Xos Inc

Previous wording

The following discussion and analysis provides information which Xos’ management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read together with the unaudited condensed consolidated financial statements and related notes that are included elsewhere in this Report. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Report and our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 29, 2024. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Risk Factors”. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we”, “us”, “our”, and “the Company” are intended to mean the business and operations of Xos and its consolidated subsidiaries.

Current wording

The following discussion and analysis provides information which Xos’ management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Report and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) filed with the SEC on March 29, 2024. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in this Item 2 (including in the sections entitled “Overview” and “Liquidity and Capital Resources” below), in the accompanying unaudited notes to condensed consolidated financial statements in this Report, under the section entitled “Risk Factors” of this Report, and under the heading “Risk Factors” in the 2023 Form 10-K. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we”, “us”, “our”, and “the Company” are intended to mean the business and operations of Xos and its consolidated subsidiaries.

Previous wording

We have also developed a fleet management platform called Xosphere™ that interconnects vehicle, maintenance, charging, and service data. The Xosphere™ is aimed at minimizing electric fleet TCO through fleet management integration. This comprehensive suite of tools allows fleet operators to monitor vehicle and charging performance in real-time with in-depth telematics; reduce charging cost; optimize energy usage; and manage maintenance and support with a single software tool.

Current wording

We have also developed a fleet management platform called Xosphere™ that interconnects vehicle, maintenance, charging, and service data. The Xosphere™ is aimed at minimizing electric fleet total cost of ownership through fleet management integration. This comprehensive suite of tools allows fleet operators to monitor vehicle and charging performance in real-time with in-depth telematics; reduce charging cost; optimize energy usage; and manage maintenance and support with a single software tool.

Previous wording

During the three months ended March 31, 2024, we generated $12.0 million in revenue (or 91% of revenue) from vehicle and powertrain sales, $0.6 million (or 5% of revenue) from Fleet-as-a-Service revenue, and $0.5 million (or 4% of revenue) from ancillary revenue. During the three months ended March 31, 2023, we generated $4.3 million in revenue (or 91% of revenue) from vehicle and powertrain sales, $0.2 million (or 3% of revenue) from Fleet-as-a-Service revenue, and $0.3 million (or 6% of revenue) from ancillary revenue.

Current wording

During the three months ended June 30, 2024, we delivered 78 vehicles and 12 powertrains (including hubs). During the three months ended June 30, 2023, we delivered 37 vehicles (including leases) and 1 powertrain. During the three months ended June 30, 2024, we generated $14.6 million in revenue (or 94% of revenue) from vehicle, powertrain and hub sales, $0.6 million (or 4% of revenue) in other product revenue, and $0.3 million (or 2% of revenue) in ancillary revenue. During the three months ended June 30, 2023, we generated $4.5 million in revenue (or 95% of revenue) from vehicle and powertrain sales, $0.1 million (or 3% of revenue) in other product revenue, and $0.1 million (or 2% of revenue) from ancillary revenue.

Previous wording

On January 11, 2024, Xos and ElectraMeccanica entered into an arrangement agreement, as amended on January 31, 2024 (the “Arrangement Agreement”), pursuant to which Xos acquired all of the issued and outstanding common shares of ElectraMeccanica pursuant to a plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (British Columbia) (the “Arrangement”).

Current wording

On January 11, 2024, Xos and ElectraMeccanica entered into an arrangement agreement, as amended on January 31, 2024 (the “Arrangement Agreement”), pursuant to which Xos acquired all of the issued and outstanding common shares of ElectraMeccanica (“ElectraMeccanica Shares”) pursuant to a plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (British Columbia) (the “Arrangement”).

Previous wording

The Arrangement was consummated on March 26, 2024. 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 our Common Stock, for total consideration of 1,766,388 shares of Common Stock. Our liquidity will be supplemented by accessing ElectraMeccanica's cash balance, which was estimated to be approximately $50.2 million (excluding severance related costs paid at closing) as of the effective date of the Arrangement.

Current wording

The Arrangement was consummated on March 26, 2024. 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 our Common Stock, for total consideration of 1,766,388 shares of Common Stock. Our liquidity was supplemented by net cash acquired in connection with the acquisition of ElectraMeccanica, which was approximately $50.2 million.

Previous wording

We expect to derive future revenue from sales of our vehicles, battery 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 (as defined below), the ElectraMeccanica acquisitionand 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.

Current wording

We expect to derive future revenue from sales of our vehicles, battery 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 (as defined below), the Convertible Note (as defined below), the ElectraMeccanica acquisitionand 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.

