XOS 10-K & 10-Q changes, risk factors and insider trading

As an early-stage growth company, our ability to access capital is critical. Unless 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. Our ability to access 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.

Additional equity financing may not be available on favorable terms or at all and, if available, could be dilutive to current stockholders. Our ability to access the SEPA (as defined below) iswas not available unlessextended and until a post-effective amendment to the Registration Statement on Form S-1 filed on July 27, 2023 is filed with the SEC and declared effective and other applicable conditions are met. Moreover, such registration statement only registers the resale of 3,333,333 shares of Common Stock, which is insufficient for us to fully utilize the remaining commitment under the SEPA, given the current market price of our Common Stock. Furthermore, unless extended by mutual agreement of the parties, the SEPA is scheduled to terminateterminated on February 11, 2026. Debt financing, if available, may involve restrictive covenants and dilutive financing instruments. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our Common Stock to decline. Moreover, the Convertible Note (as defined below) in the initial principal amount of $20.0 million, has $17.0 million principal outstanding as of March 26, 2026, which will need to be repaid outin quarterly installments from May 11, 2026 through February 11, 2028. Pursuant to General Instruction I.B.6 of ourForm availableS-3, cashthe onaggregate Augustdollar 11,amount 2025,of unlessCommon converted,Stock extendedwe orcan refinanced.sell pursuant to the ATM Offering (as defined below) in any 12-month period is limited. Furthermore, we are unable to sell shares in the ATM Offering at any time that we are in possession of material non-public information.

Global general economic and political conditions, such as a potential recession, inflation, uncertain credit 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, and geopolitical events such as local and national elections, corruption, political instability and tensions and acts of war or military conflict including repercussions of the wars between Russia and Ukraine and in Israel, terrorism, conflicts with Iran or tensions with China and related sanctions and export control restrictions, have and could continue to adversely impact our ability to raise additional funds, among other things.

Since inception, we financed our operations primarily from the sales of shares of Common Stock, the Business Combination, the SEPA, the ElectraMeccanica acquisitionacquisition, the ATM Offering and the issuance of debt. As of December 31, 2024,2025, our principal sources of liquidity were cash and cash equivalents aggregating to $11.0$14.0 million (including cash acquired pursuant to the Arrangement with ElectraMeccanica, which closed on March 26, 2024).

We currently derive a significant portion of our revenue from a small number of customers, and this trend may continue for the foreseeable future. During the year ended December 31, 2024,2025, threeone customerscustomer accounted for 13%, 11%, and 10%, respectively,54% of the Company’s revenue. The loss of any one of our significant customers, a reduction in the purchases of our products by such customers or the cancellation of significant purchases by any of these customers would reduce our revenue and could harm our ability to achieve or sustain expected results of operations, and a delay of significant purchases, even if only temporary, would reduce our revenue in the period of the delay. Any such reduction in revenue may also impact our cash resources available for other purposes, such as research and development.

Our mix of offerings, such as the Xos Hub and Xosphere™,offerings is novel in the industry and has yet to be tested in the long term. Any failure to commercialize our strategic plans could have a material adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.

We have entered and may continue to enter into agreements, purchase orders, letters of intent and memorandums of understanding (“MOUs”) or similar agreements for the sale of our products that include various cancellation rights in favor of the customer. For example, we have entered into binding distribution and purchase agreements for the purchase of vehicles; however, they are subject to the further entry into a definitive agreement with final pricing, warranty coverage and other terms. These purchase obligations may also be canceled by the customer with six months’ written notice. As a result, we cannot assureensure that we will be able to enter into a definitive agreement or that our customers will not exercise their cancellation rights. In addition, we have entered and may continue to enter into purchase orders, letters of intent and memorandums of understanding or similar agreements that are not binding on our customer and may also be subject to modification and cancellation provisions. Any of these adverse actions related to these agreements, purchase orders, letters of intent, memorandums of understanding or any future customer contracts could harm our business, prospects, financial condition and operating results.

We have entered into MOUs with certain key manufacturers, suppliers and development partners to form strategic alliances with such third-parties, and may in the future enter into additional strategic alliances or joint ventures or minority equity investments, in each case with various third-parties for the manufacture of our products. There is no guarantee that any of our MOUs will lead to any binding agreements or lasting or successful business relationships with such key suppliers and development partners. If these strategic alliances are established, they may subject us to several risks, including risks associated with sharing proprietary information, non-performance by the third-party and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of these third-parties and, to the extent that any of these strategic third-parties suffer negative publicity or harm to their reputation from events relating to our business, we may suffer negative publicity or harm to our reputation by virtue of our association with any such third-party.

Our delayDelays in providingdeployment of sufficient charging solutions for our vehicles has resulted in the delay of the delivery of vehicles to customers.

Our delayDelays in providingdeployment of sufficient charging solutions for our vehicles has resulted in the delay of the delivery of vehicles to customers. Demand for our vehicles and the customer’s willingness to take delivery depends in large part on the availability of charging infrastructure. Most vehicles in our targeted segments operate on last-mile routes that generally return to base hubs on a daily basis, and fleet operators may choose to purchase fewer Xos vehicles, or none at all, if they are unable to install sufficient dedicated charging infrastructure. We have experienced customers delaying or declining delivery of vehicles due to a lack of charging infrastructure. Our charging solutions now being offered, including the Hub may not be sufficient to meet customer needs. Our efforts to install, configure and implement dedicated charging solutions have been affected by numerous factors, such as;

•our ability to hire skilled employees, or train new employees,employees or engage contractors, that are qualified to install and/or service electric vehicle charging systems; and

Our business and prospects depend significantly on our ability to build theour Xos brand.brands. We may not successfully establish, maintain and strengthen the Xos brand,brand or any other brands, and our brand and reputation could be harmed by negative publicity regarding Xos or our products.

