notes
Convertible Promissory Note
On August 9, 2022, the Company entered into the Note Purchase Agreement with Aljomaih under which the Company agreed to sell and issue to Aljomaih a convertible promissory note with a principal amount of $
23
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
The Note, which was initially scheduled to mature on August 11, 2025, bears interest at a rate of
On August 8, 2025, the Company and Aljomaih entered into Amendment Number One to the Note Purchase Agreement and amended and restated the Convertible Note issued thereunder. On August 14, 2025, the Company and Aljomaih entered into a Letter Agreement regarding certain restrictions on convertibility of the Convertible Note. Among other things, the Aljomaih Amendments extended the maturity of the Convertible Note so that it is now due in
On May 8, 2026, the Company and Aljomaih entered into the Third A&R Note. The Third A&R Note reduced the conversion price from $
The future scheduled mandatory prepayments of principal as of September 30, 2026 were as follows (in thousands):
|
|
Mandatory |
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Total |
|
$ |
|
|
The Note also includes an optional redemption feature that provides the Company, on or after August 11, 2024, or as otherwise agreed to between the Company and Aljomaih in writing, the right to redeem the outstanding principal and accrued and unpaid interest, upon written notice not less than
The Company accounts for the Note in accordance with the guidance contained in Accounting Standards Codification ("ASC") 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, under which the Note was analyzed for the identification of material embedded features that meet the criteria for equity treatment and/or bifurcation and must be recorded as a liability. The Company initially classified the Note as a non-current liability given a maturity date of greater than one year, however, during the quarter ended September 30, 2024, the Note was reclassified as a current liability since its maturity date is less than one year from September 30, 2024. On August 8, 2025, the Note was amended subject to Amendment Number One, and as a result of such amendment, a portion of the Note has been reclassified as a non-current liability beginning at September 30, 2025, due to a change in the principal repayment schedule of the Note.
The Note is not included in the computation of either basic or diluted EPS for the three and nine months ended September 30, 2026 and 2025 in Note 16 — Net Loss per Share. This financial instrument is not included in basic EPS because it does not represent participating
24
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
securities. Further, the Note is not included in diluted EPS because including these financial instruments would have an antidilutive effect on EPS for the three and nine months ended September 30, 2026 and 2025.
As of September 30, 2026, the Company had a principal balance of $
Note 9 — Equity
Xos Common and Preferred Stock
The Company is authorized to issue
Voting Rights: Each outstanding share of Common Stock shall entitle the holder thereof to
Preferred Stock: The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Company (the “Board of Directors”) is expressly authorized to provide for the issue of all or any number of the shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the Delaware General Corporation Law (the “DGCL”). The Board of Directors is also expressly authorized to increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.
Standby Equity Purchase Agreement
On March 23, 2022, the Company entered into a Standby Equity Purchase Agreement with YA II PN, Ltd. (“Yorkville”), which was subsequently amended on June 22, 2023 (as amended, the “SEPA”), whereby the Company had the right, but not the obligation, to sell to Yorkville up to $
As consideration for Yorkville’s commitment to purchase shares of Common Stock at the Company’s direction upon the terms and subject to the conditions set forth in the SEPA, upon execution of the SEPA, the Company issued
On June 22, 2023, the Company and Yorkville entered into the First Amendment to Standby Equity Purchase Agreement (the “SEPA Amendment”), in which the Company and Yorkville amended the SEPA to: (1) change the calculation of the purchase price of an Option 1 Advance (as defined in the SEPA) from an average of the daily VWAP of the Common Stock during a
25
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Yorkville under the SEPA from dollars to shares; (3) increase Yorkville’s beneficial ownership limitation under the SEPA from
During each of the three months ended September 30, 2026 and 2025, the Company issued
Common Stock Offering
On May 30, 2023, the Company filed a Registration Statement on Form S-3 (File No. 333-272284), to issue and sell from time to time, together or separately, certain securities at an aggregate public offering price that will not exceed $
During the three months ended September 30, 2026,
Registered Direct Offering
On June 4, 2026, the Company entered into a Securities Purchase Agreement with institutional investors, pursuant to which the Company issued and sold
26
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Note 10 — Derivative Instruments
Public and Private Placement Warrants
As of September 30, 2026, the Company had
Each Warrant was exercisable to purchase one-thirtieth of one share of Common Stock. The Public Warrants had an exercise price of $
The Private Placement Warrants were identical to the Public Warrants, except that the Private Placement Warrants and the Common Stock issuable upon exercise of the Private Placement Warrants were not transferable, assignable or salable until September 19, 2021, subject to certain limited exceptions. Additionally, the Private Placement Warrants were non-redeemable so long as they were held by the initial purchasers or their permitted transferees. If the Private Placement Warrants were held by someone other than the initial shareholders or their permitted transferees, the Private Placement Warrants would have been redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Redemption of Warrants for cash when the price per share of Common Stock equals or exceeds $
At any time that the Warrants were exercisable, the Company was permitted to redeem the outstanding Warrants (except as described above with respect to the Private Placement Warrants):
Redemption of Warrants for Common Stock when the price per share equals or exceeds $
At any time that the Warrants were exercisable, the Company was permitted to redeem the outstanding Warrants (including both Public Warrants and Private Placement Warrants):
The “fair market value” of Common Stock meant the average reported last sale price of Common Stock for the
27
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
In no event would the Company be required to net cash settle any Warrant. The Warrants ultimately expired worthless on August 20, 2026.
Note 11 — Share-Based Compensation
2018 Stock Plan
On November 27, 2018, the Legacy Xos’s board of directors and stockholders adopted the 2018 Stock Plan. There are
As of September 30, 2026, there were
Stock option activity during the nine months ended September 30, 2026 consisted of the following:
|
|
Options |
|
|
Weighted |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
|||||
December 31, 2025 — Options outstanding |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
March 31, 2026 — Options outstanding |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
June 30, 2026 — Options outstanding |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
September 30, 2026 — Options outstanding |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|||||
September 30, 2026 — Options vested and exercisable |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|||||
Aggregate intrinsic value represents the difference between the exercise price of the options and the fair value of the Company’s Common Stock. No options were exercised during both the three months ended September 30, 2026 and 2025. The aggregate intrinsic value of options exercised during the nine months ended September 30, 2026 and 2025 was approximately $
The Company estimates the grant date fair value of options utilizing the Black-Scholes option pricing model, which is dependent upon several variables, including expected option term, expected volatility of the Company's share price over the expected term, expected risk-free rate and expected dividend yield rate. There were
2021 Equity Plan
On August 19, 2021 the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Equity Plan”), which was ratified by the Company’s board of directors on August 20, 2021. The 2021 Equity Plan provides for the grant of incentive stock options (“ISOs”), within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) to employees, including employees of any parent or subsidiary, and for the grant of non-statutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance awards and other forms of awards to employees, directors and consultants,
28
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
including employees and consultants of Xos’s affiliates. On June 24, 2024, the Company’s stockholders approved the Xos, Inc. Amended and Restated 2021 Equity Incentive Plan (the “A&R 2021 Equity Plan”) to increase the aggregate number of shares of Common Stock reserved for issuance under the 2021 Equity Plan by
As of September 30, 2026, there were
RSU activity during the nine months ended September 30, 2026 consisted of the following:
|
|
RSUs |
|
|
Weighted |
|
|
Aggregate Fair |
|
|||
December 31, 2025 — RSU outstanding |
|
|
|
|
$ |
|
|
$ |
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|||
Vested |
|
|
( |
) |
|
|
|
|
|
|
||
Forfeited |
|
|
|
|
|
|
|
|
|
|||
March 31, 2026 — RSU outstanding |
|
|
|
|
$ |
|
|
$ |
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|||
Vested |
|
|
( |
) |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
||
June 30, 2026 — RSU outstanding |
|
|
|
|
$ |
|
|
$ |
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|||
Vested |
|
|
( |
) |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
||
September 30, 2026 — RSU outstanding |
|
|
|
|
$ |
|
|
$ |
|
|||
The Company recognized stock-based compensation expense (including Earn-out RSUs) in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2026 totaling approximately $
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Cost of goods sold |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
We allocate stock-based compensation expense to cost of goods sold, research and development expense, sales and marketing expense and general and administrative expense, based on the roles of the applicable recipients of such stock-based compensation. The unamortized stock-based compensation expense was $
The aggregate fair value of RSUs that vested was $
29
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Note 12 — Property and Equipment, net
Property and equipment, net consisted of the following at September 30, 2026 and December 31, 2025 (in thousands):
|
|
September 30, 2026 |
|
|
December 31, |
|
||
Equipment |
|
$ |
|
|
$ |
|
||
Finance lease assets |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Company vehicles(1) |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Computers, software and related equipment |
|
|
|
|
|
|
||
Property and equipment, gross |
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense during both the three months ended September 30, 2026 and 2025 totaled $
Note 13 — Commitments and Contingencies
Legal Contingencies
Legal claims may arise from time to time in the normal course of business, the results of which may have a material effect on the Company’s accompanying unaudited condensed consolidated financial statements. As of September 30, 2026 and December 31, 2025, the Company was not a party to any legal proceedings, that individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company’s results of operations, financial condition or cash flows.
