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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________________
FORM 10-Q/A
(Amendment No. 1)
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  __________ to __________
Commission file number 001-39598
https://cdn.kscope.io/94b12786fca28e505bb8cddf885b44eb-xos-20220930_g1.jpg
XOS, INC.
______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware
98-1550505
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
3550 Tyburn Street
Los Angeles, CA
90065
(Address of Principal Executive Offices)
(Zip Code)
    
Registrant’s telephone number, including area code: (818) 316-1890

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common Stock, $0.0001 par value per shareXOSNasdaq Global Market
Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 per shareXOSWWNasdaq Global Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
☐
Accelerated filer
☐
Non-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  ☒

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The registrant had outstanding 168,034,218 shares of Common Stock, $0.0001 par value as of November 7, 2022.

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TABLE OF CONTENTS
Page
Item 1. Financial Statements (Unaudited) (As restated)
Item 1A. Risk Factors (As restated)

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EXPLANATORY NOTE

Xos, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (this “Form 10-Q/A”) to restate its unaudited condensed consolidated financial statements as of September 30, 2022, and for the three and nine months ended September 30, 2022, previously included in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 filed with the Securities and Exchange Commission (the “SEC”) on November 10, 2022 (the “Original Report”). This Form 10-Q/A also amends certain other items in the Original Report, as listed in “Items Amended in this Form 10-Q/A” below.

Restatement Background

As disclosed in the Company’s Current Report on Form 8-K, as furnished or filed, as applicable, with the SEC on March 8, 2023, the Company is restating its previously issued unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2022 due to (1) errors in recording results of a physical inventory count, which caused inventories to be overstated and cost of goods sold to be understated for the nine months ended September 30, 2022, and (2) errors in the improper recording of duplicate inventory receipts as well as improper and inaccurate recording of prepaid inventories, which caused inventories, prepaid inventories (included within Prepaid expenses and other current assets) and accrued expenses (included within Other current liabilities) to be overstated for the three and nine months ended September 30, 2022. On March 8, 2023, the Audit Committee of the Board of Directors of the Company, after discussion with the Company’s management, concluded that the Company’s unaudited condensed consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 included in the Original Report should be restated (the “Restatement”) to correct these errors. Accordingly, the Company’s previously furnished or filed reports, related earnings releases, investor presentations or similar communications of the Company describing the Company’s financial results contained in the Original Report should no longer be relied upon.

In connection with the misstatement, management identified a material weakness in internal control over financial reporting relating to the ineffective operation of controls related to inventory management that resulted in the error above and concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2022. For a discussion of management’s evaluation of our disclosure controls and procedures and the material weakness identified, see Part I, Item 4, “Controls and Procedures” of this Form 10-Q/A.

In connection with the Restatement and the filing of this Form 10-Q/A, the Company has also adjusted its unaudited condensed consolidated balance sheet as of September 30, 2022 and unaudited condensed consolidated statement of operations for the three and nine months ended September 30, 2022, contained in the Original Report in order to correct for an immaterial error related to the recognition of embedded derivative liabilities within the Convertible Debentures issued on August 11, 2022 and September 21, 2022 (the “Convertible Debentures”). Specifically, one embedded feature contained within both Convertible Debentures should have been bifurcated from the host debt contract upon issuance of the debentures and subsequently recorded at fair value as of September 30, 2022, with the change in fair value reflected in the unaudited condensed consolidated statement of operations. The error resulted in an overstatement of Convertible debt, net of $7.1 million and an understatement of Derivative liabilities of $3.8 million in the unaudited condensed consolidated balance sheet as of September 30, 2022 and an understatement of Change in fair value of derivative instruments of $4.0 million and an understatement of Other expenses, net of $0.7 million in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2022. The Company determined that this error was not material to the Company’s previously issued financial statements included in the Original Report.

