Xos(US:XOS)2025-08-13 20:11Part I - Financial Information Forward-Looking Statements and Risk Factors This section details forward-looking statements and risks, including substantial doubt about the company's going concern ability, historical losses, and material internal control weaknesses - The company explicitly states there is substantial doubt about its ability to continue as a going concern for the next 12 months9 - Xos has a history of losses, has not achieved positive operating cash flow, and requires significant additional capital to fund its business plans9 - The company has identified material weaknesses in its internal control over financial reporting, which could lead to misstatements in financial reports9 - A significant portion of revenue is derived from a small number of customers, posing a concentration risk10 - The company holds a $20.0 million convertible note, which had a maturity date of August 11, 2025, but was subsequently modified to be paid in quarterly installments from November 2025 through February 20289 Item 1. Financial Statements (Unaudited) Unaudited Q2 2025 financial statements reveal decreased cash and assets, mixed revenue, continued net losses, and significant liquidity issues raising going concern doubts Condensed Consolidated Balance Sheets Selected Balance Sheet Data (in thousands) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $8,785 | $10,996 | ($2,211) | | Accounts receivable, net | $18,089 | $26,870 | ($8,781) | | Inventories | $31,012 | $36,567 | ($5,555) | | Total current assets | $66,634 | $82,301 | ($15,667) | | Total assets | $80,349 | $98,333 | ($17,984) | | Convertible debt, current | $4,494 | $19,970 | ($15,476) | | Convertible debt, non-current | $15,500 | $0 | $15,500 | | Total liabilities | $62,021 | $64,723 | ($2,702) | | Total stockholders' equity | $18,328 | $33,610 | ($15,282) | Condensed Consolidated Statements of Operations and Comprehensive Loss Operating Results Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $18,393 | $15,535 | +18.4% | $24,272 | $28,697 | -15.4% | | Gross Profit | $1,619 | $2,030 | -20.2% | $2,830 | $4,818 | -41.3% | | Loss from operations | ($7,081) | ($11,368) | +37.7% | ($16,350) | ($21,611) | +24.3% | | Net loss | ($7,505) | ($9,663) | +22.3% | ($17,691) | ($20,666) | +14.4% | | Net loss per share (basic) | ($0.91) | ($1.23) | +26.0% | ($2.16) | ($2.96) | +27.0% | Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | ($111) | ($40,576) | $40,465 | | Net cash provided by investing activities | $0 | $51,199 | ($51,199) | | Net cash used in financing activities | ($2,100) | ($1,577) | ($523) | | Net (decrease) increase in cash | ($2,211) | $9,046 | ($11,257) | - Cash used in operating activities decreased dramatically to $0.1 million in H1 2025 from $40.6 million in H1 2024, primarily due to favorable changes in working capital, including a significant decrease in accounts receivable33228 - Investing activities in H1 2024 included $51.4 million in net cash acquired from the ElectraMeccanica acquisition, with no similar activity in H1 202533 Notes to Condensed Consolidated Financial Statements Notes detail business context, the ElectraMeccanica acquisition, and significant risks, highlighting liquidity issues, going concern doubts, revenue sources, debt, and a convertible note amendment - On March 26, 2024, the company acquired ElectraMeccanica, which supplemented liquidity by approximately $50.2 million in cash, accounted for as an asset acquisition4076 - Management concluded it is not probable that available funds and strategies will provide sufficient liquidity for the next twelve months, resulting in substantial doubt about the company's ability to continue as a going concern4751 - Customer concentration risk is high: for Q2 2025, one customer accounted for 70% of revenues, and two customers accounted for 48% and 11% of accounts receivable6667 Disaggregated Revenues by Major Source (in thousands) | Revenue Source | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Stepvans & vehicle incentives | $17,087 | $13,146 | $20,671 | $24,731 | | Powertrains & hubs | $930 | $1,423 | $2,522 | $1,845 | | Other product revenue | $152 | $642 | $619 | $1,270 | | Ancillary revenue | $224 | $324 | $460 | $851 | | Total revenues | $18,393 | $15,535 | $24,272 | $28,697 | - Subsequent to the quarter end, on August 8, 2025, the company amended its $20.0 million convertible note, changing the repayment schedule from a single maturity to ten quarterly installments from November 2025 to February 2028, with approximately $6.0 million in accrued interest to