Other Contingencies
The Company enters into non-cancellable long-term purchase orders and vendor agreements in the normal course of business. As of September 30, 2026, non-cancellable purchase commitments with
Note 14 — Related Party Transactions
The Company has lease agreements with Fitzgerald Manufacturing Partners. The owner of Fitzgerald Manufacturing Partners is a stockholder of the Company. For each of the three months ended September 30, 2026 and 2025, the Company incurred rent expense of $
Note 15 — Income Taxes
The Company’s effective tax rate for the three months ended September 30, 2026 and 2025 was (
The Company recognizes tax benefits related to positions taken, or expected to be taken, on its tax returns, only if it is more likely than not that the tax positions will be sustained upon examination. For tax positions meeting this recognition threshold, the Company
30
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
recognizes the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement. The Company has no unrecognized tax benefits as of September 30, 2026 and December 31, 2025.
The Company is subject to income taxation and files tax returns with the U.S. Internal Revenue Service and various state jurisdictions. The Company is not currently under audit or examination by any income tax authorities. Management does not believe that any uncertain tax benefits require recognition. Generally, the Company is no longer subject to examination for tax years prior to 2021, except for California.
At September 30, 2026, the Company’s deferred income taxes were in a net deferred tax asset position mainly due to deferred tax assets generated by net operating losses. The Company assesses the realizability of its deferred tax assets by considering all available positive and negative evidence, including the Company's current and past performance, the market environments in which the Company operates, the utilization of past tax credits, the length of carryback and carryforward periods, and available tax planning strategies. Based on its evaluation, management believes it is more likely than not that all or some portion of the deferred tax assets will not be realized. Accordingly, the Company has maintained a valuation allowance against its net deferred tax assets as of September 30, 2026 and December 31, 2025.
One Big Beautiful Bill Act
On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The Act modifies various energy credits to accelerate the phase out of these credits. The Act also includes certain changes to the US taxation of foreign activity, including changes to foreign tax credits, Global Intangible Low-Taxed Income (GILTI), Foreign-Derived Intangible Income (FDII), and Base Erosion and Anti-Abuse Tax (BEAT), amongst other changes. These changes are generally effective for tax years beginning after December 31, 2024. The Company evaluated the impact of the legislation in accordance with ASC 740 and determined that it did not have a material effect on the Company’s unaudited condensed consolidated financial statements as of and for the period ended September 30, 2026.
Note 16 — Net (Loss) Income per Share
Basic and diluted net (loss) income per share during the three and nine months ended September 30, 2026 and 2025 consisted of the following (in thousands, except per share amounts):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Net (loss) income attributable to common stockholders, basic |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net (loss) income attributable to common stockholders, diluted(1) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding, basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic net (loss) income per share |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of options and restricted stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding, diluted(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted net (loss) income per share |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
31
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Potential ending shares outstanding that were excluded from the computation of diluted net (loss) income per share because their effect was anti-dilutive as of September 30, 2026 and 2025 consisted of the following (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Contingent earn-out shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common stock underlying public and private warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
If-converted common stock from convertible debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 17 — Segment Reporting
The following table presents segment revenue, gross profit, and net loss for the periods presented (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Revenues |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Employee related |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Facility and rent |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Computer and software as a service(2) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Research and development materials |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other(3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gain on operating lease termination |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other expense (income), net(4)(5) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Change in fair value of derivative instruments |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Provision (benefit) for income taxes |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Segment net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
____________
32
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Note 18 — Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability.
U.S. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As presented in the tables below, this hierarchy consists of three broad levels:
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, other current liabilities, convertible debt, warrants and earn-out shares liability. The fair value of cash, cash equivalents, accounts receivable, accounts payable, other current liabilities, and convertible debt approximates carrying value due to their short-term maturity. The Public Warrants, which had an exercise price of $
As required by ASC 820, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and liabilities carried at fair value on a recurring basis as of September 30, 2026 and December 31, 2025 consisted of the following (in thousands):
|
|
September 30, 2026 |
|
|||||||||||||
|
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Private Placement Warrants |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Public Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Financial Liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
December 31, 2025 |
|
|||||||||||||
|
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Private Placement Warrants |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Public Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Financial Liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
33
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
There was no change in the fair value of Level 3 financial liabilities during the three and nine months ended September 30, 2026. The fair value of Earn-out Shares liability was immaterial to the consolidated financial statements for each of the periods ended September 30, 2026 and December 31, 2025.
Note 19 — Revision of Previously Reported Information
As previously disclosed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, the Company identified immaterial errors in its previously reported financial statements for the periods ended December 31, 2024, March 31, 2025, June 30, 2025, September 30, 2025, December 31, 2025, and March 31, 2026 relating to the improper recording of vendor accrued purchases. The comparative financial information presented in this Report reflects the correction of those errors.
In accordance with SAB 99, Materiality, and SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements, the Company evaluated the materiality of the errors from qualitative and quantitative perspectives, and concluded that the errors were immaterial to any prior annual and interim financial statements. Notwithstanding this conclusion, management has revised the accompanying unaudited condensed consolidated financial statements for the affected periods, and related notes included herein to correct the errors.
The following tables present the effect of correcting this error on the Company's previously issued financial statements (in thousands).