Items Amended in this Form 10-Q/A

This Form 10-Q/A presents the Original Report, amended, and restated with modifications as necessary to reflect the Restatement. The following items have been amended to reflect the Restatement:

•Part I, Item 1. Financial Information
•Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
•Part I, Item 4, Controls and Procedures
•Part II, Item 1A. Risk Factors
•Part II, Item 6. Exhibits and Signatures

In addition, this Form 10-Q/A includes an updated signature page and new certifications of the Company’s Chief Executive Officer and Chief Financial Officer, dated as of the date of this filing (Exhibits 31.1, 31.2, 32.1 and 32.1).

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This Form 10-Q/A sets forth the Original Report in its entirety, as amended to reflect the restatement. Among other things, forward-looking statements made in the Original Report have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the Original Report, and such forward-looking statements should be read in their historical context. Except as described above, this Form 10-Q/A does not amend, update or change any other items or disclosures in the Original Report and does not purport to reflect any information or events subsequent to the filing thereof. As such, this Form 10-Q/A speaks only as of the date the Original Report was filed, and we have not undertaken herein to amend, supplement or update any information contained in the Original Report to give effect to any subsequent events. Accordingly, this Form 10-Q/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Report, including any amendment to those filings.

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Forward-Looking Statements

This Quarterly Report on Form 10-Q/A (the “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,” “should,” “will,” “would” or the negative of such terms or other similar expressions. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

•our ability to successfully commercialize our Fleet-as-a-Service offering to customers over time;

•delays in the design, manufacturing and wide-spread deployment of our vehicles, powertrains and battery packs;

•our ability to grow market share in our existing markets or any new markets we may enter;

•our ability to successfully complete strategic relationships and alliances with third parties or acquisitions in the future;

•changes in domestic and foreign business, market, financial, political and legal conditions;

•changes in applicable laws or regulations;

•our financial and business performance, including financial projections and business metrics and any underlying assumptions thereunder;

•changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

•the restatement of our financial statements as of and for the three and nine months ended September 30, 2022 and our ability to maintain an effective system of internal controls over financial reporting, including our ability to remediate the existing material weakness in our internal controls;

•our ability to maintain an effective system of internal controls over financial reporting;

•our ability to respond to general economic conditions, including supply chain delays or interruptions that may occur;

•our ability to manage our growth effectively;

•our ability to achieve and maintain profitability in the future;

•our future capital requirements and our ability to access sources of capital, including debt financing and other sources of capital to finance operations and growth;

•our ability to maintain and enhance our products and brand, and to attract customers;

•our ability to execute our business model, including market acceptance of our planned products and services and achieving sufficient production volumes at acceptable quality levels and prices;

•ability to source certain of our critical inventory items, including battery cells, semiconductor chips and vehicle bodies and aluminum;

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•our ability to successfully manage supply shortages and disruptions, product delivery delays, and anticipate costs and production timing in light of those challenges;

•our ability to scale in a cost-effective manner, including hiring qualified personnel, particularly during recent labor shortages, to meet our manufacturing and delivery goals;

•developments and projections relating to our competitors and industry;

•general economic and political conditions, such as the effects of the COVID-19 pandemic, recessions, interest rates, inflation, local and national elections, fuel prices, international currency fluctuations, corruption, political instability and acts of war or military conflict, including repercussions of the recent military conflict between Russia and Ukraine, or terrorism on our business and the actions we may take in response thereto;

•our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

•expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012, as amended;

•our ability to recognize the anticipated benefits of the Business Combination (as defined below) and proceeds from the concurrent private placement, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably;

•our future capital requirements and sources and uses of cash;

•the outcome of, and costs associated with, any known and unknown legal, litigation and regulatory proceedings; and

•any other risks and uncertainties set forth in this Report in the section entitled “Risk Factors”.

A discussion of these and other factors affecting our business and prospects is set forth in Part II, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2022 (the “2021 Form 10-K”), as supplemented by other SEC filings, including this Report and future SEC filings. We encourage investors to review these risk factors.

Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Report may not prove to be accurate. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.

Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.


Part I - Financial Information
Glossary of Terms
Unless otherwise stated in this Report or the context otherwise requires, reference to:

•“Business Combination” means the Domestication, the Merger and the other transactions contemplated by the Merger Agreement, collectively, including the PIPE Financing;

•“Class 5 to 8 Vehicles” means medium and heavy duty trucks that typically travel on predictable routes and cover less than 200 miles per day;

•“Closing” means the closing of the Business Combination;

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•“Closing Date” means August 20, 2021;

•“Common Stock” means the shares of common stock, par value $0.0001 per share, of Xos;

•“Domestication” means the transfer by way of continuation and deregistration of NextGen from the Cayman Islands and the continuation and domestication of NextGen as a corporation incorporated in the State of Delaware;

•“Energy Services” means our infrastructure-as-a-service offering which includes charging infrastructure deployment, energy procurement and management, and the Xos HubTM, our proprietary mobile charging unit deployable for on-demand charging requirements;

•“Fleet-as-a-Service” means our comprehensive suite of products and services facilitating commercial battery-electric fleet operations through a combination of in-house proprietary technology and turnkey solutions from industry-leading partners. The platform includes our X-Pack battery system, X-Platform modular chassis, Energy Services, service and maintenance, digital fleet management products, over-the-air software update technology, and a wide range of additional service products;

•“Flex Manufacturing Strategy” means leveraging smaller, more-nimble existing facilities and labor talent to assemble vehicles through our strategic manufacturing partnerships, while the Company coordinates other aspects of the manufacturing process, including supply chain logistics, quality control, and manufacturing engineering;

•“Founders” means Dakota Semler and Giordano Sordoni;

•“Founder Shares” means Class B ordinary shares, par value $0.0001 per share, of NextGen, which were converted into shares of Common Stock in connection with the Business Combination;

•“Initial Public Offering” means NextGen’s initial public offering that was consummated on October 9, 2020;

•“Legacy Xos Common Stock” means shares of common stock, par value $0.0001 per share, issued by Legacy Xos prior to the Business Combination;

•“Legacy Xos Preferred Stock” means Class A through A-10 shares of preferred stock, par value $0.0001 per share, issued by Legacy Xos prior to the Business Combination;

•“Legacy Xos” means Xos, Inc., a Delaware corporation, prior to the consummation of the Business Combination;

•“Merger” means the merger of NextGen Merger Sub with and into Legacy Xos pursuant to the Merger Agreement, with Legacy Xos as the surviving company in the Merger and, after giving effect to such Merger, Legacy Xos becoming a wholly owned subsidiary of Xos;

•“Merger Agreement” means that certain Merger Agreement, dated as of February 21, 2021, as amended on May 14, 2021, by and among NextGen, Sky Merger Sub I, Inc., a Delaware corporation and direct wholly owned subsidiary of NextGen, and Legacy Xos;

•“NextGen” means NextGen Acquisition Corp., a Cayman Islands exempted company, prior to the consummation of the Domestication;

•“NextGen Sponsor” means NextGen Sponsor LLC.

•“PIPE Financing” means the transactions contemplated by the Subscription Agreements, pursuant to which the PIPE Investors collectively subscribed for 21,600,000 shares of Common Stock for an aggregate purchase price of $216,000,000 in connection with the Closing;

•“PIPE Investors” means the investors who participated in the PIPE Financing and entered into the Subscription Agreements;

•“Powertrain” means an assembly of every component that pushes a vehicle forward. A vehicle’s powertrain creates power from the engine and delivers it to the wheels on the ground. The key components of a powertrain include an engine, transmission, driveshaft, axles, and differential;

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•“Preferred Stock” means preferred stock, par value $0.0001 per share, authorized under the Certificate of Incorporation of Xos, Inc.;