Our business and prospects are heavily dependent on our ability to develop, maintain and strengthen theour Xos brand.brands. If we do not establish, maintain and strengthen our brand,brands, we may lose the opportunity to build a critical mass of customers, and our business, prospects, financial condition and operating results may be materially and adversely affected.

Promoting and positioning our brandbrands will likely depend significantly on our ability to provide high-quality products and engage with our existing and potential customers as intended, and we have limited experience in these areas. In addition, our ability to develop, maintain and strengthen the Xos brand or any other brands will depend heavily on the success of our customer development and branding efforts. Our target customers may be reluctant to acquire products from a new and unproven company such as Xos. In addition, our novel technology and design may not align with target customer preferences. If we do not develop and maintain a strong brand,brands, our business, prospects, financial condition and operating results will be materially and adversely impacted.

In addition, if negative incidents relating to our products occur or are perceived to have occurred, whether or not such incidents are our fault, we could be subject to adverse publicity. In particular, given the popularity of social media, any negative publicity, whether true or not, could quickly proliferate and harm consumer perceptions and confidence in theour Xos brand.brands. Furthermore, there is the risk of potential adverse publicity related to our manufacturing or other partners whether or not such publicity is related to their collaboration with us. Our ability to successfully position our brandbrands could also be adversely affected by perceptions about the quality of our competitors’ products.

•expanding our product offering across products, as well as services such as energy services and Xosphere™;

As of December 31, 2024,2025, we had 109101 employees (including 99 full-time employees) and 2134 contractors. We intend to strategically hire personnel across a variety of functions as business needs arise. However, we may have difficulties hiring qualified personnel at times, such as during challenging labor markets. Because our vehicles and powertrains are based on a different technology platform than traditional internal combustion engines, individuals with sufficient training and experience in alternative fuel technologies may not be available to hire, and as a result, we may need to expend significant time and expense training newly hired employees. Competition for individuals with experience designing, manufacturing and servicing vehicles and powertrains and their software is intense, and we may not be able to attract, integrate, train, motivate or retain sufficient highly qualified personnel. The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm our business, prospects, financial condition and operating results.

Our customers will also depend on our customer support team to resolve technical and operational issues relating to the integrated software underlying our products. As we continue to grow, additional pressure may be placed on our customer support team or partners, and we may be unable to respond quickly enough to accommodate short-term increases in customer demand for technical support. We also may be unable to modify the future scope and delivery of our technical support to compete with changes in the technical support provided by our competitors. Increased customer demand for support, without corresponding revenue, could increase costs and negatively affect our operating results. If we are unable to establish a reputation for providing high-quality support or otherwise successfully address the service requirements of our customers, our brand may be harmed and we may be subject to claims from our customers, including loss of revenue or damages, and our business, prospects, financial condition and operating results may be materially and adversely affected.

The charges and expenditures that we expect to incurincurred in connection with these cost-cutting measures, and timing thereof, are subject to a number of assumptions, including local law requirements in various jurisdictions, and weour actual costs may incur costs that arebe greater than we currently expect in connection with these activities. The cost-cutting measures may yield unintended consequences and costs, such as the loss of institutional knowledge and expertise, employee attrition beyond our intended reductions in force, and a reduction in morale among our remaining employees, all of which may have a material adverse effect on our business, results of operations or financial condition. Furthermore, these cost-cutting measures could place substantial demands on our management and remaining employees, which could lead to the diversion of attention from other business priorities. In addition, while we eliminated certain positions in connection with the reduction in force, certain functions necessary to our operations remain, and we may be unsuccessful in distributing the duties and obligations of departed employees among our remaining employees or to external service providers, which could result in disruptions to our operations. We may also discover that the workforce reductions will make it difficult for us to pursue new opportunities and initiatives and require us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses. To compensate for reductions in salary for affected employees, we may incur additional unanticipated stock-based compensation expense and related dilution.

We have yet to achieve positive operating cash flow for a full year and, given our projected funding needs, ourOur ability to generate or maintain positive cash flow is uncertain.

WeFor the first time, we had negativepositive cash flow from operating activities of $48.8$5.4 million for a full fiscal year for the year ended December 31, 2024.2025. OurWe expect our business also will at times require significant amounts of working capital to support our expectedplanned future growth and expansion of products. An inability to generate and maintain positive cash flow for the near term may adversely affect our ability to raise needed capital for our business on reasonable terms or at all, diminish supplier or customer willingness to enter into transactions with us, and/or have other adverse effects that may decrease our long-term viability. There can be no assurance that we will achieve or maintain positive cash flow in the near future or at all.

Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business model, as well as restrictions arising from our existing debt securities (see “—Risks Related to our Indebtedness—We have incurred substantial debt, which could impair our flexibility and access to capital and adversely affect our financial position, and our business would be adversely affected if we are unable to service our debt obligations and are subject to default”). In addition, our ability to access funds potentially available underin the SEPAATM Offering is limited byin variousthe dollar amount we can raise in any 12-month period, and in that we are unable to sell shares in the ATM Offering at any time that we are in possession of material non-public information. These factors, including,as butwell not limited to,as the availabilitymarket offor an effective registration statement permitting the resale of shares ofour Common Stock issuable thereunder. In particular, the Company’s access to the SEPA is not available as of the date of this Report and will not be available unless and until the Company files with the SEC a post-effective amendment to the applicable registration statement. Moreover, unless extended by mutual agreement of the parties, the SEPA is scheduled to expire on February 11, 2026. These factorsStock, may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient capital, we may have to significantly reduce our spending, delay or cancel our planned activities or substantially change our corporate structure. We may not be able to obtain any funding, and we may not have sufficient resources to conduct our business as projected, both of which could mean that we would be forced to curtail or discontinue our operations.