be converted into common stock159161 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 revenue growth and H1 decline, significant operating expense reductions, and reiterates severe liquidity constraints and going concern doubts requiring additional capital Overview Unit Deliveries by Period | Period | Vehicles | Hubs | Powertrains | | :--- | :--- | :--- | :--- | | Q2 2025 | 128 | 3 | 4 | | Q2 2024 | 78 | 4 | 8 | | H1 2025 | 150 | 8 | 6 | | H1 2024 | 138 | 4 | 10 | - The company's ability to access capital is critical, and failure to raise additional funds could force it to delay or eliminate programs, or potentially dissolve and liquidate under bankruptcy laws181182 Results of Operations - Q2 2025 revenue increased 18% YoY to $18.4 million, driven by a higher volume of vehicle sales (128 vs. 78), partially offset by a lower average selling price due to product mix199 - H1 2025 revenue decreased 15% YoY to $24.3 million, primarily due to a change in product mix resulting in a lower average selling price, despite a slight increase in vehicle deliveries (150 vs. 138)200 - Total operating expenses for Q2 2025 decreased by 35% YoY to $8.7 million, reflecting significant cost reductions in G&A (-36%), R&D (-30%), and S&M (-42%), mainly due to lower headcount and personnel costs198206208210 Liquidity and Capital Resources - As of June 30, 2025, the company had $8.8 million in cash and cash equivalents and an accumulated deficit of $221.1 million219 - Management's analysis concludes there is substantial doubt about the company's ability to continue as a going concern through the next 12 months due to recurring losses, cash outflows, and the need for significant additional capital220221 - Access to the $119.4 million remaining under the Standby Equity Purchase Agreement (SEPA) is not currently available and requires a post-effective amendment to its registration statement to be filed and declared effective222225 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Xos is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, Xos is exempt from the requirement to provide information for this item240 Item 4. Controls and Procedures Disclosure controls and procedures were ineffective as of June 30, 2025, due to material weaknesses in inventory, revenue, and IT controls, stemming from turnover and insufficient resources - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were not effective as of June 30, 2025242 - Material weaknesses were identified in three areas: inventory management, revenue recognition, and information technology (IT) general controls246 - The root cause of the weaknesses is attributed to turnover in key positions and a lack of sufficient personnel with the appropriate knowledge and experience due to cost-reduction efforts246 - Remediation efforts are underway, including adding qualified resources, improving training, and partnering with external consultants, with a target to remediate the weaknesses during the year ending December 31, 2025249251 Part II - Other Information Item 1. Legal Proceedings The company is not currently involved in any legal proceedings that would materially impact its business or financial condition - As of the filing date, the company is not involved in any material legal proceedings252 Item 1A. Risk Factors No material changes to the company's risk factors have occurred since the December 31, 2024, Annual Report on Form 10-K filing - No material changes to risk factors were reported for the quarter253 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued unregistered common stock and cash on August 1, 2025, to settle approximately $348,000 in debt owed to The Bancorp Bank, N.A - On August 1, 2025, the company issued 64,043 unregistered shares of common stock as part of a settlement agreement with The Bancorp, Inc. to resolve approximately $348,000 in debt254 Item 5. Other Information This section details post-quarter events, including the amendment of a $20 million convertible note with Aljomaih and the formal appointment of Liana Pogosyan as CFO and Treasurer - On August 8, 2025, the company amended its convertible note with Aljomaih, changing the principal repayment from a lump sum on August 11, 2025, to ten quarterly installments ending February 11, 2028257258 - As part of the note amendment, approximately $6.0 million of interest accrued through August 11, 2025, will be converted into shares of the company's common stock257 - Effective August 10, 2025, Liana Pogosyan was appointed as the company's Chief Financial Officer and Treasurer, having served as Acting CFO since May 2023260