•“Private Placement Warrants” means the warrants to purchase Common Stock originally issued in a private placement in connection with the Initial Public Offering;

•“Public Warrants” means the redeemable warrants to purchase shares of Common Stock at an exercise price of $11.50 per share originally issued in connection with the Initial Public Offering;

•“Sponsor” means NextGen’s sponsor, NextGen Sponsor LLC;

•“Subscription Agreements” means the subscription agreements entered into by NextGen and each of the PIPE Investors in connection with the PIPE Financing;

•“Warrants” means Private Placement Warrants and Public Warrants;

•“X-Pack” means our proprietary battery system;

•“X-Platform” means our proprietary, purpose-built vehicle chassis platform; and

•“Xosphere Intelligence Platform” means our advanced connected vehicle ecosystem that combines our proprietary hardware and embedded software with a modern and intuitive user platform.

Item 1.    Financial Statements
Index to Unaudited Condensed Consolidated Financial Statements
Page

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Xos, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Unaudited
(in thousands, except par value)
September 30, 2022
(As restated)(1)
December 31, 2021
Assets
Cash and cash equivalents$46,433 $16,142 
Restricted cash
3,037 3,034 
Accounts receivable
4,150 3,353 
Marketable debt securities, available-for-sale — short-term
59,700 94,696 
Inventories
62,009 30,883 
Prepaid expenses and other current assets15,664 17,850 
Total current assets190,993 165,958 
Marketable debt securities, available-for-sale — long-term— 54,816 
Property and equipment, net18,023 7,426 
Operating lease right-of-use assets, net6,933 — 
Other non-current assets
1,600 506 
Total assets$217,549 $228,706 
Liabilities and Stockholders’ Equity
Accounts payable$5,239 $10,122 
Other current liabilities15,078 5,861 
Total current liabilities20,317 15,983 
Convertible debt, net
46,659 — 
Derivative liabilities
3,788 — 
Earn-out shares liability
5,150 29,240 
Common stock warrant liability
2,337 7,496 
Other non-current liabilities
11,214 1,594 
Total liabilities89,465 54,313 
Commitments and Contingencies (Note 14)
Stockholders’ Equity
Common Stock $0.0001 par value, authorized 1,000,000 shares,
166,432 and 163,137 shares issued and outstanding at September 30, 2022
and December 31, 2021, respectively
17 16 
Preferred Stock $0.0001 par value, authorized 10,000 shares,
0 shares issued and outstanding at September 30, 2022
and December 31, 2021, respectively
— — 
Additional paid-in capital
187,014 178,851 
Accumulated deficit(57,731)(4,093)
Accumulated other comprehensive loss
(1,216)(381)
Total stockholders’ equity
128,084 174,393 
Total liabilities and stockholders’ equity$217,549 $228,706 
____________
(1) For discussion on the restatement adjustments, see Note 2 – Basis of Presentation and Summary of Significant Accounting Policies – Restatement of Unaudited Condensed Consolidated Financial Statements.