Any reduction, elimination or discriminatory application of government subsidies and economic incentives due to policy changes, the reduced push for such subsidies and incentives due to the perceived success of the electric vehicle industry or other reasons may increase the net cost to consumers of electric vehicles and related products and result in diminished demand for, and competitiveness of, alternative fuel and electric vehicles (including our products). Our business model currently relies, in part, on the availability of federal tax credits used by our customers to offset the incremental cost of purchasing electric vehicles. While certain tax credits and other incentives for alternative energy production, alternative fuel vehicles and electric vehicles have been available in the past, there is no guarantee these programs will be available in the future. Support for, and opposition to, such subsidies and incentives are subject to political forces and fiscal changes. For example, the current U.S. presidential administration has issued a policy statement aimed at eliminating the “electric vehicle mandate,” which targets state emissions waivers and governmental subsidies. CorrespondingFor example, the One Beautiful Bill Act signed on July 4, 2025 made certain credits provided by the Inflation Reduction Act of 2022, which were applicable to our products, no longer available for vehicles not acquired or placed in service on or before September 30, 2025. Additional legislation and/or executive orders may be furtherenacted or issued to implement this stated policy. Any reduction, elimination or selective application of tax and other governmental programs and economic incentives because of policy changes, the reduced need for such programs due to the perceived success of the electric vehicle, fiscal tightening or other reasons may result in the diminished competitiveness of the electric vehicle industry generally or our electric vehicles in particular, which would adversely affect our business, prospects, financial condition and results of operations. If current government subsidies and economic incentives, such as credits under the Inflation Reduction Act, are not available in the future, the affordability and attractiveness of our products and our business, prospects, financial position and results of operations could be materially and adversely affected.

We have incurred losses during our history and may never achieve profitability. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire. As of December 31, 2024,2025, we had federal and state income tax net operating loss carryforwards of $505.4$598.0 million. This consists of approximately $233.2$284.8 million of federal net operating loss carryovers, and approximately $272.2$313.2 million of state net operating loss carryovers. The federal net operating loss carryovers have an indefinite carryforward period, and the state net operating loss carryovers maybegin to expire betweenin 2036 and 2044.2036.

As disclosed in our prior year Annual Report on our Form 10-K for the year ended December 31, 2023,2024, we identified material weaknesses in internal controls related to the ineffective operation of controls related to inventory management, revenue recognition, and information technology (“IT”) general controls. As of December 31, 2025, we completed remediation efforts to address the material weaknesses related to inventory management and revenueIT recognition.general Furthermore,controls. duringDuring the financial reporting close process for the year ended December 31, 2024,2025, managementwe identifiedcontinue to identify material weaknesses in the design and operation of our internal controls over financialrevenue reportingrecognition. We also identified additional material weaknesses related to threethe areas,timeliness specifically,of inventoryrecording management, revenue recognition,supplier and informationvendor technologyaccruals, (“IT”)including generalinstances controls.in which accruals were not properly recorded due to deficiencies in the identification and evaluation of vendor contract terminations. We believe these material weaknesses wereresulted causedfrom bylimited turnoverresources ofwithin accounting,our accounting and operations andfunctions, ITwhich positionsrestricted withinour the Company’s organization, resulting in the inability of Company accounting personnel who have recently assumed new and additional responsibilities,ability to timely identify, evaluateevaluate, and address technical accounting and disclosure matters thataffecting affect ourthe consolidated financial statements on a timely basis.statements. Management has determined that these deficiencies are related to insufficient internal resources in technical accounting and financial reporting impacting our internal control over financial reporting for the year ended December 31, 2024.2025.

In order to remediate the material weaknesses in internal controlscontrol over financial reporting related to the ineffective design and operationoperating effectiveness of controls related to inventory management,over revenue recognitionrecognition, the timeliness of recording supplier and ITvendor generalaccruals, controls,and the timely identification and assessment of vendor contract terminations, management is implementing enhancements to our financial reporting control changes,framework. These remediation stepsefforts designedare intended to improvestrengthen itsboth disclosure controls and procedures and internal control over financial reporting by further documenting and implementing control activities to address thesethe identified risks of material weaknesses.misstatement, as well as enhancing monitoring activities over such controls. These material weaknesses will not be considered remediated until the applicable remediated control operates for a sufficient period of time and management has concluded, through testing, that this enhanced control is operating effectively, if ever. Furthermore, we cannot ensure that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate in a timely manner or at all the control deficiencies that led to our material weaknesses in our internal controls over financial reporting or that they will prevent or avoid potential future material weaknesses due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future these controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

Our ability to make payments of principal or interest on our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. If the assumptions underlying our cash flow guidance are incorrect, our business may not continue to generate cash flow from operations in the future sufficient to service our indebtedness and make necessary capital expenditures.

The conversion of some or all of the Convertible Note may dilute the ownership interests of our stockholders. If we elect to settle our conversion obligation with respect to the Convertible Note in shares of our Common Stock or a combination of cash and shares of our Common Stock, any sales in the public market of our Common Stock issuable upon such conversion could adversely affect prevailing market prices of our Common Stock. The holder of the Convertible Note also has rights to convert the principle under the note into shares of Common Stock, subject to certain limitations and the terms of the Convertible Note, and any such conversion, or the perception that any such settlement or conversion is likely or economically attractive, could have adverse effects on the prevailing market prices of our Common Stock. For example, if the market price of our Common Stock approaches the conversion price of the Convertible Note, a conversion becomes more likely and ultimately may become economically attractive if the market price exceeds the conversion price. In addition, the existence of the Convertible Note may encourage short selling by market participants because the conversion of the Convertible Note could be used to satisfy short positions, or anticipated conversion of the Convertible Note into shares of our Common Stock could depress the price of our Common Stock.