Previous wording

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 unaudited condensed consolidated financial statements for more information.

Current wording

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 unaudited notes to condensed consolidated financial statements for more information.

Previous wording

To date, we have primarily generated revenue from the sale of electric step vans, stripped chassis vehicles and battery systems. Our stripped chassis is our vehicle offering that consists of our X-Platform electric vehicle base and X-Pack 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. In addition, we also offer service offerings, such as Fleet-as-a-Service, which is a full suite of service offerings that includes Xos Energy Solutions™, our energy solutions offering and Xosphere™, our fleet management platform.

Current wording

To date, we have primarily generated revenue from the sale of electric step vans, stripped chassis vehicles and battery systems. Our stripped chassis is our vehicle offering that consists of our X-Platform electric vehicle base and X-Pack 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. In addition, we also offer service offerings that include Xos Energy Solutions™, our energy solutions offering and Xosphere™, our fleet management platform.

Previous wording

Revenue consists of product sales, inclusive of shipping and handling charges, net of estimates for customer allowances, Fleet-as-a-Service product offerings, and leasing. Revenue is measured as the amount of consideration we expect to receive in exchange for delivering products. All revenue is recognized when we satisfy the performance obligations under the contract. We recognize revenue by delivering the promised products to the customer, with the revenue recognized at the point in time the customer takes control of the products. For shipping and handling charges, revenue is recognized at the time the products are delivered to or picked up by the customer. For leasing, revenue is recognized on a straight line basis over the term of the lease agreement. The majority of our current contracts have a single performance obligation, which is met at the point in time that the product is delivered, and title passes, to the customer, and are short term in nature.

Current wording

Revenue consists of product sales, inclusive of shipping and handling charges, net of estimates for customer allowances, service offerings, and leasing. Revenue is measured as the amount of consideration we expect to receive in exchange for delivering products. All revenue is recognized when we satisfy the performance obligations under the contract. We recognize revenue by delivering the promised products to the customer, with the revenue recognized at the point in time the customer takes control of the products. For shipping and handling charges, revenue is recognized at the time the products are delivered to or picked up by the customer. For leasing, revenue is recognized on a straight-line basis over the term of the lease agreement. The majority of our current contracts have a single performance obligation, which is met at the point in time that the product is delivered, and title passes, to the customer, and are short term in nature.

Previous wording

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 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 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, allocated to cost of goods sold.

Current wording

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 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 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.

Previous wording

General and administrative (“G&A”) expenses consist 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 as G&A expenses. G&A expenses also include 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 theconsolidated statements of operations and comprehensive loss, allocated to G&A.

Current wording

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

Previous wording

We expect that our G&A will start to decrease for the foreseeable future primarily due to lower headcount driven by our reduction in workforce.

Current wording

We expect that our G&A expense will decrease for the foreseeable future primarily due to lower headcount driven by our reduction in workforce.

Previous wording

Research and development (“R&D”) expenses consist primarily of costs incurred for the design and development of our vehicles and battery systems, which include:

Current wording

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

Previous wording

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

Current wording

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

Previous wording

•web design, marketing and promotional items, and consultants who assist in the marketing of the Company;

Current wording

•web design, marketing and promotional items, and consultants who assist in the marketing of the Company and its products and services;

Previous wording

Other expense, net primarily includes interest income from our investments in marketable debt securities, available-for-sale (for the three months ended March 31, 2023), interest paid on our equipment leases and interest expense related to our financing obligations, including the amortization for debt discount and issuance costs.

Current wording

Other income (expense), net is primarily comprised of income associated with the duty drawback receivable, which are estimated recoveries of tariffs paid for vehicles that were acquired through the EMV acquisition, and interest income from our investments in marketable debt securities, available-for-sale, partially offset by interest paid on our equipment leases and interest expense related to our financing obligations, including the amortization for debt discount and issuance costs.

Previous wording

Comparison of the Three Months Ended March 31, 2024 and 2023

Current wording

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

Our total revenues increased by $8.5 million, or 180%, from $4.7 million in the three months ended March 31, 2023 to $13.2 million in the three months ended March 31, 2024, primarily driven by an increase in unit sales and in average selling price. During the three months ended March 31, 2024, we sold 60 stepvans and 2 powertrains, compared to 30 stepvans and 1 powertrain during the three months ended March 31, 2023.