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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Xos, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
Unaudited
(in thousands, except per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2022
(As restated)(1)
2021
2022
(As restated)(1)
2021
Revenues$11,008 $357 $27,805 $1,746 
Cost of goods sold
21,759 418 49,859 1,675 
Gross (loss) margin
(10,751)(61)(22,054)71 
Operating expenses
General and administrative
9,470 7,606 30,991 15,756 
Research and development
8,573 5,302 24,493 9,846 
Sales and marketing
2,345 1,337 7,891 2,173 
Total operating expenses
20,388 14,245 63,375 27,775 
Loss from operations
(31,139)(14,306)(85,429)(27,704)
Other expense, net
(1,334)(66)(1,479)(83)
Change in fair value of derivative instruments
5,857 1,066 9,125 6,030 
Change in fair value of earn-out shares liability
6,654 48,202 24,148 48,202 
Write off of subscription receivable— — — (379)
Realized loss on debt extinguishment
— — — (14,104)
(Loss) income before provision for income taxes
(19,962)34,896 (53,635)11,962 
Provision for income taxes
— — 3 — 
Net (loss) income
$(19,962)$34,896 $(53,638)$11,962 
Other comprehensive (loss) income
Marketable debt securities, available-for-sale
Change in net unrealized gain (loss), net of tax of $0, for the three and nine months ended September 30, 2022 and 2021
141 — (835)— 
Total comprehensive (loss) income
$(19,821)$34,896 $(54,473)$11,962 
Net (loss) income per share
Basic
$(0.12)$0.31 $(0.33)$0.14 
Diluted
$(0.13)$0.30 $(0.34)$0.14 
Weighted average shares outstanding
Basic165,901 113,797 164,379 86,192 
Diluted174,118 115,932 167,148 88,487 
____________
(1) For discussion on the restatement adjustments, see Note 2 – Basis of Presentation and Summary of Significant Accounting Policies – Restatement of Unaudited Condensed Consolidated Financial Statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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Xos, Inc. and Subsidiaries
Condensed Consolidated Statements of Legacy Xos Preferred Stock and Stockholders’ Equity (Deficit)
Unaudited
(in thousands)
Legacy Xos
Preferred Stock		Common StockAdditional Paid-in CapitalAccumulated
Deficit		Accumulated Other Comprehensive LossTotal
Stockholders’
Equity (Deficit)
SharesAmountShares
Par Value
Balance at December 31, 2020
2,762 $7,862 72,277 $7 $290 $(27,494)$— $(27,197)
Payment of subscription receivable— 2,430 — — 380 (74)— 306 
Issuance of Legacy Xos Preferred Stock, including note conversion49,518 66,701 — — — — — — 
Stock options exercised— — 206 — 3 — — 3 
Stock repurchased and retired— — (94)— (1)— — (1)
Stock based compensation expense— — — — 2 — — 2 
Net loss— — — — — (13,776)— (13,776)
Balance at March 31, 202152,280 76,993 72,389 7 674 (41,344)— (40,663)
Stock based compensation expense— — — — 2 — — 2 
Stock options exercised— — 2 — — — — — 
Net loss— — — — — (9,158)— (9,158)
Balance at June 30, 202152,280 76,993 72,391 7 676 (50,502)— (49,819)
Stock based compensation expense— — — — 1 — — 1 
Stock options exercised— — 315 — 7 — — 7 
Preferred stock warrant exercise625 2,715 — — — — — — 
Conversion of preferred into common shares(52,905)(79,708)52,905 5 79,767 — — 79,772 
Issuance of common stock upon merger, net of transaction costs of $55,424
— — 17,694 2 20,719 — — 20,721 
Issuance of PIPE common stock— — 19,600 2 195,998 — — 196,000 
Recognition of common stock public and private warrants as liability— — — — (17,891)— — (17,891)
Recognition of earn-out interests liability— — — — (101,744)— — (101,744)
Net income— — — — — 34,896 — 34,896 
Balance at September 30, 2021— $— 162,905 $16 $177,533 $(15,606)$— $161,943 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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Xos, Inc. and Subsidiaries
Condensed Consolidated Statements of Legacy Xos Preferred Stock and Stockholders’ Equity (Deficit)
Unaudited
(in thousands)
Legacy Xos
Preferred Stock		Common StockAdditional Paid-in Capital
Accumulated
Deficit
(As restated)(1)
Accumulated Other Comprehensive Loss
Total
Stockholders’
Equity (Deficit)
(As restated)(1)
SharesAmountShares
Par Value
Balance at December 31, 2021
— $— 163,137 $16 $178,851 $(4,093)$(381)$174,393 
Stock based compensation expense— — — — 1,068 — — 1,068 
Issuance of common stock for vesting of restricted stock units— — 133 — — — — — 
Shares withheld related to net share settlement of stock-based awards— — (36)— (97)— — (97)
Issuance of common stock for commitment shares under the Standby Equity Purchase Agreement— — 19 — 62 — — 62 
Net and comprehensive loss— — — — — (24,030)(826)(24,856)
Balance at March 31, 2022 (As restated)(1)
— — 163,253 16 179,884 (28,123)(1,207)150,570 
Stock options exercised— — 385 — 1 — — 1 
Stock based compensation expense— — — — 1,407 — — 1,407 
Issuance of common stock for vesting of restricted stock units— — 89 — — — — — 
Shares withheld related to net share settlement of stock-based awards— — (33)— (86)— — (86)
Issuance of common stock under the Standby Equity Purchase Agreement— — 1,810 1 4,310 — — 4,311 