TheAlthough we expect that the acquisition of ElectraMeccanica iswill expected toultimately create growth, operational enhancement, expansion and other opportunities for us, including, among others, through significantly improving our capital position and financial flexibility and providing significant growth funding and runway to execute our business plan. Thethe identification and scope of these opportunities is based on various assumptions, which may or may not prove to be accurate. These opportunities may not arise as expected, or we may not be able to realize the anticipated benefits from these opportunities, from the sources or in the amount, manner or time frame expected, or at all. In addition, we may incur additional or unexpected costs in order to pursue and/or realize these opportunities. Failure to realize these opportunities could significantly reduce the expected benefits associated with the acquisition of ElectraMeccanica.

We are subject to stringent and evolving U.S. and foreign laws, regulations and rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to: regulatory investigations and actions; litigation (including class claims) and mass arbitration demands; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue and profits; loss of customers and sales; and other adverse business consequences.

Our products are subject to export control, import and economic sanctions laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control. Exports of our products must be made in compliance with these laws and regulations. In addition, these laws may restrict or prohibit altogether the sale or supply of certain of our products, services, and technologies to certain governments, persons, entities, countries, and territories, including those that are the target of comprehensive sanctions, unless there are license exceptions that apply or specific licenses are obtained. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to: substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.

Although none of our employees are currently represented by a labor union, it is common throughout the automobile industry generally for many employees at automobile companies to belong to a union, which can result in higher employee costs and increased risk of work stoppages. We may also directly and indirectly depend upon other companies with unionized work forces,workforces, such as our manufacturing partners, parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or operating results.

We are required to comply with Section 404 of the Sarbanes-Oxley Act, which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. WhenIf we lose our status as an “emerging growth company” and become an “accelerated filer” or a “large accelerated filer,” then an attestation of the independent registered public accounting firm will also be required. The rules governing the standards that must be met for management to assess internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

•general economic and political conditions, such as the effects of health crises, recessions, inflation, interest rates, local and national elections, fuel prices, international currency fluctuations, corruption, political instability and acts of war or military conflict, including repercussions of the military conflict between Russia and Ukraine and in the Middle EastEast, including Iran, and tensions with China, or terrorism.

The exercise price for our Warrants is $345.00 per share of our Common Stock.Stock, and they expire August 20, 2026. There is no guarantee that the Warrants will be in the money prior to their expiration, and as such, the Warrants may expire worthless.

We account for the Warrants as derivative warrant liabilities. At each reporting period, (1) the accounting treatment of the Warrants will be re-evaluated for proper accounting treatment as a liability or equity, and (2) the fair value of the liability of the Public Warrants and Private Placement Warrants will be remeasured and the change in the fair value of the liability will be recorded in our statement of operations and comprehensive loss. The impact of changes in fair value on earnings may have an adverse effect on the market price of our securities.

On March 26, 2024, we completed the previously announced businessacquisition combination involvingof ElectraMeccanica. Subject to the terms and conditions set forth in the Arrangement Agreement and the Plan of Arrangement, on March 26, 2024, each ElectraMeccanica Share outstanding immediately prior to the effective time of the Arrangement was converted automatically into the right to receive 0.0143739 of a share of Common Stock, for total consideration of 1,766,388 shares of Common Stock.

Certain investments that involve the acquisition of, or investment in, a U.S. business by a non-U.S. investor may be subject to review and approval by the Committee on Foreign Investment in the United States (“CFIUS”). Whether CFIUS has jurisdiction to review an acquisition or investment transaction depends on, among other factors, the nature and structure of the transaction, including the level of beneficial ownership interest and the nature of any information or governance rights involved. For example, investments that result in “control” of a U.S. business by a foreign person always are subject to CFIUS jurisdiction. Significant CFIUS reform legislation, which was fully implemented through regulations that became effective on February 13, 2020, among other things expanded the scope of CFIUS’s jurisdiction to investments that do not result in control of a U.S. business by a foreign person but afford certain foreign investors certain information or governance rights in a U.S. business that has a nexus to “critical technologies,” “critical infrastructure” and/or “sensitive personal data.” Moreover, other countries continue to strengthen their own foreign direct investment (“FDI”) regimes, and investments and transactions outside of the U.S. may be subject to review by non-U.S. FDI regulators if such investments are perceived to implicate national security policy priorities. Any review and approval of an investment or transaction by CFIUS or another FDI regulator may have outsized impacts on transaction certainty, timing, feasibility, and cost, among other things. CFIUS and other FDI regulatory policies and practices are rapidly evolving, and in the event that CFIUS or another FDI regulator reviews one or more proposed or existing investment by investors, there can be no assurances that such investors will be able to maintain, or proceed with, such investments on terms acceptable to such investors. CFIUS or another FDI regulator may seek to impose limitations or restrictions on, or prohibit, investments by such investors (including, but not limited to, limits on purchasing our Common Stock, limits on information sharing with such investors, requiring a voting trust, governance modifications, or forced divestiture, among other things).

Geopolitical events, hostilities and social unrest, war, military conflict, including repercussions of the military conflict between Russia and Ukraine and in the Middle EastEast, conflicts with Iran, and tensions with China, terrorism, political instability, acts of public violence, boycotts, health crises and pandemics or other occurrences that lead to avoidance of public places or cause people to stay at home could harm our business. Additionally, labor discord or disruption, natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce, and the global economy, and thus could harm our business. In the event of a major earthquake, hurricane or catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war or terrorist attack, we may be unable to continue our operations and may endure system interruptions, reputational harm, breaches of data security, and loss of critical data, all of which would harm our business, results of operations, and financial condition. In addition, the insurance we maintain would likely not be adequate to cover our losses resulting from disasters or other business interruptions.

We have been and may continue to be impacted by macroeconomic conditions, rising inflation rates, uncertain credit and global financial market, including potential bank failures, supply chain disruption and geopolitical events, such as the wars between Russia and Ukraine and in the Middle EastEast, conflicts with Iran, and tensions with China.