For the period ended December 31, 2024 |
|
|
|
|
|
|
|
|
|
|||
|
|
As previously reported |
|
|
Adjustment |
|
|
As revised |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Consolidated Statement of Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|||
Accumulated deficit |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Total stockholders' equity |
|
|
|
|
|
|
|
|
|
|||
For the period ended March 31, 2025 |
|
|
|
|
|
|
|
|
|
|||
|
|
As previously reported |
|
|
Adjustment |
|
|
As revised |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Condensed Consolidated Statement of Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|||
Net and comprehensive loss |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Accumulated deficit |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Total stockholders' equity |
|
|
|
|
|
|
|
|
|
|||
For the period ended June 30, 2025 |
|
|
|
|
|
|
|
|
|
|||
|
|
As previously reported |
|
|
Adjustment |
|
|
As revised |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Condensed Consolidated Statement of Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|||
Net and comprehensive loss |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Accumulated deficit |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Total stockholders' equity |
|
|
|
|
|
|
|
|
|
|||
34
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
For the three months ended September 30, 2025 |
|
|
|
|
|
|
|
|
|
|||
|
|
As previously reported |
|
|
Adjustment |
|
|
As revised |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Condensed Consolidated Statement of Operations and Comprehensive Loss |
|
|
|
|
|
|
|
|
|
|||
Cost of goods sold |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Gross profit |
|
|
|
|
|
|
|
|
|
|||
Loss from operations |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Income (loss) before provision for income taxes |
|
|
|
|
|
|
|
|
|
|||
Net income (loss) |
|
|
|
|
|
|
|
|
|
|||
Net and comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|||
Net income (loss) per share |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
|
|
|
|
|
|
|
|
|||
Diluted |
|
|
|
|
|
|
|
|
|
|||
For the nine months ended September 30, 2025 |
|
|
|
|
|
|
|
|
|
|||
|
|
As previously reported |
|
|
Adjustment |
|
|
As revised |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Condensed Consolidated Statement of Operations and Comprehensive Loss |
|
|
|
|
|
|
|
|
|
|||
Cost of goods sold |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Gross profit |
|
|
|
|
|
|
|
|
|
|||
Loss from operations |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Income (loss) before provision for income taxes |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net income (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net and comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net income (loss) per share |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Diluted |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
For the period ended September 30, 2025 |
|
|
|
|
|
|
|
|
|
|||
|
|
As previously reported |
|
|
Adjustment |
|
|
As revised |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Condensed Consolidated Statement of Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|||
Net and comprehensive income (loss) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Accumulated deficit |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Total stockholders' equity |
|
|
|
|
|
|
|
|
|
|||
For the period ended September 30, 2025 |
|
|
|
|
|
|
|
|
|
|||
|
|
As previously reported |
|
|
Adjustment |
|
|
As revised |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Condensed Consolidated Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
|||
Net income (loss) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other liabilities |
|
|
|
|
|
( |
) |
|
|
|
||
35
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
For the period ended December 31, 2025 |
|
|
|
|
|
|
|
|
|
|||
|
|
As previously reported |
|
|
Adjustment |
|
|
As revised |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Consolidated Balance Sheet |
|
|
|
|
|
|
|
|
|
|||
Other current liabilities |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Total current liabilities |
|
|
|
|
|
( |
) |
|
|
|
||
Total liabilities |
|
|
|
|
|
( |
) |
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Total stockholders' equity |
|
|
|
|
|
|
|
|
|
|||
For the period ended December 31, 2025 |
|
|
|
|
|
|
|
|
|
|||
|
|
As previously reported |
|
|
Adjustment |
|
|
As revised |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Consolidated Statement of Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|||
Accumulated deficit |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Total stockholders' equity |
|
|
|
|
|
|
|
|
|
|||
For the period ended March 31, 2026 |
|
|
|
|
|
|
|
|
|
|||
|
|
As previously reported |
|
|
Adjustment |
|
|
As revised |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Condensed Consolidated Statement of Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Accumulated deficit |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Total stockholders' equity |
|
|
|
|
|
|
|
|
|
|||
36
Table of Contents
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information which Xos’s management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Report and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 30, 2026 (as amended by Amendment No. 1 thereto, filed with the SEC on April 21, 2026, the “2025 Form 10-K”). This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in this Item 2 (including in the sections entitled “Overview” and “Liquidity and Capital Resources” below), in the accompanying unaudited notes to condensed consolidated financial statements in this Report, under the section entitled “Risk Factors” of this Report, and under the heading “Risk Factors” in the 2025 Form 10-K. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we”, “us”, “our”, and “the Company” are intended to mean the business and operations of Xos and its consolidated subsidiaries.
Recent Developments
On May 8, 2026, the Company and Aljomaih Automotive Co. (“Aljomaih”) amended the Convertible Promissory Note (as amended from time to time, the “Convertible Note”) to reduce the conversion price from $71.451 per share to $12.00 per share of Common Stock (subject to customary proportional adjustment), and to add a mandatory conversion feature pursuant to which the Company may compel the conversion of the Convertible Note if the Daily VWAP (as defined in the Convertible Note) of the Common Stock exceeds $16.00 per share (subject to customary proportional adjustment) for at least twenty out of thirty consecutive trading days.
The Public Warrants, which had an exercise price of $345.00 per whole share, subject to adjustments, and were listed on the Nasdaq Capital Market with trading symbol “XOSWW,” expired on August 20, 2026, and ceased trading on or prior to such expiration date. The Private Warrants also expired on August 20, 2026. See Note 10 – Derivative Instruments of this Report.
As of September 30, 2026, the Company had no contingent obligation to issue any Earn-out Shares or Earn-out RSUs, as the Earn-out Period ended on August 20, 2026. See Note 7 – Earn-out Shares Liability.
Key Factors Affecting Operating Results
We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed in this Report.
Successful Commercialization of our Products and Services
We expect to derive future revenue from sales of our vehicles, energy-storage systems and other product and service offerings. As many of these products are in development, we will require substantial additional capital to continue developing our products and services and bring them to full commercialization as well as fund our operations for the foreseeable future. Until we can generate sufficient revenue from product sales, we expect to finance a substantial portion of our operations through commercialization and production and any future capital raising efforts. The amount and timing of our future funding requirements, if any, will depend on many factors, including the pace and results of our commercialization efforts.
Customer Demand
We have sold a limited number of our vehicles to our existing customers, have agreements with future customers and have received interest from other potential customers. The sales of our vehicles and services to our existing and future customers will be an important indicator of our performance.
Supply Chain Disruptions
Our supply chain remains subject to component availability constraints, changing trade policies, and evolving regulatory and customer sourcing requirements. Batteries, power electronics, harnesses, and structural materials remain areas of focus as we work to improve
37
Table of Contents
supply continuity, manage costs, and support existing products and new energy storage applications.
Tariffs under Sections 232 and 301 continue to affect certain imported components. Effective July 24, 2026, additional Section 301 tariffs were imposed on imports from multiple trading partners following investigations into their failure to prohibit and effectively enforce restrictions on imports produced with forced labor. Applicability depends on country of origin, product classification, and available exemptions. These measures, together with other applicable duties and potential changes in trade policy, create uncertainty in landed costs and procurement planning. We continue reviewing supplier tariff charges, classifications, sourcing alternatives, and commercial terms to manage this exposure.
Our broader supply-chain improvement efforts include:
We have been closely monitoring potential changes to trade policies and tariffs in order to proactively adjust and refine our strategy. These efforts are intended to strengthen supply resilience and cost competitiveness. Supply constraints, tariffs, regulatory changes, and additional engineering or certification requirements could increase costs, delay production or customer deliveries, and affect margins and our ability to pursue certain opportunities.
Overview
We are a leading energy storage and fleet electrification solutions provider committed to the decarbonization of commercial transportation. We offer, through Xos Energy Solutions™, mobile charging and energy storage products, such as the Xos Hub™, and have from time to time offered services to support electric vehicle fleets, including fixed charging infrastructure products. We design and manufacture Classes 5 and 6 battery-electric commercial vehicles that travel on last-mile, back-to-base routes of up to 200 miles per day. We developed our proprietary, purpose-built vehicle chassis platform and high-voltage architecture with a focus on the medium-duty commercial vehicle segment and, in particular, last-mile commercial fleet operations.
Xos Energy Solutions™ is our charging infrastructure business through which we offer mobile and stationary multi-application chargers, including the Xos Hub, and mobile energy storage to accelerate transitions to electric fleets by maximizing incentive capture and reducing implementation lead times and costs.
Our X-Platform provides modular features that allow us to accommodate a wide range of last-mile applications and enable us to offer clients vehicles at a lower total cost of ownership compared to traditional diesel fleets. The X-Platform was engineered to be modular in nature to allow fleet operators to customize their vehicles to fit their commercial applications (e.g., upfitting with a specific vehicle body and/or tailoring battery range).
Through our Powered by Xos™ business we also provide mixed-use powertrain solutions for off-highway, industrial and other specialty vehicles, such as forklifts, school buses, medical and dental clinics, blood donation vehicles, and mobile command vehicles. Our powertrain offerings encompass a broad range of solutions, including high-voltage batteries, power distribution and management componentry, battery management systems, system controls, inverters, electric traction motors and auxiliary drive systems.