Net and comprehensive loss— — — — — (9,646)(150)(9,796)
Balance at June 30, 2022 (As restated)(1)
— — 165,504 17 185,516 (37,769)(1,357)146,407 
Stock options exercised— — 4 — 1 — — 1 
Stock based compensation expense— — — — 1,343 — — 1,343 
Issuance of common stock for vesting of restricted stock units— — 441 — — — — — 
Shares withheld related to net share settlement of stock-based awards— — (69)— (111)— — (111)
Conversion of convertible notes— — 202 — 265 — — 265 
Issuance of restricted stock— — 350 — — — — — 
Net and comprehensive income (loss)— — — — — (19,962)141 (19,821)
Balance at September 30, 2022 (As restated)(1)
— $— 166,432 $17 $187,014 $(57,731)$(1,216)$128,084 
___________
(1) For discussion on the restatement adjustments, see Note 2 – Basis of Presentation and Summary of Significant Accounting Policies – Restatement of Unaudited Condensed Consolidated Financial Statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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Xos, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Unaudited
(in thousands, unaudited)
Nine Months Ended September 30,
2022
(As restated)(1)
2021
OPERATING ACTIVITIES:
Net income (loss)
$(53,638)$11,962 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation1,193 628 
Amortization of right-of-use assets
1,188 — 
Amortization of debt discounts and issuance costs768 — 
Amortization of insurance premiums362 — 
Inventory write-downs
5,300 — 
Write off of subscription receivable— 379 
Realized loss on debt extinguishment
— 14,104 
Change in fair value of derivative instruments
(9,125)(6,030)
Change in fair value of earn-out shares liability(24,148)(48,202)
Net realized losses on marketable debt securities, available-for-sale
147 — 
Stock-based compensation expense3,751 5 
Other non-cash items
1,496 — 
Changes in operating assets and liabilities:
Accounts receivable(812)(175)
Inventories(35,615)(18,967)
Prepaid expenses and other current assets(1,441)(17,784)
Other assets(1,094)(505)
Accounts payable(5,399)11,300 
Other liabilities
11,470 150 
Net cash used in operating activities(105,597)(53,135)
INVESTING ACTIVITIES:
Purchase of property and equipment(11,898)(3,343)
Proceeds from sales and maturities of marketable debt securities, available-for-sale
87,413 — 
Net cash provided by (used in) investing activities
75,515 (3,343)
FINANCING ACTIVITIES:
Proceeds from reverse merger, net— 20,721 
Proceeds from PIPE investment— 196,000 
Proceeds from issuance of shares of Legacy Xos Preferred Stock— 31,757 
Proceeds from subscription receivable – preferred— 2,430 
Proceeds from exercise of Legacy Xos Preferred Stock warrant— 2,715 
Proceeds from short-term insurance financing note3,627 — 
Payment for short-term insurance financing note(567)— 
Proceeds from issuance of convertible notes54,300 — 
Debt issuance costs(167)— 
Principal payment of equipment loans(835)(126)
Taxes paid related to net share settlement of stock-based awards(294)— 
Proceeds from stock option exercises2 10 
Proceeds from issuance of common stock under Standby Equity Purchase Agreement4,310 — 
Net cash provided by financing activities60,376 253,507 
Net increase in cash, cash equivalents and restricted cash
30,294 197,029 
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Cash, cash equivalents and restricted cash, beginning of period
19,176 10,359 
Cash, cash equivalents and restricted cash, end of period
$49,470 $207,388 
Reconciliation of Cash, Cash Equivalents and Restricted Cash to Unaudited Condensed Consolidated Balance Sheets:
Cash and cash equivalents
$46,433 $207,388 
Restricted cash
3,037 — 
Total cash, cash equivalents and restricted cash
$49,470 $207,388 
Supplemental disclosure of non-cash investing and financing activities
Purchase of property and equipment in accounts payable$577 $— 
Recognition of ROU asset and lease liabilities upon ASC 842 adoption at 1/1/2022$7,682 $— 
ROU asset obtained in exchange for operating lease obligations$437 $— 
Accrued debt issuance costs$237 $— 
Conversion of notes payable and accrued interest to Common Stock$(265)$— 
Conversion of notes payable to redeemable convertible preferred stock:
Issuance of Legacy Xos Preferred Stock$— $34,918 
Conversion of interest payable on convertible notes$— $2,453 
Conversion of notes payable into Legacy Xos Preferred Stock$— $21,540 
Fair value adjustment of related party debt at conversion    $— $3,763 
Non-cash activities relating to the reverse merger:
Conversion of Legacy Xos Preferred Stock into Common Stock$— $79,708 
Assumption of Public and Private Warrants$— $17,891 
Recognition of earn-out shares liability$— $101,744 
Transaction costs relating to the reverse merger offset against additional paid-in capital$— $55,424 
____________
(1) For discussion on the restatement adjustments, see Note 2 – Basis of Presentation and Summary of Significant Accounting Policies – Restatement of Unaudited Condensed Consolidated Financial Statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited

Note 1— Description of Business

Xos, Inc. and its wholly owned subsidiaries (collectively, the “Company” or “Xos”) is a mobility solutions company. Xos manufactures Class 5 to 8 battery-electric commercial vehicles, facilitates fleet transition from traditional internal combustion engine vehicles to electric vehicles, and enables electric fleets to better manage their fleet operations through a portfolio of management tools. Xos developed the X-Platform (its proprietary, purpose-built vehicle chassis platform) and the X-Pack (its proprietary battery system) specifically for the medium- and heavy-duty commercial vehicle segment with a focus on last-mile commercial fleet operations. Xos’ “Fleet-as-a-Service” package offers customers a comprehensive suite of commercial products and services to facilitate electric fleet operations and seamlessly transition their traditional combustion-engine fleets to battery-electric vehicles.

Xos Fleet, Inc. (“Legacy Xos”), the new legal entity name of the legacy Xos operating entity and Xos Services, Inc. (“Xos Services”, formerly Rivordak, Inc.), the subsidiary holding a California dealer license to sell Xos vehicles, are wholly owned subsidiaries of Xos, Inc., and make up 100% of the operations of the Company.

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”). As a result, Xos became the publicly traded entity listed on the Nasdaq Global Market.

Emerging Growth Company

Section 102(b)(1) of the Jumpstart its Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement declared effective pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard, until such time the Company is no longer considered to be an emerging growth company. At times, the Company may elect to early adopt a new or revised standard.

Negative global economic conditions, which the COVID-19 pandemic and the military conflict between Russia and Ukraine have contributed to, have impacted the Company’s ability to source certain critical inventory items. The series of restrictions imposed and the speed and nature of the recovery in response to the pandemic have placed burdens on the Company’s supply chain management.

Despite supply chain disruptions, the Company has continued to source inventory for its vehicles and its purchasing team has been working with vendors to find alternative solutions to areas where there are supply chain constraints, and where appropriate and critical, has placed orders in advance of projected need to ensure inventory is able to be delivered in time for production plans.