Current wording

Our total revenues increased by $10.8 million, or 227%, from $4.8 million in the three months ended June 30, 2023 to $15.5 million in the three months ended June 30, 2024, primarily driven by an increase in unit sales and in average selling price. During the three months ended June 30, 2024, we sold 78 stepvans and 12 powertrains (including hubs), compared to 37 stepvans and 1 powertrain during the three months ended June 30, 2023.

Previous wording

Cost of goods sold increased by $4.8 million, or 86%, from $5.6 million in the three months ended March 31, 2023 to $10.4 million in the three months ended March 31, 2024. The increase in cost of goods sold is directly attributable to the increase in our product revenue and associated increases of (i) $4.4 million in direct materials, (ii) $0.2 million in unfavorable physical inventory count and other adjustments and (iii) $1.4 million for dealer return reserves and warranty. These increases were offset by a decrease of (i) $0.7 million in direct labor, manufacturing overhead, and freight, and (ii) $0.5 million due to reductions in inventory reserves and associated write-downs to net realizable value.

Current wording

Cost of goods sold increased by $5.0 million, or 59%, from $8.5 million in the three months ended June 30, 2023 to $13.5 million in the three months ended June 30, 2024. The increase in cost of goods sold is directly attributable to the increase in our product revenue and associated increases of (i) $5.6 million in direct materials and (ii) $1.7 million in direct labor, manufacturing overhead, and freight costs. These increases were offset by decreases of (i) $1.3 million related to reductions in inventory reserves and associated write-downs to net realizable value during the three months ended June 30, 2023, (ii) $0.6 million less in unfavorable physical inventory count and other adjustments and (iii) $0.4 million for dealer return reserves and warranty.

Previous wording

The decrease in direct labor encompasses both employee and subcontractor labor costs. The decrease in direct labor and overhead costs are primarily attributable to the mix of units sold during the quarter and the overhead and labor cost associated with the specific production period for the sold units. The increase in direct material costs is driven by an increase in units sold. A significant portion of the overhead costs incurred include 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 are still incurred when we experience a reduction in production volume. In the near term, we plan to increase production activities, expecting fixed and semi-fixed overhead costs to be absorbed through the production of our batteries and chassis.

Current wording

The increase in direct labor encompasses both employee and subcontractor labor costs. The increases in direct labor, manufacturing overhead and direct material costs are driven by an increase in units sold. A significant portion of the overhead costs incurred include 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 are still incurred when we experience a reduction in production volume. In the near term, we plan to increase production activities, expecting fixed and semi-fixed overhead costs to be absorbed through the production of our batteries, hubs and chassis.

Previous wording

General and administrative expenses decreased by $2.6 million, or 23%, from $11.6 million in the three months ended March 31, 2023 to $9.0 million in the three months ended March 31, 2024, attributable to decreases of (i) $2.3 million in headcount and personnel cost for legal, finance, accounting, information technology and general and administrative functions, (ii) $0.8 million in insurance costs driven by cost efficiencies associated with a new broker, (iii) $1.1 million in professional fees, and (iv) $0.8 million in other operating expenses, including travel, recruiting, and facility costs. These decreases were offset by increases of (i) $0.3 million in depreciation expense due to the allocation of overhead costs, (ii) $0.1 million in stock-based compensation expense, and (iii) $2.0 million in severance expense related to the ElectraMeccanica acquisition.

Current wording

General and administrative expenses decreased by $0.6 million, or 7%, from $9.8 million in the three months ended June 30, 2023 to $9.2 million in the three months ended June 30, 2024, attributable to decreases of (i) $0.8 million in headcount and personnel costs for legal, finance, accounting, information technology and general and administrative functions, (ii) $0.2 million in professional fees, (iii) $0.2 million in stock-based compensation expense, (iv) $0.1 million in insurance costs driven by cost efficiencies associated with a new broker and (v) $0.1 million in depreciation expense due to the allocation of overhead costs. These decreases were offset by increases of $0.8 million in other operating expenses, primarily due to facility expenses related to two operating leases acquired in connection withthe ElectraMeccanica acquisition.

Previous wording

Research and development expenses decreased by $2.7 million, or 47%, from $5.7 million in the three months ended March 31, 2023 to $3.1 million in the three months ended March 31, 2024. The change was primarily due to decreases of (i) $1.5 million in allocation of personnel costs driven by lower headcount in engineering, (ii) $0.9 million in equipment and material purchases due to fewer research and development projects in development year over year and (iii) $0.3 million in other research and development costs, including consulting and software.