38
Table of Contents
We have also developed a fleet management platform called Xosphere™ that interconnects vehicle, maintenance, charging, and service data. The Xosphere™ is aimed at minimizing electric fleet total cost of ownership through fleet management integration. This comprehensive suite of tools allows fleet operators to monitor vehicle and charging performance in real-time with in-depth telematics; reduce charging cost; optimize energy usage; and manage maintenance and support with a single software tool.
In the first quarter of 2026, we entered into an agreement to serve as a dealer for Windrose Technology, Inc.’s electric long-haul truck products (the “Windrose Dealer Agreement”). We believe this relationship will enable us to address customer and prospect demand for heavy-duty long-range electric trucks that our own manufactured vehicles do not meet. The Windrose Dealer Agreement does not include any minimum volume requirements, and we cannot estimate what volumes or revenues we might achieve from this arrangement, if any.
During the three months ended September 30, 2026, we delivered 12 vehicles (including leases) and 21 powertrains & hubs. During the three months ended September 30, 2025, we delivered 98 vehicles and 32 powertrains & hubs. During the three months ended September 30, 2026, we generated $3.0 million (or 54% of revenue) in powertrain & hub sales, $2.0 million in revenue (or 35% of revenue) in vehicle sales, $0.4 million (or 7% of revenue) in other product revenue, and $0.2 million (or 4% of revenue) in ancillary revenue. During the three months ended September 30, 2025, we generated $13.7 million in revenue (or 83% of revenue) from vehicle sales, $2.6 million (or 16% of revenue) in powertrain & hub sales, $0.1 million (or 1% of revenue) in other product revenue, and $0.1 million (or less than 1% of revenue) from ancillary revenue. Unless and until we develop a robust backlog of binding orders, we expect our unit volumes to fluctuate from quarter to quarter, particularly where customers place, and/or shift delivery dates, for larger orders.
During the nine months ended September 30, 2026, we delivered 32 vehicles (including leases) and 126 powertrains & hubs. During the nine months ended September 30, 2025, we delivered 248 vehicles and 46 powertrains & hubs. During the nine months ended September 30, 2026, we generated $15.6 million (or 72% of revenue) in powertrain & hub sales, $4.2 million in revenue (or 19% of revenue) in vehicle sales, $1.2 million (or 5% of revenue) in other product revenue, and $0.6 million (or 3% of revenue) in ancillary revenue. During the nine months ended September 30, 2025, we generated $34.3 million in revenue (or 84% of revenue) from vehicle sales, $5.2 million (or 13% of revenue) in powertrain & hub sales, $0.7 million (or 2% of revenue) in other product revenue, and $0.5 million (or 1% of revenue) from ancillary revenue.
We believe our growth in the coming years will be supported by the growth of e-commerce and last-mile delivery, and will depend in part on regulatory and consumer interest in reducing the impacts of climate change. E-commerce continues to grow rapidly and has been accelerated by changes in consumer purchasing behavior, including as a result of the COVID-19 pandemic. Commercial trucks are the largest emitters of greenhouse gasses per capita in the transportation industry. Although some such goals have been rolled back and there can be no assurance any goals will be maintained or re-established, the U.S. federal, state and foreign governments, along with corporations such as FedEx, UPS and Amazon, have set ambitious goals to reduce greenhouse gas emissions. We believe regulation relating to commercial vehicles, sustainability initiatives from leading financial and corporate institutions and growth of last-mile logistics will be important factors in establishing the level of demand for, and adoption of, our products worldwide.
Xos is an early-stage company, and as such has incurred net losses and cash outflows since its inception. As an early-stage company, the Company's ability to access capital is critical. However, there can be no assurance such capital will be available to the Company when needed, on favorable terms or at all. If we are unable to collect on our outstanding accounts receivable, obtain a sufficient level of new capital in the near-term and/or obtain replacement financing for or extend the maturity of existing debt, we could be required to dissolve and liquidate our assets under bankruptcy laws or otherwise.
As an early-stage company, we have incurred net losses and cash outflows since our inception. We will continue to incur net losses and cash outflows in accordance with our operating plan as we continue to scale our operations to meet anticipated demand and seek to establish our product and service offerings. As a result, our ability to access capital is critical and until we can generate sufficient revenue to cover our operating expenses, working capital and capital expenditures, we will need to raise additional capital in order to fund and scale our operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our commercialization, research and development programs and/or other efforts and our ability to continue our operations would be negatively impacted. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all. In addition, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our unaudited condensed consolidated financial statements and/or seek protection under Chapters 7 or 11 of
39
Table of Contents
the United States Bankruptcy Code. This could potentially cause us to cease operations and result in a complete or partial loss of your investment in our Common Stock.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Xos and its wholly owned subsidiaries, Xos Fleet, Inc. and Xos Services, Inc. (f/k/a Rivordak, Inc.), as well as the entities acquired pursuant to the arrangement with ElectraMeccanica. All significant intercompany accounts and transactions have been eliminated in consolidation. All long-lived assets are maintained in, and all losses are attributable to, the United States.
Currently, we conduct business through one operating segment. We are an early-stage company with minimal commercial operations and our activities to date have been conducted primarily within North America. For more information about our basis of operations, refer to Note 1 — Description of Business in the accompanying unaudited notes to condensed consolidated financial statements.
Components of Results of Operations
Revenue
To date, we have primarily generated revenue from the sale of electric stepvans, stripped chassis vehicles and battery systems. Our stripped chassis is our vehicle offering that consists of our X-Platform electric vehicle base and battery systems, which customers can upfit with their preferred vehicle body. As we continue to expand our commercialization, we expect our revenue to come from these products and other vehicle offerings including chassis cabs, which will feature our chassis and powertrain with the inclusion of a proprietary designed cab, and tractors, a shortened version of the chassis cab designed to haul trailers (also known as “day cabs”), that travel in last-mile use cases. Through Xos Energy Solutions™, we have provided charging infrastructure, including our Xos Hub, as well as certain energy services. In addition, we offer Xosphere™, our fleet management platform.
Revenue consists of product sales, inclusive of shipping and handling charges, net of estimates for customer allowances, service offerings, and leasing. Revenue is measured as the amount of consideration we expect to receive in exchange for delivering products. All revenue is recognized when we satisfy the performance obligations under the contract. We recognize revenue by delivering the promised products to the customer, with the revenue recognized at the point in time the customer takes control of the products. For shipping and handling charges, revenue is recognized at the time the products are delivered to or picked up by the customer. For operating leases which are accounted for under ASC 842, Leases, revenue is recognized on a straight-line basis over the term of the lease agreement. The majority of our current contracts have a single performance obligation, which is met at the point in time that the product is delivered, and title passes, to the customer, and are short term in nature.
Revenue also consists of sales-type leases which are accounted for under ASC 842, Leases. Revenue is the lower of the fair value of the asset leased or the present value of the lease receivable and prepayments.
We also earn tradable credits in the operation of our automotive business under various regulations related to emission reduction, clean fuel, and others. We sell these credits to other regulated entities who can use the credits to comply with emission standards and other regulatory requirements. We recognize revenue on the sale of these credits, which have negligible incremental costs associated with them, at the time control of the regulatory credit is transferred to the purchasing party.
Cost of Goods Sold
Cost of goods sold includes materials and other direct costs related to production of our vehicles, including components and parts, batteries, direct labor costs and manufacturing overhead, among others. Cost of goods sold also includes materials and other direct costs related to the production and assembly of hubs, powertrains and battery packs as well as materials and other costs incurred related to charging infrastructure installation. Materials include inventory purchased from suppliers, as well as assembly components that are assembled by company personnel, including the allocation of stock-based compensation expense. Direct labor costs relate to the wages of those individuals responsible for the assembly of vehicles, powertrain units, hubs and batteries delivered to customers. Cost of goods sold also includes depreciation expense on property and equipment related to cost of goods sold activities, calculated over the estimated useful life of the property and equipment on a straight-line basis. Upon property and equipment retirement or disposal, the cost of the asset disposed, and the related accumulated depreciation from the accounts and any gain or loss is reflected in the unaudited condensed consolidated statements of operations, allocated to cost of goods sold.