Inflation and Other Risks

The Company is exposed to a variety of market and other risks, including the effects of changes in interest rates and inflation, as well as risks to the availability of funding sources, hazard events, and specific asset risks. The U.S. economy is experiencing
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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
broad and rapid inflation. The Company monitors inflation and the effects of changing prices. Inflation increases the cost of goods and services used. If the Company’s costs were to become subject to significant inflationary pressures, the Company may not be able to fully offset these higher costs through price increases or mitigate the impact through alternative solutions.

Note 2— Basis of Presentation and Summary of Significant Accounting Policies

The following is a summary of the significant accounting policies consistently applied in the preparation of the accompanying unaudited condensed consolidated financial statements:

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“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, Legacy Xos and Xos Services. All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, all adjustments (primarily consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. 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, 2021 and 2020 presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 30, 2022.

Restatement of Condensed Consolidated Financial Statements

Subsequent to the original issuance of the interim financial statements for the quarterly period ended September 30, 2022 on November 10, 2022, management determined, upon further analysis, that the Company’s previously issued unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2022 should be restated due to (1) errors in recording results of a physical inventory count, which caused inventories to be overstated and cost of goods sold to be understated for the nine months ended September 30, 2022, and (2) errors in the improper recording of duplicate inventory receipts as well as improper and inaccurate recording of prepaid inventories, which caused inventories, prepaid inventories (included within Prepaid expenses and other current assets) and accrued expenses (included within Other current liabilities) to be overstated for the three and nine months ended September 30, 2022.

In addition, the Company is also adjusting its previously issued financial statements for the correction of an immaterial error related to its Convertible Debentures. Subsequent to the original issuance of the interim financial statements, management determined, upon further analysis, that an embedded feature contained within both of its Convertible Debentures issued during the three months ended September 30, 2022 did not qualify for a scope exception to derivative treatment under ASC 815-40 as the feature, on a stand-alone basis, would not be classified within stockholders’ equity. As such, the feature should have been bifurcated from its respective host debt contract and derivative liabilities at fair value (and corresponding discount) should have been recorded at inception of the debentures. Additionally, the derivative liabilities should have been subsequently revalued as of September 30, 2022 with changes in fair value recognized in income.

The following tables reflect the impact of the restatement adjustments to the specific line items presented in our previously issued financial statements for the periods indicated (in thousands, except per share amounts):
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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited

September 30, 2022
Condensed Consolidated Balance SheetAs Previously ReportedAdjustmentsAs Restated
Inventories$66,306 $(4,297)$62,009 
Prepaid expenses and other current assets20,054 (4,390)15,664 
Total current assets199,680 (8,687)190,993 
Total assets226,236 (8,687)217,549 
Other current liabilities20,760 (5,682)15,078 
Total current liabilities25,999 (5,682)20,317 
Convertible debt, net53,722 (7,063)46,659 
Derivative liabilities— 3,788 3,788 
Total liabilities98,422 (8,957)89,465 
Accumulated deficit(58,001)270 (57,731)
Total stockholders' equity127,814 270 128,084 
Total liabilities and stockholders' equity$226,236 $(8,687)$217,549 


Three Months Ended September 30, 2022
Condensed Consolidated Statement of Operations and Comprehensive LossAs Previously ReportedAdjustmentsAs Restated
Cost of goods sold$21,777 $(18)$21,759 
Gross loss(10,769)18 (10,751)
Loss from operations(31,157)18 (31,139)
Other expense, net(642)(692)(1,334)
Change in fair value of derivative instruments1,890 3,967 5,857 
Loss before provision from income taxes(23,255)3,293 (19,962)
Net (loss) income(23,255)3,293 (19,962)
Total comprehensive (loss) income$(23,114)$3,293 $(19,821)
Net loss per share
Basic$(0.14)$0.02