Xos(XOS) - 2023 Q1 - Quarterly Report

Part I - Financial Information Item 1. Financial Statements (Unaudited) Presents the company's unaudited condensed consolidated financial statements for the first quarter of 2023 Condensed Consolidated Balance Sheets Total assets decreased to $162.2 million as of March 31, 2023, reflecting a decline in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $36,489 | $35,631 | | Marketable debt securities | $27,528 | $50,648 | | Inventories | $57,007 | $57,540 | | Total Assets | $162,215 | $189,936 | | Convertible debt, current & non-current | $39,517 | $46,719 | | Total Liabilities | $72,464 | $77,861 | | Total Stockholders' Equity | $89,751 | $112,075 | Condensed Consolidated Statements of Operations and Comprehensive Loss Revenues decreased to $4.7 million in Q1 2023, though the net loss remained stable at $24.3 million Q1 2023 Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Revenues | $4,697 | $7,031 | | Cost of goods sold | $5,574 | $13,030 | | Gross loss | ($877) | ($5,999) | | Total operating expenses | $19,152 | $20,299 | | Loss from operations | ($20,029) | ($26,298) | | Net loss | ($24,331) | ($24,030) | | Net loss per share (Basic & Diluted) | ($0.14) | ($0.15) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $15.3 million, with a net cash decrease of $2.2 million Q1 2023 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($15,326) | ($31,304) | | Net cash provided by investing activities | $22,812 | $27,153 | | Net cash used in financing activities | ($9,672) | ($181) | | Net decrease in cash | ($2,186) | ($4,332) | Notes to Unaudited Condensed Consolidated Financial Statements Details the company's accounting policies, financial statement items, and key business risks and liquidity - Xos is a fleet electrification solutions provider for Class 5-8 commercial vehicles, offering vehicles, charging infrastructure (Xos Energy Solutions™), and fleet management software (Xosphere™)[35] - The company faces risks from capital market volatility, inflation, interest rate increases, and supply chain disruptions but believes existing cash resources of $64.0 million are sufficient for the next 12 months[37][44][45] Disaggregated Revenues (in thousands) | Revenue Source | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Stepvans & vehicle incentives | $4,262 | $6,863 | | Powertrains | $5 | $14 | | Fleet-as-a-Service | $166 | $95 | | Ancillary revenue | $264 | $59 | | Total revenues | $4,697 | $7,031 | - The company has convertible debentures with Yorkville ($24.0M principal outstanding) and a convertible promissory note with Aljomaih ($20.0M principal outstanding) as of March 31, 2023[92][101] - On December 28, 2022, the company received a deficiency letter from Nasdaq for its stock price falling below the $1.00 minimum bid price requirement[111] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses a 33% year-over-year revenue decrease, improved gross loss, and sufficient liquidity for the next 12 months Results of Operations Q1 2023 revenue fell 33% to $4.7 million due to lower unit sales, but gross loss improved significantly Comparison of Operations for the Three Months Ended March 31 (in thousands) | Metric | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $4,697 | $7,031 | ($2,334) | (33%) | | Gross loss | ($877) | ($5,999) | $5,122 | (85%) | | Loss from operations | ($20,029) | ($26,298) | $6,269 | (24%) | | Net Loss | ($24,331) | ($24,030) | ($301) | 1% | - The decrease in revenue was primarily due to a decrease in unit sales (30 stepvans in Q1 2023 vs. 56 in Q1 2022), partially offset by a higher average selling price[207] - The significant decrease in cost of goods sold was attributed to lower product revenue, a $1.5 million decrease in inventory reserves, and a $1.3 million decrease in unfavorable physical inventory count adjustments[208] Liquidity and Capital Resources The company holds $64.0 million in liquid assets, which management deems sufficient for the next 12 months - Principal sources of liquidity as of March 31, 2023, were cash and marketable securities aggregating to $64.0 million[219] - Management believes existing cash resources are sufficient to support planned operations for the next 12 months[220] - The company plans to seek stockholder approval to issue shares exceeding Nasdaq limits under its SEPA and convertible debt agreements, which is necessary to fully access these capital sources[224] Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($15,326) | ($31,304) | | Net cash provided by investing activities | $22,812 | $27,153 | | Net cash used in financing activities | ($9,672) | ($181) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to interest rate risk on its investment portfolio and broader inflation risk - The company's primary market risks are from changes in interest rates and inflation[243] Interest Rate Sensitivity on Investment Portfolio (as of March 31, 2023) | Change in Interest Rate | Approximate Change in Fair Value | | :--- | :--- | | 1% Increase | ($65,000) | | 1% Decrease | $65,000 | - Inflation increases the cost of goods and services, and an inability to offset these higher costs could harm the business's financial condition and results of operations[246] Item 4. Controls and Procedures Disclosure controls were deemed ineffective due to a material weakness in internal controls over inventory management - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were not effective as of March 31, 2023[248][249] - A material weakness in internal controls related to the ineffective operation of controls over inventory management has been identified[253] - Remediation efforts are underway, including adding internal controls, implementing new software tools, and partnering with external consultants, with the company expecting to remediate the weakness during the year ended December 31, 2023[255] Part II - Other Information Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings - As of the reporting date, the company is not involved in any material legal proceedings[258] Item 1A. Risk Factors No material changes to risk factors have occurred since the 2022 Annual Report - No material changes to risk factors have occurred since the filing of the 2022 Form 10-K[259] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[260] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[261] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[262] Item 5. Other Information The company reported no other information for the period - None[263] Item 6. Exhibits Lists the exhibits filed with the Form 10-Q, including certifications and XBRL data - Exhibits filed include corporate governance documents, officer certifications (Rule 13a-14(a) and 13a-14(b)), and XBRL interactive data files[265]