In recent years, the United States and other significant markets have experienced cyclical downturns and worldwide economic conditions remain uncertain. Economic uncertainty and associated macroeconomic conditions, including high volatility and uncertainty in the capital markets including as a result of inflation and interest rate spikes and potential future disruptions in access to bank deposits or lending commitments due to bank failures, supply chain disruption and geopolitical events, such as the war between Russia and Ukraine and in the Middle EastEast, conflicts with Iran, and tensions with China, 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. Furthermore, during uncertain economic times our customers may face issues gaining timely access to sufficient funding, which could result in an impairment of their ability to make timely payments to us. If that were to occur, we may be required to increase our allowance for expected credit losses and our results could be negatively impacted. 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.

Given the global nature of our supply chain and customer base, global political, economic, and other conditions, including geopolitical risks such as the current conflicts between Russia and Ukraine and in Israel,Israel and with Iran, tensions with China and related sanctions, may adversely affect our business and results of operations in ways we cannot foresee at the outset or at this point. War and economic dislocations may spur recessions, economic downturns, slowing economic growth and social and political instability; commodity shortages, supply chain risks and price increases; instability in U.S. and global capital and credit markets which could impact us, our suppliers and customers; and currency exchange rate fluctuations among other impacts that adversely affect our business or results of operations. In particular, we are subject to currency exchange risks for vehicles sold in Canada, including during the period between vehicle delivery and receipt of reimbursement from federal or provincial incentive programs, which can take several months to process.

The ultimate impact of a public health crisis on our business, operations or the global economy hasas a whole may depend on factors that are highly uncertain and that are difficult to predict, including, but not limited to, the duration and spread of the health crisis, its severity, the actions to contain the crisis or treat its impact and how quickly and to what extent normal economic and operating activities can resume. However, the effects could have a material impact on our results of operations.

•provide that vacancies on our board of directors may be filled only by the affirmative vote of a majority of directors then in office, even thoughif less than a quorum; and

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 throughand 86 battery-electric commercial vehicles that travel on last-mile, back-to-base routes of up to 200 miles per day. We also offer, through Xos Energy Solutions™, mobile and fixed charging infrastructure products, such as the Xos Hub, and have from time to time offered services to support electric vehicle fleets. Our proprietary fleet management software, Xosphere™, integrates vehicle operation and vehicle charging to provide commercial fleet operators a more seamless and cost-efficient vehicle ownership experience than traditional internal combustion engine counterparts. We developed the X-Platform (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.

Through our Powered by Xos™ business, we also provide mix-usemixed-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.

Xos is an early-stage growth company, and as such has incurred net losses and cash outflows since its inception. 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. 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 growth 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 audited 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.

Management’sBeginning in the fourth quarter of 2024, management implemented plans to improve Xos’s liquidity and working capital requirementsrequirements. over the next twelve months includeincluding reducing operating costs in order to conserve financial resources. Accordingly, inIn the fourth quarter of 2024, Xos took the following measures:

•We completed a reduction in force (the “RIF”) pursuant to which we terminated approximately 26% of our total workforce. We do not expect to incur material costs in connection with the RIF. The RIF may have had, and may continue to have, unintended and/or unknown adverse effects on our operations and results. See “Our recent cost-cutting measures may not adequately reduce our operating costs or improve our operating margins, may lead to additional workforce attrition and may cause operational disruptions” in Part I Item 1A Risk Factors of this Report.

•Certain of our senior executives have accepted temporary reductions in their annual base salaries, including our Chief Executive Officer and Chief Operating OfficerOfficer, who have volunteered to temporarily reducereducing their cash salaries by between approximately 20% and approximately 50%, respectively effective October 28, 2024.

We expect to derive future revenue from sales of our vehicles, batteryenergy-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 with proceeds from the Business Combination, the SEPA, the Convertible Note, the ElectraMeccanica acquisition 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.

While our ability to source certain critical inventory items has been steadily improving since prior years,improving, we are still experiencing long-standing negative effects from global economic conditions, and management expects such effects to continue to varying degrees for the foreseeable future. We have also observed, and expect to be impacted by, sporadic and unpredictable shortages for specific components, primarily in power electronics and harnesses, and disruptions to the supply of components. Fluctuating fuel prices and geopolitical conflicts have compounded ongoing supply and demand pressures for shipping, resulting in port congestion, higher freight fees and longer transit times.

The accompanying 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.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 growth 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 notes to the consolidated financial statements for more information.statements.

To date, we have primarily generated revenue from the sale of electric step vans,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.

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 material 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 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 consolidated statements of operations and comprehensive loss,operations, allocated to cost of goods sold.

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 consolidated statements of operations and comprehensive loss,operations, allocated to G&A.

Research and development (“R&D”) expense consists primarily of costs incurred for the design and development of our vehicles and batteryenergy-storage systems, including the Hub, which include:

•expenses related to materials and,and supplies consumed in the development and modifications to existing vehicle designs, new vehicle designs contemplated for additional customer offerings, and our battery pack design We expect our R&D costs to decrease for the foreseeable future primarily due to lower headcount driven by our RIF.design.

Sales and marketing (“S&M”) expense consists primarily of expenses related to our marketing of vehiclesproducts and brand initiatives, which includes:

•web design, marketing and promotional items, and consultants who assist in the marketing of theour Companyproducts, services and its products and services.brand.

Change in fair value of derivative instruments relates to Common Stock warrant liability assumed as part of the Business Combination and the conversion feature on the convertible notes issued in prior years and derivative features of the Convertible Debentures (as defined below) issued on August 11, 2022 and September 21, 2022.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.