40
Table of Contents
Cost of goods sold includes reserves for estimated warranty expenses as well as reserves for estimated returns of vehicles. Additionally, cost of goods sold includes adjustments for the results of physical inventory counts. Cost of goods sold also includes reserves to write down the carrying value of our inventory to their net realizable value and to provide for any excess or obsolescence.
Cost of goods sold includes the impact of identifiable tariff costs related to the production of our products. Tariffs implemented to date in the United States have caused significant disruption, increased costs (both directly and indirectly), and driven uncertainty in the automotive industry for OEMs, suppliers, and dealers, as well as customers. Additional tariffs implemented in the United States and elsewhere in the future may exacerbate these impacts.
We continue to undertake efforts to identify more cost-effective vendors and sources of parts and raw materials to lower our overall cost of production.
General and Administrative Expense
General and administrative (“G&A”) expense consists of personnel-related expenses, outside professional services, including legal, audit and accounting services, as well as expenses for facilities, non-sales related travel, and general office supplies and expenses. Personnel-related expenses consist of salaries, benefits, allocations of stock-based compensation, and associated payroll taxes. Overhead items including rent, insurance, utilities, and other items are included in G&A expense. G&A expense also includes depreciation expense on property and equipment related to G&A activities, calculated over the estimated useful life of the property and equipment on a straight-line basis. Upon property and equipment retirement or disposal, the cost of the asset disposed, and the related accumulated depreciation from the accounts and any gain or loss is reflected in the unaudited condensed consolidated statements of operations, allocated to G&A.
Research and Development Expense
Research and development (“R&D”) expense consists primarily of costs incurred for the design and development of our vehicles and energy-storage systems, including the Hub, which include:
Sales and Marketing Expense
Sales and marketing (“S&M”) expense consists primarily of expenses related to our marketing of products and brand initiatives, which includes:
41
Table of Contents
Gain on Operating Lease Termination
Gain on operating lease termination primarily includes gains from the termination of the Company's operating lease obligations.
Other (Expense) Income, Net
Other (expense) income, net primarily includes recoveries associated with previously paid import duties for the three and nine months ended September 30, 2026, interest expense related to our financing obligations and interest expense for our equipment leases, offset by income from the sublease of our Los Angeles, California, office space.
Change in Fair Value of Derivative Instruments
Change in fair value of derivative instruments relates to Common Stock warrant liability assumed as part of the Business Combination. Changes in the fair value relate to remeasurement of our Public and Private Placement Warrants to fair value as of any respective exercise date and as of each subsequent balance sheet date and mark-to-market adjustments for these derivative liabilities each measurement period. The Public Warrants and Private Warrants expired on August 20, 2026. See Note 10 – Derivative Instruments of this Report.
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. As of September 30, 2026, the Company had no contingent obligation to issue any Earn-out Shares or Earn-out RSUs, as the Earn-out Period ended on August 20, 2026. See Note 7 – Earn-out Shares Liability.
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2026 and 2025
The following table sets forth our historical operating results for the periods indicated:
|
|
For the Three Months Ended September 30, |
|
|||||||||||||
(dollars in thousands) |
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
Revenues |
|
$ |
5,546 |
|
|
$ |
16,500 |
|
|
$ |
(10,954 |
) |
|
|
(66 |
)% |
Cost of goods sold |
|
|
4,696 |
|
|
|
13,948 |
|
|
|
(9,252 |
) |
|
|
(66 |
)% |
Gross profit |
|
|
850 |
|
|
|
2,552 |
|
|
|
(1,702 |
) |
|
|
(67 |
)% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
5,272 |
|
|
|
6,456 |
|
|
|
(1,184 |
) |
|
|
(18 |
)% |
Research and development |
|
|
2,241 |
|
|
|
2,101 |
|
|
|
140 |
|
|
|
7 |
% |
Sales and marketing |
|
|
797 |
|
|
|
968 |
|
|
|
(171 |
) |
|
|
(18 |
)% |
Total operating expenses |
|
|
8,310 |
|
|
|
9,525 |
|
|
|
(1,215 |
) |
|
|
(13 |
)% |
Loss from operations |
|
|
(7,460 |
) |
|
|
(6,973 |
) |
|
|
(487 |
) |
|
|
7 |
% |
Gain on operating lease termination |
|
|
— |
|
|
|
9,394 |
|
|
|
(9,394 |
) |
|
|
(100 |
)% |
Other (expense) income, net |
|
|
(224 |
) |
|
|
(240 |
) |
|
|
16 |
|
|
|
(7 |
)% |
Change in fair value of derivative instruments |
|
|
79 |
|
|
|
(39 |
) |
|
|
118 |
|
|
|
(303 |
)% |
(Loss) income before Provision (benefit) for income taxes |
|
|
(7,605 |
) |
|
|
2,142 |
|
|
|
(9,747 |
) |
|
|
(455 |
)% |
Provision (benefit) for income taxes |
|
|
4 |
|
|
|
(2 |
) |
|
|
6 |
|
|
|
(300 |
)% |
Net (loss) income |
|
$ |
(7,609 |
) |
|
$ |
2,144 |
|
|
$ |
(9,753 |
) |
|
|
(455 |
)% |
42
Table of Contents
|
|
For the Nine Months Ended September 30, |
|
|||||||||||||
(dollars in thousands) |
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
Revenues |
|
$ |
21,511 |
|
|
$ |
40,772 |
|
|
$ |
(19,261 |
) |
|
|
(47 |
)% |
Cost of goods sold |
|
|
15,717 |
|
|
|
35,347 |
|
|
|
(19,630 |
) |
|
|
(56 |
)% |
Gross profit |
|
|
5,794 |
|
|
|
5,425 |
|
|
|
369 |
|
|
|
7 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
17,154 |
|
|
|
20,258 |
|
|
|
(3,104 |
) |
|
|
(15 |
)% |
Research and development |
|
|
6,170 |
|
|
|
6,118 |
|
|
|
52 |
|
|
|
1 |
% |
Sales and marketing |
|
|
2,517 |
|
|
|
2,329 |
|
|
|
188 |
|
|
|
8 |
% |
Total operating expenses |
|
|
25,841 |
|
|
|
28,705 |
|
|
|
(2,864 |
) |
|
|
(10 |
)% |
Loss from operations |
|
|
(20,047 |
) |
|
|
(23,280 |
) |
|
|
3,233 |
|
|
|
(14 |
)% |
Gain on operating lease termination |
|
|
54 |
|
|
|
9,394 |
|
|
|
(9,340 |
) |
|
|
(99 |
)% |
Other (expense) income, net |
|
|
538 |
|
|
|
(1,496 |
) |
|
|
2,034 |
|
|
|
(136 |
)% |
Change in fair value of derivative instruments |
|
|
73 |
|
|
|
(99 |
) |
|
|
172 |
|
|
|
(174 |
)% |
Loss before provision for income taxes |
|
|
(19,382 |
) |
|
|
(15,481 |
) |
|
|
(3,901 |
) |
|
|
25 |
% |
Provision for income taxes |
|
|
36 |
|
|
|
23 |
|
|
|
13 |
|
|
|
57 |
% |
Net loss |
|
$ |
(19,418 |
) |
|
$ |
(15,504 |
) |
|
$ |
(3,914 |
) |
|
|
25 |
% |
Revenues
Our total revenues decreased by $11.0 million, or 66%, from $16.5 million in the three months ended September 30, 2025 to $5.5 million in the three months ended September 30, 2026, primarily driven by a 75% decrease in unit sales, partially offset by an increase in average product selling price. During the three months ended September 30, 2026, we sold 12 vehicles and 21 powertrains & hubs, compared to 98 vehicles and 32 powertrains & hubs during the three months ended September 30, 2025.
Our total revenues decreased by $19.3 million, or 47%, from $40.8 million in the nine months ended September 30, 2025 to $21.5 million in the nine months ended September 30, 2026, primarily driven by a 46% decrease in unit sales, partially offset by an increase in average product selling price. During the nine months ended September 30, 2026, we sold 32 vehicles and 126 powertrains & hubs, compared to 248 vehicles and 46 powertrains & hubs during the nine months ended September 30, 2025.