Current wording

Research and development expenses decreased by $2.2 million, or 42%, from $5.2 million in the three months ended June 30, 2023 to $3.0 million in the three months ended June 30, 2024. The change was primarily due to decreases of (i) $0.8 million in allocation of personnel costs driven by lower headcount in engineering, (ii) $0.8 million in equipment and material purchases due to fewer research and development projects in development year over year and (iii) $0.6 million in other research and development costs, including consulting and software.

Previous wording

Sales and marketing expense decreased by $0.8 million, or 45%, from $1.8 million in the three months ended March 31, 2023 to $1.0 million in the three months ended March 31, 2024. The change was primarily due to decreases of (i) $0.7 million in allocation of personnel costs driven by lower headcount and (ii) $0.1 million in stock-based compensation expense.

Current wording

Sales and marketing expense decreased by $0.5 million, or 30%, from $1.8 million in the three months ended June 30, 2023 to $1.2 million in the three months ended June 30, 2024. The change was primarily due to decreases of (i) $0.4 million in allocation of personnel costs driven by lower headcount and (ii) $0.1 million in stock-based compensation expense.

Previous wording

Other expense, net decreased by $3.6 million, from $4.2 million in the three months ended March 31, 2023 to $0.6 million in the three months ended March 31, 2024. The change was attributable to decreases of (i) $1.9 million in net interest expense related to the Convertible Note and Convertible Debentures, including amortization of related discounts and issuance costs, primarily due to Convertible Debentures being fully repaid on December 4, 2023, (ii) $1.0 million for impairment on assets held for sale during the three months ended March 31, 2023 with no such comparable expense during the three months ended March 31, 2024, (iii) $0.5 million of redemption premiums related to prepayments on Convertible Debentures during the three months ended March 31, 2023 with no such comparable expense during the three months ended March 31, 2024, (iv) $0.1 million in amortization expense related to marketable debt securities, available-for-sale and (v) $0.1 million in other miscellaneous expenses.

Current wording

Other income (expense), net increased by $5.5 million, from a $4.0 million expense in the three months ended June 30, 2023 to a $1.5 million income in the three months ended June 30, 2024. The change was attributable to decreases of (i) $2.5 million in net interest expense related to the Convertible Note and Convertible Debentures, including amortization of related discounts and issuance costs, primarily due to Convertible Debentures being fully repaid on December 4, 2023, (ii) $0.5 million for impairment on assets held for sale during the three months ended June 30, 2023 with no such comparable expense during the three months ended June 30, 2024, (iii) $0.3 million of redemption premiums related to prepayments on Convertible Debentures during the three months ended June 30, 2023 with no such comparable expense during the three months ended June 30, 2024, and (iv) $0.1 million in amortization expense related to marketable debt securities, available-for-sale with no such comparable expense during the three months ended June 30, 2024. Additionally, during the three months ended June 30, 2024 there was a $2.1 million increase in other income related to theestimated amount that can be recovered from previously paid tariffs relating to crushed SOLO vehicles that were acquired in connection with the ElectraMeccanica acquisition.

Previous wording

The loss on change in fair value of derivative instruments increased by $0.1 million, or 73%, from $0.1 million in the three months ended March 31, 2023 to $0.2 million in the three months ended March 31, 2024. 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.

Current wording

The loss on change in fair value of derivative instruments increased by $0.2 million, or 119%, from a gain of $0.2 million in the three months ended June 30, 2023 to a loss of $40 thousand in the three months ended June 30, 2024. 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.

Previous wording

The loss on the change in fair value of contingent earn-out shares liability decreased by $0.1 million from $0.1 million in the three months ended March 31, 2023 to $3,000 in the three months ended March 31, 2024. 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.

Current wording

The gain on the change in fair value of contingent earn-out shares liability decreased by $0.5 million from $0.6 million in the three months ended June 30, 2023 to $36 thousand in the three months ended June 30, 2024. 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.

Previous wording

The Company recorded income tax provision of $5,000 and $2,000 during the three months ended March 31, 2024 and 2023, respectively.

Current wording

The Company recorded income tax provision of $4,000 and $2,000 during the three months ended June 30, 2024 and 2023, respectively. The Company recorded an income tax provision of $9,000 and $4,000 during the six months ended June 30, 2024 and 2023, respectively

Previous wording

As of March 31, 2024, our principal sources of liquidity were our cash and cash equivalents of$46.2 million. Our access to capital under the SEPA is not available as of the date of this Report and will not be available until we file with the SEC a post-effective amendment to the Registration Statement on Form S-1 filed on July 27, 2023. 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.