Our total revenue increaseddecreased by $11.4$10.0 million, or 26%,18%, from $44.5 million in the year ended December 31, 2023 to $56.0 million in the year ended December 31, 2024.2024 to $46.0 million in the year ended December 31, 2025. The increasedecrease in revenues for the year ended December 31, 2024,2025, was driven by increased deliveries of our hub and powertrain units coupled with an increaseoverall decrease in average selling price associatedfrom withproduct salesmix, including a greater proportion of ourstrip updated stepvan platform producedchassis and deliveredpowertrain inunits as opposed to complete stepvans sold during the currentyear year.ended December 31, 2025 compared to the year ended December 31, 2024. During the year ended December 31, 2024,2025, we delivered 297259 units,stepvans (244 stepvans, including leases, 19 powertrains and 34 hubs, including leases), 69 powertrains & Hubs, compared to 283244 unitsstepvans (277including stepvans,leases), 553 powertrains,powertrains and& 1Hubs, hub)including leases, in the year ended December 31, 2023.2024.

Cost of goods sold increaseddecreased by $6.2$8.7 million, or 13%,17%, from $45.8$52.0 million in year ended December 31, 20232024 to $52.0$43.3 million in the year ended December 31, 2024.2025. The increasedecrease in cost of goods sold is attributable to increasesdecreases of (i) $2.3$5.5 million in direct materials, (ii) $4.2 million in inventory reserves and associated write-downs of inventory to its net realizable value, (iiiii) $2.3$2.1 million in unfavorablefavorable physical inventory count and other adjustments, (iiiiv) $2.0$0.6 million in direct materials,labor, (ivv) $0.6 million related to overhead, and (vvi) $0.3$0.5 million in freight out. These decreases were offset by increases of (i) $1.8 million related to additional reserves for freight related to a shift in product strategy, (ii) $1.3 million related to warranty reserves, (iii) $1.2 million in identifiable tariff charges, and (vi) $0.5 million due to recognition of return reserves for the year ended December 31, 2024. These increases were offset by a decrease of (i) $0.8 million in direct labor and (ii) $0.5 million related to warranty reserves.2025.

General and administrative expense decreased by $2.6$10.3 million, or 7%,29%, from $37.7 million in the year ended December 31, 2023 to $35.1 million in the year ended December 31, 2024,2024 to $24.8 million in the year ended December 31, 2025, attributable to decreases of (i) $1.9 million in professional fees (ii) $1.1$5.7 million in headcount and personnel cost for legal, finance, accounting, IT and general and administrative functions, (ii) $1.2 million in professional fees, including a favorable settlement of an outstanding vendor payable for $0.8 million, (iii) $1.1 million in depreciation due to the allocation of less overhead costs, (iv) $1.0 million in bad debt expense, (v) $0.7 million in stock-based compensation expense, (vi) $0.6 million in other operating expenses, including travel, recruiting, and computer equipment, (vii) $0.6 million in facility costs connected to the termination of the Mesa lease, (viii) and $0.5 million in insurance costs driven by cost efficiencies associated with a new broker and (iv) $1.0 million in other operating expenses, including travel, recruiting, and computer equipment.broker. These decreases were offset by increasesincrease of (i) $1.9$0.9 million in facilityfinanced costsequipment lease expense with no such comparable expense for the year ended December 31, 2024 and (ii) $0.5$0.2 million in stock-basedincremental compensationexpense expense.related to the settlement of an employee’s severance arrangements.

Research and development expenses decreased by $9.0$2.6 million, or 46%,25%, from $19.6 million in the year ended December 31, 2023 to $10.6 million in the year ended December 31, 2024.2024 to $8.0 million in the year ended December 31, 2025. The change was primarily due to decreases of (i) $4.3$2.4 million in allocation of personnel costs driven by lower headcount in engineering,engineering and (ii) $3.0 million in equipment and material purchases due to fewer research and development projects in development year over year, (iii) $1.3$0.4 million in net other costs, driven by reductions of consulting and design fees, in addition to equipmentcomputer and vehiclesoftware purchasescosts. usedThese solelydecreases forwere researchoffset andby developmentincreases purposes andof (ivi) $0.4$0.1 million in stock-based compensation expense.expense and (ii) $0.1 million in equipment and material purchases related to the development of new Hub variants.

Sales and marketing expense decreased by $2.3$1.1 million, or 35%,27%, from $6.4 million in the year ended December 31, 2023 to $4.1 million in the year ended December 31, 2024.2024 to $3.0 million in the year ended December 31, 2025. The change was primarily due to decreases of (i) $1.7$1.2 million in allocation of personnel costs driven by lower headcount, (ii) $0.4$0.2 million related to reduction in public relations costs and tradeshows costscosts. andThese were offset by an increase of (iiii) $0.2$0.3 million in stock-based compensation expense.

The gain on the change in fair value of contingent earn-out shares liability decreased by $0.5 million,$39,000, or 93%100% from $0.5 million in the year ended December 31, 2023 to $39,000 in the year ended December 31, 2024.2024 to $0 in the year ended December 31, 2025. The decrease in change in fair value in both periods is primarily attributable to differences in our stock price and the resulting valuation for the applicable reporting period.

As of December 31, 2024,2025, our principal sources of liquidity were our cash and cash equivalents of $11.0$14.0 million, with an accumulated deficit of approximately $228.7 million. Our short-term uses of cash are for working capital and our long-term uses of cash are for working capital and to pay the principal of our indebtedness. During the twelve months ended December 31, 2024,2025, we incurred a net loss of approximately $50.2$25.3 million and had net cash usedprovided inby operating activities of $48.8$5.4 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 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 consolidated financial statements in this Report.

As an early stage growth company, we have mainly incurred net losses and cash outflows since our inception. We willmay 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 financial information does not include any adjustment that may result from the outcome of this uncertainty.

On May 8, 2026, the Company and Aljomaih furtherAutomotive 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.