Revenue for the three months ended September 30, 2026 and 2025 consisted of the following (dollars in thousands):
|
|
Three Months Ended September 30, |
|
|||||||||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
Product and service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stepvans & vehicle incentives(1) |
|
$ |
1,950 |
|
|
$ |
13,671 |
|
|
$ |
(11,721 |
) |
|
|
(86 |
)% |
Powertrains & hubs(1) |
|
|
2,997 |
|
|
|
2,635 |
|
|
|
362 |
|
|
|
14 |
% |
Other product revenue(2) |
|
|
362 |
|
|
|
129 |
|
|
|
233 |
|
|
|
181 |
% |
Total product revenue |
|
|
5,309 |
|
|
|
16,435 |
|
|
|
(11,126 |
) |
|
|
(68 |
)% |
Ancillary revenue |
|
|
237 |
|
|
|
65 |
|
|
|
172 |
|
|
|
265 |
% |
Total revenues |
|
$ |
5,546 |
|
|
$ |
16,500 |
|
|
$ |
(10,954 |
) |
|
|
(66 |
)% |
Revenue for the nine months ended September 30, 2026 and 2025 consisted of the following (dollars in thousands):
|
|
Nine Months Ended September 30, |
|
|||||||||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
Product and service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stepvans & vehicle incentives(1) |
|
$ |
4,151 |
|
|
$ |
34,342 |
|
|
$ |
(30,191 |
) |
|
|
(88 |
)% |
Powertrains & hubs(1) |
|
|
15,581 |
|
|
|
5,157 |
|
|
|
10,424 |
|
|
|
202 |
% |
Other product revenue(2) |
|
|
1,179 |
|
|
|
748 |
|
|
|
431 |
|
|
|
58 |
% |
Total product revenue |
|
|
20,911 |
|
|
|
40,247 |
|
|
|
(19,336 |
) |
|
|
(48 |
)% |
Ancillary revenue |
|
|
600 |
|
|
|
525 |
|
|
|
75 |
|
|
|
14 |
% |
Total revenues |
|
$ |
21,511 |
|
|
$ |
40,772 |
|
|
$ |
(19,261 |
) |
|
|
(47 |
)% |
43
Table of Contents
Cost of Goods Sold
Cost of goods sold decreased by $9.3 million, or 66%, from $13.9 million in the three months ended September 30, 2025 to $4.7 million in the three months ended September 30, 2026. The decrease in cost of goods sold is directly attributable to the decrease in our product revenue and associated decreases of (i) $7.0 million in direct materials, (ii) $1.3 million in manufacturing overhead, (iii) $0.9 million related to identifiable tariff charges, (iv) $0.2 million in inventory reserves, (v) $0.1 million dealer return reserves with no such comparable expense in the three months ended September 30, 2026, (vi) $0.1 million for warranty reserve and (vii) $0.1 million for freight costs. These decreases were offset by increases of (i) $0.3 million in physical inventory count and other adjustments, and (ii) $0.1 million in direct labor largely related to the completion of energy service projects.
Cost of goods sold decreased by $19.6 million, or 56% from $35.3 million in the nine months ended September 30, 2025 to $15.7 million in the nine months ended September 30, 2026. The decrease in cost of goods sold is directly attributable to the decrease in our product revenue and associated decreases of (i) $16.5 million in direct materials, (ii) $3.0 million in manufacturing overhead, (iii) $0.6 million related to identifiable tariff charges, (iv) $0.3 million in freight costs (v) $0.2 million in dealer return reserves with no such comparable expense in the nine months ended September 30, 2026, and (vi) $0.1 million for warranty reserve. These decreases were offset by increases of (i) $0.4 million in costs for ongoing scrapping projects, physical inventory count, and other adjustments (ii) $0.4 million for direct labor largely related to the completion of energy service projects, and (iii) $0.3 million related to increases in inventory reserves.
The decreases in direct material and manufacturing overhead costs are driven by a decrease in units sold. A significant portion of the overhead costs incurred include freight, tariff charges, indirect salaries, facility rent, utilities, and depreciation of production equipment, which are primarily fixed in nature and allocated based on production levels. Accordingly, these costs decrease correspondingly with a decrease in production volume and units sold.
General and Administrative
General and administrative expenses decreased by $1.2 million, or 18%, from $6.5 million in the three months ended September 30, 2025 to $5.3 million in the three months ended September 30, 2026, attributable to decreases of (i) $0.6 million in facility expenses connected to the termination of the Mesa Lease (as defined below) with no such comparable expense in the three months ended September 30, 2026, (ii) $0.6 million in computer and software services (including $0.5 million related to the settlement of a software-related vendor contract), (iii) $0.2 million in insurance costs driven by cost efficiencies associated with new policies, (iv) $0.2 million in other operating expenses including travel, recruiting, and computer software costs, and (v) $0.1 million in depreciation expenses. These decreases were offset by increases of (i) $0.2 million in stock-based compensation expense, (ii) $0.2 million in professional fees, and (iii) $0.1 million in personnel costs for legal, finance, accounting, information technology and general and administrative functions.
General and administrative expenses decreased by $3.1 million, or 15%, from $20.3 million in the nine months ended September 30, 2025 to $17.2 million in the nine months ended September 30, 2026, attributable to decreases of (i) $2.3 million in financed equipment lease expense due to fees incurred during the nine months ended September 30, 2025 with no comparable expense for the nine months ended September 30, 2026, (ii) $1.7 million in facility expenses connected to the termination of the Mesa Lease (as defined below) with no such comparable expense in the nine months ended September 30, 2026, (iii) $0.5 million in insurance costs driven by cost efficiencies associated with new policies, (iv) $0.5 million in computer and software services (including $0.5 million related to the settlement of a software-related vendor contract), and (v) $0.1 million in depreciation expenses. These decreases were offset by increases
44
Table of Contents
of (i) $1.0 million in stock-based compensation expense, (ii) $0.5 million in personnel costs for legal, finance, accounting, information technology and general and administrative functions and (iii) $0.5 million in professional fees.
Research and Development
Research and development expenses increased by $0.1 million, or 7%, from $2.1 million in the three months ended September 30, 2025 to $2.2 million in the three months ended September 30, 2026. The change was primarily due to an increase of $0.1 million related to computer and software services.
Research and development expenses increased by $0.1 million, or 1%, from $6.1 million in the nine months ended September 30, 2025 to $6.2 million in the nine months ended September 30, 2026. The change was primarily due to a $0.4 million increase in costs to support product development activities, including materials and parts for Hub development and prototype builds, as well as computer and software services. This increase was offset by a decrease of $0.3 million in personnel costs.
Sales and Marketing
Sales and marketing expense decreased by $0.2 million, or 18% from $1.0 million in the three months ended September 30, 2025 to $0.8 million in the three months ended September 30, 2026. The change was primarily due to a decrease of $0.2 million in employee bonuses and other personnel costs.
Sales and marketing expense increased by $0.2 million, or 8% from $2.3 million in the nine months ended September 30, 2025 to $2.5 million in the nine months ended September 30, 2026. The change was primarily due to an increase of $0.3 million in stock-based compensation, offset by a decrease of $0.1 million in personnel costs.
Other (Expense) Income, net
Other (expense) income, net was a loss of $0.2 million for each of the three months ended September 30, 2026 and 2025.
Other (expense) income, net increased by $2.0 million, from a loss of $1.5 million in the nine months ended September 30, 2025 to a gain of $0.5 million in the nine months ended September 30, 2026. The change was attributable to (i) $1.3 million of income primarily related to recoveries associated with previously paid import duties in the nine months ended September 30, 2026, with no such comparable income in the prior year period, (ii) $0.4 million less in interest expense and (iii) $0.3 million less in impairment losses on property and equipment.