Current wording

As of June 30, 2024, our principal sources of liquidity were our cash and cash equivalents of$19.7 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.

Previous wording

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 research and development activities with respect to our vehicles and battery systems, and scale our operations to meet anticipated demand. 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.

Current wording

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. These conditions and events raise substantial doubt about our ability to continue as a going concern. Our consolidated financial information does not include any adjustment that may result from the outcome of this uncertainty.

Previous wording

In response to these conditions, we are currently evaluating different strategies to obtain the required funding for future operations. We have plans to secure and intend to employ various strategies to raise additional capital, such as through the SEPA and other capital raising strategies such as a combination of debt financing, other non-dilutive financing and/or equity financing, including through asset-based lending and/or receivable financing. However, the ability to access the SEPA is dependent on trading volumes and market price of our Common Stock. Additionally, collection on our outstanding accounts receivable will provide additional source of funding.

Current wording

In response to these conditions, we are currently evaluating different strategies to obtain the required funding for future operations. We have plans to secure and intend to employ various strategies to raise additional capital, which may include the SEPA as well as other capital raising strategies such as debt financing (which may include asset-based lending and/or receivable financing), other non-dilutive financing, and/or equity financing. However, our access to the SEPA is not available as of the date of this Report and will not be available until a post-effective amendment to the Registration Statement on Form S-1 filed on July 27, 2023, is filed and declared effective and other applicable conditions are met. Our ability to access other capital when needed is not assured and, if capital is not available to us when, and in the amounts needed, we could be required to delay, scale back or abandon some or all of our development programs and other operations, which could materially harm our business, prospects, financial condition and operating results. Global general economic and political conditions, such as inflation, uncertain credit and global financial markets, supply chain disruption, international currency fluctuations, and geopolitical events have had and could continue to have an adverse impact in our ability to raise additional funds. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our commercialization, research and development programs and/or other efforts and our ability to continue our operations would be negatively impacted. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all. In addition, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our 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.

Previous wording

On March 23, 2022, we entered into a Standby Equity Purchase Agreement (“the SEPA”) with Yorkville, which was subsequently amended on June 22, 2023 (as amended, the "SEPA"), whereby we have the right, but not the obligation, to sell to Yorkville up to $125.0 million of its shares of Common Stock at our request any time until February 11, 2026, subject to certain conditions. As of March 31, 2024, the remaining commitment available under the SEPA was $119.5 million. We used the net proceeds received from sales of Common Stock pursuant to the SEPA for working capital and general corporate purposes and expect similar use of proceeds going forward. See Note 8 — Convertible Notes and Note 9 — Equity — Standby Equity Purchase Agreement in the accompanying unaudited condensed consolidated financial statements for more information regarding the SEPA, the Side Letter and the Securities Purchase Agreement.

Current wording

On March 23, 2022, we entered into a Standby Equity Purchase Agreement with YA II PN, Ltd. (“Yorkville”), which was subsequently amended on June 22, 2023 (as amended, the "SEPA"), whereby we have the right, but not the obligation, to sell to Yorkville up to $125.0 million of our shares of Common Stock at our request any time until February 11, 2026, subject to certain conditions. As of June 30, 2024, the remaining commitment available under the SEPA was $119.4 million. We used the net proceeds received from sales of Common Stock pursuant to the SEPA for working capital and general corporate purposes and expect similar uses of any remaining proceeds going forward. See Note 8 — Convertible Notes and Note 9 — Equity — Standby Equity Purchase Agreement in the accompanying unaudited condensed consolidated financial statements for more information regarding the SEPA, the Side Letter and the Securities Purchase Agreement.

Previous wording

On August 11, 2022 and September 21, 2022, we issued convertible debentures (as subsequently amended, the “Convertible Debentures”) to Yorkville in the aggregate principal amount of $35.0 million, with a maturity date of November 11, 2023, which may be extended to February 11, 2024. Also on August 11, 2022, we issued a convertible promissory note (as subsequently amended and restated, the “Convertible Note”) to Aljomaih Automotive Co. (“Aljomaih”) with a principal amount of $20.0 million and a maturity date of August 11, 2025. As of March 31, 2024, the aggregate principal amount of $20.0 million was outstanding on the Convertible Note. The Convertible Debentures were fully repaid on December 4, 2023. We have used the net proceeds from the Convertible Debentures and the Convertible Note for operational liquidity, working capital and general and administrative expenses and expect similar use of proceeds going forward.