These overlapping and evolving tariff regimes have introduced significant volatility into our cost structure and procurement planning, particularly with respect tofor power electronics, batteries and battery components, and structural materials. TheUncertainty uncertainty around tariffregarding implementation timelines, theproduct scopecoverage, ofapplicable new investigations, and the expirationexemptions, and potential replacementfuture oftrade the current Section 122 surchargeactions has necessitatedrequired frequent adjustments to sourcing strategies, supplier selection, inventory planning, and contract terms. To mitigate these impacts, we have undertaken the following measures:

•diversificationdiversified ofour supply base toby includequalifying alternatealternative suppliers in tariff-exemptjurisdictions orwith trade-friendlylower regionstariff exposure;

•renegotiationrenegotiated ofpricing, pricingdelivery, and deliverycommercial terms to account foraddress tariff exposure and potential cost passthroughs;

•reclassificationconducted tariff classification and compliance reviews to ensureconfirm correctapplicable harmonized tariff schedule (HTS) codes and leverageevaluate tariffavailable exemptionsexemptions, orexclusions, reducedpreferential treatment, and duty programs,reduction where applicableprograms;

•monitoringmonitored pending Section 232 and Section 301 investigations for components in our supply chain and evaluating pre-buy, qualification ofevaluated alternative sources, advance purchases, and contract re-pricingrepricing provisions in anticipation of potential new tariff actions; and evaluated the effect of the expiration of the Section 122 surcharge and the Section 301 tariffs effective July 24, 2026, on our sourcing strategies and cost assumptions.

During the three months ended MarchJune 31,30, 2026, we delivered 136 vehicles (including leases) and 8224 powertrains & hubs. During the three months ended MarchJune 31,30, 2025, we delivered 22128 vehicles and 7 powertrains & hubs. During the three months ended MarchJune 31,30, 2026, we generated $1.6$0.6 million in revenue (or 14%12% of revenue) in vehicle sales, $9.1$3.5 million (or 81%73% of revenue) in powertrain & Hub sales, $0.3 million (or 3% of revenue) in other product revenue, and $0.2 million (or 2% of revenue) in ancillary revenue. During the three months ended March 31, 2025, we generated $3.6 million in revenue (or 61% of revenue) from vehicle sales, $1.6 million (or 27% of revenue) in powertrain & Hubhub sales, $0.5 million (or 8%11% of revenue) in other product revenue, and $0.2 million (or 4% of revenue) in ancillary revenue. During the three months ended June 30, 2025, we generated $17.1 million in revenue (or 93% of revenue) from vehicle sales, $0.9 million (or 5% of revenue) in powertrain & hub sales, $0.2 million (or 1% of revenue) in other product revenue, and $0.2 million (or 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.

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.

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 materialmaterials 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.

CostsCost of goods sold includes the impact of identifiable tariff costs related to the production of our vehicles.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 are continuingcontinue to undertake efforts to findidentify more cost-effective vendors and sources of parts and raw materials to lower our overall cost of production.

•payroll expense for employees primarily engaged in R&D activities, including allocation of stock-based compensation expense;

•expenses related to licenses and subscriptions of software utilized in R&D activities;

•fees paid to third-parties such as consultants and contractors for engineering and computer-aided design work on vehicle designs and other third-party services; and expenses related to materials and supplies consumed in the development and modifications to existing vehicle designs, new vehicle designs contemplated for additional customer offerings, and our battery pack design.

•payroll expense for employees primarily engaged in S&M activities, including allocation of stock-based compensation expense; and web design, marketing and promotional items, and consultants who assist in the marketing of our products, services, and brand.

Other Expense,Income (Expense), Net

Other expense,income (expense), net primarily includes recoveries associated with previously paid import duties, 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.

Comparison of the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

Our total revenues increaseddecreased by $5.3$13.7 million, or 91%,74%, from $5.9$18.4 million in the three months ended MarchJune 31,30, 2025 to $11.2$4.7 million in the three months ended MarchJune 31,30, 2026, primarily driven by ana increasedecrease in unit sales. During the three months ended MarchJune 31,30, 2026, we sold 136 vehicles and 8224 powertrains & hubs, compared to 22128 vehicles and 7 powertrains & hubs during the three months ended MarchJune 31,30, 2025.

Revenue for the three months ended MarchJune 31,30, 2026 and 2025 consisted of the following (dollars in thousands):

(1)Amounts are net of returns and allowances. Stepvans & vehicle incentives and powertrains & hubs include revenue generated from operating and sales-type leases.

(2)Other product revenue for both of the three and six months ended MarchJune 31,30, 2026 includes revenue related to non-recurring powertrain engineering services of $0.1 million and revenue related to software services of $0.1 million. The remaining performance obligations for non-recurring engineering services total $39,000$8,000 as of MarchJune 31,30, 2026 and are expected to be satisfied in 2026. The remaining performance obligations for software services total $0.5 million as of June 30, 2026 and $0.2 million are expected to be satisfied in 2026 with the remaining $0.3 million expected to be satisfied in 2027 and beyond.

Cost of goods sold increaseddecreased by $2.2$12.6 million, or 48%,75%, from $4.7$16.8 million in the three months ended MarchJune 31,30, 2025 to $6.9$4.2 million in the three months ended MarchJune 31,30, 2026. The increasedecrease in cost of goods sold is directly attributable to the increasedecrease in our product revenue and associated increasesdecreases of (i) $1.3$11.0 million in direct materials, (ii) $0.4$2.0 million in identifiablemanufacturing tariffoverhead, charges,(iii) $0.1 million dealer return reserves with no such comparable expense in the three months ended June 30, 2026, (iv) $0.1 million for warranty reserve and (v) $0.1 million for freight costs. These decreases were offset by increases of (i) $0.2 million in physical inventory count and other adjustments, (ii) $0.3 million related to increases in inventory reserves and (iii) $0.2 million in direct labor,labor (iv) $0.2 in manufacturing overhead, (v) $0.2 millionlargely related to athe smaller favorable adjustmentcompletion of inventoryenergy reservesservice and (vi) $0.1 million for warranty reserve. These increases were offset by decreases of (i) $0.1 million less in unfavorable physical inventory count and other adjustments and (ii) $0.1 million less in freight costs related to product deliveries.projects.