Gain on Operating Lease Termination
Gain on operating lease termination decreased by $9.4 million, from a gain of $9.4 million in the three months ended September 30, 2025 to $0 in the three months ended September 30, 2026. The change was attributable to a $9.4 million gain resulting from the early termination of the Mesa operating lease in the three months ended September 30, 2025, with no such comparable gain in the current year period.
Gain on operating lease termination decreased by $9.3 million, from a gain of $9.4 million in the nine months ended September 30, 2025 to a gain of $0.1 million in the nine months ended September 30, 2026. The change was attributable to a $9.4 million gain resulting from the early termination of the Mesa operating lease in the nine months ended September 30, 2025, compared to a $0.1 million gain resulting from the early termination of the Huntington Beach operating lease in the nine months ended September 30, 2026.
Change in Fair Value of Derivatives
The gain on the change in fair value of derivative instruments increased by $118,000, or 303%, from a loss of $39,000 in the three months ended September 30, 2025 to a gain of $79,000 in the three months ended September 30, 2026. 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, with the Company's Public Warrants and Private Placement Warrants expired on August 20, 2026. See Note 10 – Derivative Instruments of this Report.
The gain on the change in fair value of derivative instruments increased by $172,000, or 174%, from a loss of $99,000 in the nine months ended September 30, 2025 to a gain of $73,000 in the nine months ended September 30, 2026. The change in fair value in both periods
45
Table of Contents
is primarily attributable to the change in our stock price and the resulting valuation at the respective reporting period, with the Company's Public Warrants and Private Placement Warrants expired on August 20, 2026. See Note 10 – Derivative Instruments of this Report.
Provision for Income Taxes
The Company recorded an income tax provision of $4,000 during the three months ended September 30, 2026 and an income tax benefit of $2,000 during the three months ended September 30, 2025.
The Company recorded an income tax provision of $36,000 and $23,000 during the nine months ended September 30, 2026 and 2025, respectively.
Liquidity and Capital Resources
General
As of September 30, 2026, our principal sources of liquidity were our cash and cash equivalents of $12.1 million with an accumulated deficit of approximately $247.5 million. Our short-term uses of cash are for working capital and to pay the principal of our indebtedness. During the nine months ended September 30, 2026, we incurred a net loss of approximately $19.4 million and had net cash used in operating activities of $6.8 million.
Under ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern (“ASC 205-40”), we have the responsibility to evaluate whether conditions and/or events raise substantial doubt about our ability to meet our future financial obligations as they become due within one year of the unaudited condensed consolidated financial statements included elsewhere in this Report. The result of our ASC 205-40 analysis, due to uncertainties discussed below, is that there is substantial doubt about our ability to continue as a going concern through the next 12 months from the date of the unaudited condensed consolidated financial statements in this Report.
As an early-stage company, we have mainly incurred net losses and cash outflows since our inception. We may continue to incur net losses and cash outflows in accordance with our operating plan as we continue to scale our operations to meet anticipated demand and seek to establish our product and service offerings. As a result, our ability to access capital is critical and until we can generate sufficient revenue to cover our operating expenses, working capital and capital expenditures, we will need to raise additional capital in order to fund and scale our operations. These conditions and events raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial information does not include any adjustment that may result from the outcome of this uncertainty.
In response to these conditions, we are currently evaluating different strategies to obtain the required funding for future operations. We have plans to secure and intend to employ various strategies to raise additional capital, which may include the ATM Offering (as defined below) as well as other capital raising strategies such as debt financing (which may include asset-based lending and/or receivable financing), other non-dilutive financing and/or equity financing. However, we are limited in how much money we can raise under the ATM Offering. Our ability to access other capital when needed is not assured and, if capital is not available to us when, and in the amounts needed, we could be required to delay, scale back or abandon some or all of our development programs and other operations, which could materially harm our business, prospects, financial condition and operating results.
Global general economic and political conditions, such as inflation, tariffs (or the threat of tariffs), uncertain credit and global financial markets, supply chain disruption, international currency fluctuations, and geopolitical events have had and could continue to have an adverse impact in our ability to raise additional funds. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our commercialization, research and development programs and/or other efforts and our ability to continue our operations would be negatively impacted. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all. In addition, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our unaudited condensed consolidated financial statements and/or seek protection under Chapters 7 or 11 of the United States Bankruptcy Code. This could potentially cause us to cease operations and result in a complete or partial loss of your investment in our Common Stock.
46
Table of Contents
ATM Offering
On August 14, 2025, we entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (the “Agent”). Pursuant to the terms of the Sales Agreement, we may offer and sell shares of our common stock having an aggregate offering amount of up to $20 million from time to time through the Agent (the “ATM Offering”), subject to the limitations of General Instruction I.B.6 of Form S-3, which limits the amount the Company may sell, together with any other primary offerings on Form S-3, during any 12-month period pursuant to the Sales Agreement. Any sales of Common Stock pursuant to the Sales Agreement would be made in sales deemed to be an “at-the-market offering” as defined in Rule 415 under the Securities Act of 1933, as amended. The Agent is entitled to a commission of 3.0% of the gross proceeds from the sale of Common Stock sold under the Sales Agreement. During 2025, we sold an aggregate of 730,400 shares of common stock in the ATM Offering, resulting in net proceeds of approximately $2.4 million. In the nine months ended September 30, 2026, we sold 1,016,109 shares of common stock in the ATM Offering, resulting in net proceeds of approximately $5.1 million. During the 12 calendar month period ending November 12, 2026, we have sold an aggregate of $11,520,902 of securities pursuant to General Instruction I.B.6 of Form S-3. As of September 30, 2026, we had $5.8 million of shares of Common Stock available for future issuance under the ATM Offering pursuant to our prospectus supplement with respect to the ATM Offering, and $11.7 million remaining under the terms of the Sales Agreement.
Registered Direct Offering
On June 4, 2026, we entered into (i) a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional investors and (ii) a Placement Agency Agreement (the “Placement Agency Agreement”) with the Agent, pursuant to which the Agent acted as our exclusive placement agent in connection with a registered direct offering of 1,090,910 shares of Common Stock at a purchase price of $5.50 per share (the "Registered Direct Offering"). On June 5, 2026, we completed the sale of the 1,090,910 shares of Common Stock pursuant to the Securities Purchase Agreement. The aggregate gross proceeds to us from the offering were approximately $6.0 million, before deducting placement agent fees and other offering expenses. Pursuant to the Placement Agency Agreement, we agreed to pay Agent a cash fee equal to 6.5% of the aggregate gross proceeds received by us in the offering and to reimburse certain expenses of Agent in an aggregate amount of up to $75,000.
Cash Flow Data
The following table provides a summary of cash flow data for the nine months ended September 30, 2026 and 2025 (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Net cash (used in) provided by operating activities |
|
$ |
(6,778 |
) |
|
$ |
2,966 |
|
Net cash provided by investing activities |
|
|
116 |
|
|
|
43 |
|
Net cash provided by financing activities |
|
|
4,686 |
|
|
|
61 |
|
Net (decrease) increase in cash and cash equivalents |
|
$ |
(1,976 |
) |
|
$ |
3,070 |
|
Cash Flow from Operating Activities
Our cash flow from operating activities is significantly affected by the growth of our business. Our operating cash flow is also affected by our working capital needs to support growth in inventory and fluctuations in accounts receivable, accounts payable and other current assets and liabilities.
Net cash used in operating activities was $6.8 million for the nine months ended September 30, 2026, primarily consisting of a cash-basis net loss of $9.0 million from normal operations of the Company (after non-cash adjustments of $10.4 million), partially offset by favorable net working capital changes of $2.2 million, primarily driven by lower inventories due to improved inventory turns and lower accounts receivable due to collections, partially offset by higher prepaid expenses and other current assets and lower other liabilities.