Current wording

On August 11, 2022 and September 21, 2022, we issued convertible debentures (as subsequently amended, the “Convertible Debentures”) to Yorkville in the aggregate principal amount of $35.0 million, with a maturity date of November 11, 2023, which may be extended to February 11, 2024. Also on August 11, 2022, we issued a convertible promissory note (as subsequently amended and restated, the “Convertible Note”) to Aljomaih Automotive Co. (“Aljomaih”) with a principal amount of $20.0 million and a maturity date of August 11, 2025.

Previous wording

The following table provides a summary of cash flow data(in thousands):

Current wording

The following table provides a summary of cash flow data for the six months ended June 30, 2024 and 2023(in thousands):

Previous wording

Our cash flows from operating activities are significantly affected by the growth of our business primarily related to research and development and selling, general, and administrative activities and working capital needs to support growth in inventory reserves and fluctuations in accounts payable and other current assets and liabilities.

Current wording

Our cash flow from operating activities is significantly affected by the growth of our business primarily related to research and development and selling, general, and administrative activities and working capital needs to support growth in inventory reserves and fluctuations in accounts payable and other current assets and liabilities.

Previous wording

Net cash used in operating activities was $14.6 million for the three months ended March 31, 2024, primarily consisting of a net loss excluding non-cash expenses and gains of $7.1 million, and unfavorable net changes in operating assets and liabilities of $7.4 million.

Current wording

Netcash used in opera ting activities was$40.6 million for the six months ended June 30, 2024, primarily consisting of a netloss excluding non-cash expenses and gainsof $13.6 million, and unfavorable net changes in operating assets and liabilities of $26.9 million primarily driven by higher accounts receivable and inventory.

Previous wording

Net cash used in operating activities was $15.3 million for the three months ended March 31, 2023, primarily consisting of a net loss excluding non-cash expenses and gains of $17.6 million, offset by net changes in operating assets and liabilities of $2.3 million.

Current wording

Net cash used in operating activities was $30.0 million for the six months ended June 30, 2023, primarily consisting of a net loss excluding non-cash expenses and gains of$34.4 million, partially offset by net changes in operating assets and liabilities of $4.4 million.

Previous wording

Net cash provided by investing activities was $51.3 million for the three months ended March 31, 2024, due to net cash acquired in connection with the acquisition of ElectraMeccanica.

Current wording

Net cash provided by investing activities was$51.2 million for the six months ended June 30, 2024, due to net cash acquired in connection with the acquisition of ElectraMeccanica, partially offset by property and equipment purchases of $0.2 million.

Previous wording

Net cash provided by investing activities was $22.8 million for the three months ended March 31, 2023, primarily consisted of net proceeds from the sale of investments in marketable debt securities of $23.1 million, offset by property and equipment purchases of $0.3 million.

Current wording

Net cash provided by investing activities was $36.6 million for the six months ended June 30, 2023, which primarily consisted of net proceeds from the sale of investments in marketable debt securities of $37.5 million and net proceeds from sale of assets held for sale of $0.5 million, offset by property and equipment purchases of $1.4 million.

Previous wording

Net cash used in financing activities was $1.1 million for the three months ended March 31, 2024, which primarily related to (i) equipment lease principal payments of $0.6 million, (ii) taxes paid relating to net-settlement of stock-based awards of $0.2 million, and (iii) outflow from net short-term insurance financing note activity of $0.3 million.

Current wording

Net cash used in financing activitieswas $1.6 million for the six months ended June 30, 2024, which primarily related to (i) equipment lease principal paymentsof $1.2 million and (ii) taxes paid relating to net-settlement of stock-based awards of $0.8 million. This was partially offset by proceeds from net short-term insurance financing note activity of $0.3 million.

Previous wording

Net cash used in financing activities was $9.7 million for the three months ended March 31, 2023, primarily related to (i) payments for convertible notes of $9.5 million, (ii) equipment lease principal payments of $0.6 million, and (iii) taxes paid relating to net-settlement of stock-based awards of $0.4 million. This was offset by proceeds from net short-term insurance financing note activity of $0.8 million.

Current wording

Net cash used in financing activities was $17.4 million for the six months ended June 30, 2023, primarily related to (i) payments for convertible notes of $15.7 million, (ii) equipment lease principal payments of $1.2 million, (iii) taxes paid relating to net-settlement of stock-based awards of $0.7 million, and (iv) outflow from net short-term insurance financing note activity of $0.7 million. This was partially offset by proceeds from issuance of common stock under the SEPA of $0.9 million.