The increasesdecreases in direct material, direct labor,material and manufacturing overhead costs are driven by ana increasedecrease 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 increasedecrease correspondingly with ana increasedecrease in production volume and units sold.

General and administrative expenses decreased by $1.8$0.1 million, or 23%,2%, from $7.9$5.9 million in the three months ended MarchJune 31,30, 2025 to $6.1$5.8 million in the three months ended MarchJune 31,30, 2026, attributable to decreases of (i) $1.9 million in financed equipment lease expense with no such comparable expense for the three months ended March 31, 2026, (ii) $0.5$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 June 30, 2026, (ii) $0.2 million in insurance costs, and (iii) $0.1$0.3 million in insuranceother operating expenses including travel, recruiting, and computer software costs. These decreases were offset by increases of (i) $0.4 million in stock-based compensation expense, (ii) in $0.1$0.3 million in personnel costs for legal, finance, accounting, information technology and general and administrative functionsfunctions, and (iii) $0.1$0.3 million in other operating expenses including professional services and computer software costs, and (iv) $0.1 million in depreciation expense due to the allocation of more overhead costs.fees.

Research and development expenses increaseddecreased by $0.1$0.2 million, or 5%,9%, from $2.1 million in the three months ended June 30, 2025 to $1.9 million in the three months ended MarchJune 31, 2025 to $2.0 million in the three months ended March 31,30, 2026. The change was primarily due to increasesdecreases of (i) $0.2$0.1 million frompersonnel expenses related to software subscriptions, certifications and professional services,costs and (ii) $0.1 million in materials purchases related to Hub development. These increases were offset by a decrease of $0.2 million in allocation of personnel costs, including stock-based compensation expense.

Sales and marketing expense increased by $0.2$0.1 million, or 40%14% from 0.7$0.7 million in the three months ended MarchJune 31,30, 2025 to 0.9$0.8 million in the three months ended MarchJune 31,30, 2026. The change was primarily due to an increase of $0.2$0.1 million in stock-basedemployee compensation expense.bonuses.

Other Expense,Income (Expense), net

Other expense,income (expense), net decreasedincreased by $0.6$1.5 million, from $0.9a loss of $0.4 million in the three months ended MarchJune 31,30, 2025 to $0.3a gain of $1.1 million in the three months ended MarchJune 31,30, 2026. The change was attributable to (i) $0.4$1.2 million lessin recoveries associated with previously paid import duties in impairmentthe lossesthree onmonths propertyended andJune equipment,30, 2026, with no such comparable income in the prior year period (ii) $0.1 million less in interest expense, (iii) $0.1 million gain resulting from the early termination of an operating lease with no such comparable income for the three months ended June 30, 2025 and (iiiiv) $0.1 million related to intercompanylower accountsother payable and currency revaluation reversal in the three months ended March 31, 2025.expenses.

The gainloss on the change in fair value of derivative instruments increased by $63,000,$9,000, or 117%,150%, from a loss of $54,000$6,000 in the three months ended MarchJune 31,30, 2025 to a gain of $9,000$15,000 in the three months ended MarchJune 31,30, 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.

The Company recorded an income tax provision of $5,000$27,000 and $12,000$13,000 during the three months ended MarchJune 31,30, 2026 and 2025, respectively.

As of MarchJune 31,30, 2026, our principal sources of liquidity were our cash and cash equivalents of $9.8$13.2 million with an accumulated deficit of approximately $233.7$239.9 million. Our short-term uses of cash are for working capital and to pay the principal of our indebtedness. During the threesix months ended MarchJune 31,30, 2026, we incurred a net loss of approximately $5.0$11.8 million and had net cash used in operating activities of $1.6$4.3 million.

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”)., Pursuantsubject to the limitations of General Instruction I.B.6 of Form S-3, thewhich prospectus setting forthlimits the offer and sale of securities pursuant toamount the ATMCompany Offeringmay issell, limitedtogether towith anany aggregateother ofprimary $5.4offerings millionon Form S-3, during any 12-month period pursuant to the Sales Agreement. Any sales of commonCommon stockStock 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 commonCommon stockStock 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 six months ended June 30, 2026, we sold 378,700 shares of common stock in the ATM Offering, resulting in net proceeds of approximately $2.2 million. During the 12 calendar month period ending August 12, 2026, we have sold an aggregate of $11,366,932 of securities pursuant to General Instruction I.B.6 of Form S-3. As of MarchJune 31,30, 2026, we had $2.5$8.8 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 $17.2$14.6 million remaining under the terms of the Sales Agreement.

The following table provides a summary of cash flow data for the threesix months ended MarchJune 31,30, 2026 and 2025 (in thousands):

Net cash used in operating activities was $1.6$4.3 million for the threesix months ended MarchJune 31,30, 2026, primarily consisting of a cash-basis net loss of $1.7$5.8 million from normal operations of the Company (after non-cash adjustments of $3.3$6.0 million), partially offset by favorable net working capital changes of $0.1$1.5 million, primarily driven by lower inventories due to improved inventory turns and otherlower assets,accounts receivable due to collections, partially offset by higherlower other liabilities, accounts receivablepayable, and higher prepaid expenses and other current assets.

Net cash used in operating activities was $4.8$0.1 million for the threesix months ended MarchJune 31,30, 2025, primarily consisting of a cash-basis net loss of $7.1$13.1 million from normal operations of the Company (after non-cash adjustments of $3.1$4.6 million), partially offset by favorable net working capital changes of $2.3$13.0 million, primarily driven by lower accounts receivable anddue otherto liabilities,collections, inventories due to improved inventory turns, partially offset by lower accounts payable and purchaseshigher ofprepaid inventoryexpenses forand productionother build-up.current assets.