Net cash provided by operating activities was $3.0 million for the nine months ended September 30, 2025, primarily consisting of a cash-basis net loss of $15.3 million from normal operations of the Company (after non-cash adjustments of $0.2 million), more than fully offset by favorable net working capital changes of $18.3 million, primarily driven by lower accounts receivable due to collections, and lower inventories due to improved inventory turns and other liabilities, partially offset by lower accounts payable.
47
Table of Contents
Cash Flow from Investing Activities
Net cash provided by investing activities was $0.1 million for the nine months ended September 30, 2026 due to proceeds of $359,000 from the disposal of assets held for sale, partially offset by $243,000 in purchases of property and equipment.
Net cash provided by investing activities was $43,000 for the nine months ended September 30, 2025.
Cash Flow from Financing Activities
Net cash provided by financing activities was $4.7 million for the nine months ended September 30, 2026, which primarily related to (i) net proceeds of $5.4 million in the Registered Direct Offering, (ii) net proceeds of $5.1 million in sales under the ATM Offering program, and (iii) proceeds of $1.8 million from short-term insurance financing notes, partially offset by (i) $4.5 million for payments of principal on Convertible Notes, (ii) payments for short-term insurance financing notes of $1.5 million, (iii) taxes paid relating to net-settlement of stock-based awards of $1.3 million, and (iv) equipment lease principal payments of $0.2 million.
Net cash provided by financing activities was $0.1 million for the nine months ended September 30, 2025, primarily related to (i) $2.4 million of proceeds from issuance of common stock under an at-the-market offering by the Company and (ii) net short-term insurance financing note activity of $0.4 million. This was partially offset by (i) equipment lease principal payments of $1.9 million and (ii) taxes paid relating to net-settlement of stock-based awards of $0.8 million.
Management plans to continue to seek opportunities to reduce costs and, in particular, cash expenditures, in a manner intended to minimize their adverse impact on our core operations. However, there can be no assurance that the measures described above, or any other cost-cutting measures we may implement in the future, will be sufficient to address our immediate or longer-term liquidity and working capital needs.
48
Table of Contents
Contractual Obligations and Commitments
As a result of the termination of the lease on the Company’s manufacturing facility in Mesa, Arizona (“Mesa Lease”) and the lease on the Company's office in Huntington Beach, California, future lease commitments have been reduced. We did not have any additional material contractual obligations or other commitments as of September 30, 2026, other than as disclosed in the 2025 Form 10-K, and in Note 13 — Commitments and Contingencies.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined under the applicable rules and regulations of the SEC.
Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenues and expenses during the reporting periods. Our most significant estimates and judgments involve inventory valuation, incremental borrowing rates for assessing operating and financing lease liabilities, useful lives of property and equipment, stock-based compensation, and product warranty liability. We base our estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to our financial statements.
There were no material changes in our critical accounting policies from those disclosed in our 2025 Form 10-K.
Recent Accounting Pronouncements
See Note 2 — Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements to our unaudited condensed consolidated financial statements included in this filing for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations.
49
Table of Contents
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company (as defined in Item 10(f)(1) of Regulation S-K), we are not required to provide the information under this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Principal Executive Officer and Principal Financial Officer carried out evaluations of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2026. Based upon each of their evaluations, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective at the reasonable assurance level as of September 30, 2026, due to the material weaknesses in our internal control over financial reporting discussed below.
Material Weaknesses in Internal Controls Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim unaudited condensed consolidated financial statements will not be prevented or detected on a timely basis. Accordingly, a material weakness increases the risk that the financial information we report contains material errors. If we fail to remediate these material weaknesses, determine that our internal controls over financial reporting are not effective, discover areas that need improvement in the future or discover additional material weaknesses, these shortcomings could have an adverse effect on our business and financial results, and the price of our Common Stock could be negatively affected.
As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, as amended, during the financial reporting close process for the period ended December 31, 2025, management continued to identify material weaknesses in the design and operating effectiveness of internal control over financial reporting related to revenue recognition. Management also identified additional material weaknesses related to the timeliness of recording supplier and vendor accruals, including instances in which accruals were not properly recorded due to deficiencies in the identification and evaluation of vendor contract terminations.
During the period ended June 30, 2026, management identified an additional material weakness related to the improper recording of vendor accrued inventory purchases, including instances in which accruals were overstated due to deficiencies in the purchase-to-pay process.
50
Table of Contents
Management believes these material weaknesses resulted from limited resources within our accounting and operations functions, which restricted its ability to timely identify, evaluate, and address technical accounting and disclosure matters affecting the consolidated financial statements. As part of management’s efforts to reduce costs and preserve liquidity, we were unable to develop and retain sufficient personnel to adequately fulfill internal control responsibilities, resulting in an insufficient complement of individuals with the appropriate level of accounting knowledge and experience. Accordingly, management has concluded that these deficiencies were attributable to insufficient internal resources in technical accounting and financial reporting, which adversely impacted our internal control over financial reporting for the year ended December 31, 2025 and the quarter ended September 30, 2026.
Based on the results of our evaluation and the material weaknesses described above, management concluded that the Company’s internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of annual and interim unaudited condensed consolidated financial statements for external reporting purposes in accordance with GAAP as of December 31, 2025 and September 30, 2026.
Notwithstanding these material weaknesses, management has concluded that our unaudited condensed consolidated financial statements included in this Form 10-Q are fairly stated in all material respects in accordance with U.S. GAAP for each of the periods presented therein.
Remediation of Material Weakness in Internal Control Over Financial Reporting
To remediate the material weaknesses in internal control over financial reporting related to the ineffective design and operating effectiveness of controls over revenue recognition, the timeliness and accuracy of recording supplier and vendor accruals, including vendor accrued inventory purchases, and the timely identification and assessment of vendor contract terminations, management is implementing enhancements to our financial reporting control framework. These remediation efforts are intended to strengthen both disclosure controls and procedures and internal control over financial reporting by further documenting and implementing control activities to address the identified risks of material misstatement, as well as enhancing monitoring activities over such controls. Management believes these remediation efforts are progressing as planned and expects to remediate the material weaknesses during the year ending December 31, 2026. Remediation efforts to date include the following:
To further remediate the identified material weaknesses, management, including the Chief Executive Officer and Chief Financial Officer, has reaffirmed and reinforced the importance of effective internal control, control consciousness and maintaining a strong control environment throughout the organization. Management expects to continue its efforts to evaluate, refine, and enhance our financial reporting controls and procedures. These material weaknesses will not be considered remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that the enhanced controls are designed appropriately and operating effectively.
51
Table of Contents
Changes in Internal Control over Financial Reporting
Except as noted above, there were no changes in the Company’s internal control over financial reporting that occurred during the three months ended September 30, 2026, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
52
Table of Contents
Part II - Other Information
Item 1. Legal Proceedings
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not currently a party to any legal proceedings, the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition or results of operations.
Item 1A. Risk Factors
Our risk factors are described in the “Risk Factors” section of our 2025 Form 10-K. There have been no material changes to our risk factors since the filing of the 2025 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
No unregistered sales of equity securities occurred during the quarter.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
On
On
On
53
Table of Contents
Item 6. Exhibits
Exhibit Number |
|
Description |
3.1 |
|
Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on August 26, 2021). |
3.2 |
|
Certificate of Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on December 6, 2023). |
3.3 |
|
Bylaws of the Company (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on August 26, 2021). |
31.1* |
|
Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
31.2* |
|
Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
32.1** |
|
Certification of the Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350. |
101.INS |
|
XBRL Instance Document. |
101.SCH |
|
XBRL Taxonomy Extension Schema Document. |
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith.
** Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act, or the Exchange Act (whether made before or after the date of this Report), irrespective of any general incorporation language contained in such filing.
54
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
XOS, INC. |
|
|
|
|
Date: November 12, 2026 |
By: |
/s/ Dakota Semler |
|
Name: |
Dakota Semler |
|
Title: |
Chief Executive Officer (Principal Executive Officer) |
|
|
|
Date: November 12, 2026 |
By: |
/s/ Liana Pogosyan |
|
Name: |
Liana Pogosyan |
|
Title: |
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
55