Xos, Inc.

Note 1 — Description of Business

Xos, Inc., together with its wholly owned subsidiaries (collectively, the “Company” or “Xos”) is a leading fleet electrification solutions provider committed to the decarbonization of commercial transportation. Xos designs and manufactures Classes 5 through 8 battery-electric commercial vehicles designed to travel on last-mile, back-to-base routes of up to 200 miles per day. Xos also offers charging infrastructure products and services through Xos Energy Solutions™ to support electric vehicle fleets. The Company’s proprietary fleet management software, Xosphere™, integrates vehicle operation and vehicle charging aimed at providing commercial fleet operators a more seamless and cost-efficient vehicle ownership experience than traditional internal combustion engine counterparts. Xos developed the X-Platform (its proprietary, purpose-built vehicle chassis platform) specifically for the medium-duty commercial vehicle segment with a focus on last-mile commercial fleet operations. Xos seeks to offer customers a suite of commercial products and services to facilitate electric fleet operations and seamlessly transition their traditional combustion-engine fleets to battery-electric vehicles.

Business Combination

Xos, Inc. was initially incorporated on July 29, 2020, as a Cayman Islands exempted company under the name “NextGen Acquisition Corporation” (“NextGen”). On August 20, 2021, the transactions contemplated by the Agreement and Plan of Merger, as amended on May 14, 2021, by and among NextGen, Sky Merger Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary of NextGen (“Merger Sub”), and Xos, Inc., a Delaware corporation (now known as Xos Fleet, Inc., “Legacy Xos”), were consummated (the “Closing”), whereby Merger Sub merged with and into Legacy Xos, the separate corporate existence of Merger Sub ceased and Legacy Xos became the surviving corporation and a wholly owned subsidiary of NextGen (such transaction the “Merger” and, collectively with the Domestication, the “Business Combination”), and Xos became the publicly traded entity listed on Nasdaq.

Risks and Uncertainties

In recent years, the United States and other significant markets have experienced cyclical downturns and worldwide economic conditions remain uncertain. Global general economic and political conditions, such as recession, inflation, uncertain credit conditions 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 (or the perception that such changes may occur), and geopolitical events such as local and national elections, corruption, political instability and acts of war or military conflict, or terrorism, 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 or impact their ability to make timely payments. 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. The ultimate impact of current economic conditions on the Company is uncertain, but it may have a material negative impact on the Company’s business, operating results, cash flows, liquidity and financial condition.

Additionally, ongoing geopolitical events, such as the military conflicts between Russia and Ukraine, conflicts and tensions in the Middle East, including those involving Israel and Iran, and economic relations with China and related sanctions and export control restrictions, may increase the severity of supply chain disruptions and further hinder our ability to source inventory for our vehicles. These geopolitical issues continue to evolve and the ultimate impact on the Company is uncertain, but any prolonged or escalating conflict or tension may have a material negative impact on the Company’s business, operating results, cash flows, liquidity and financial condition.

Although the Company has used the best current information available to it in its estimates, actual results could materially differ from the estimates and assumptions developed by management.

Liquidity

As an early-stage company, the Company has incurred net losses and cash outflows since its inception. The Company may continue to incur net losses and cash outflows in accordance with its operating plan as the Company continues to scale its operations to meet anticipated demand and establish its product and service offerings. As a result, the Company’s ability to access capital is critical and until the Company can generate sufficient revenue to cover its operating expenses, working capital and capital expenditures, the

Company will need to raise additional capital in order to fund and scale its operations. The Company may raise additional capital through a combination of debt financing, other non-dilutive financing and/or equity financing, including through asset-based lending and/or receivable financing and collecting on its outstanding receivables. The Company’s ability to raise or access capital when needed is not assured and, if capital is not available to the Company when, and in the amounts needed, the Company could be required to delay, scale back or abandon some or all of its development programs and other operations, which could materially harm its business, prospects, financial condition and operating results. Global general economic conditions continue to be unpredictable and challenging in many sectors, with disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the effects of potential recessions, rising inflation rates, potential bank failures, 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 acts of war or military conflicts including repercussions of the wars between Russia and Ukraine and in Israel, conflicts with Iran and tensions with China, or terrorism.

As of June 30, 2026, the Company’s principal sources of liquidity were its cash and cash equivalents aggregating to$13.2 million. The Company’s short- and long-term uses of cash are for working capital and to pay interest and principal on its debt. The Company has incurred losses in nearly every period since inception and had net cash used in operating activities of$4.3 million and$0.1 million for the six months ended June 30, 2026 and 2025, respectively.

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. The consolidated financial information does not include any adjustments that might result from the outcome of this uncertainty. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

The Company intends to employ various strategies to obtain the required funding for future operations, which may include capital raising strategies such as debt financing, other non-dilutive financing and/or equity financing, including through asset-based lending and/or receivable financing and collecting on its outstanding receivables. The Company may sell additional shares of its Common Stock pursuant to the ATM Offering (as defined below in Note 9 — Equity), subject to certain limitations on the amount of proceeds that may be raised. The Company also had the SEPA (as defined below in Note 9 — Equity), although its ability to access the SEPA was contingent upon specified conditions, including having a post-effective amendment to the Registration Statement on Form S-1, filed on July 27, 2023 filed with the SEC and declared effective. Moreover, the SEPA expired on February 11, 2026.

On August 9, 2022, the Company entered into a note purchase agreement (as amended on September 28, 2022, the “Note Purchase Agreement”) with Aljomaih Automotive Co. (“Aljomaih”) under which the Company agreed to sell and issue to Aljomaih a convertible promissory note with a principal amount of$20.0 million and a maturity date of August 11, 2025. On August 8, 2025, the Company and Aljomaih entered into Amendment Number One to the Note Purchase Agreement and amended and restated the Convertible Note issued thereunder. On August 14, 2025, the Company and Aljomaih entered into a Letter Agreement regarding certain restrictions on convertibility of the Convertible Note (Amendment Number One to the Note Purchase Agreement, the amendment and restatement of the Convertible Note and the Letter Agreement are referred to collectively as the “Aljomaih Amendments”). Among other things, the Aljomaih Amendments extended the maturity of the Convertible Note such that it is now due inten quarterly installments payable between November 11, 2025 and February 11, 2028. The first four such installments are$1.5 million each, the fifth through eighth installments are$2.0 million each and the final two installments are$3.0 million each; provided that such installments may be increased in the event certain financing activities result in proceeds to the Company in excess offour times the aggregate amount of Convertible Note principal payments otherwise required on or prior to any installment date. Pursuant to the Aljomaih Amendments, and notwithstanding the postponement of maturity of the Convertible Note, interest that had accrued on the Convertible Note through August 11, 2025, of approximately$6.0 million in the aggregate, was converted into 1,803,262 shares of Common Stock at the 10-day VWAP (as defined in the Convertible Note) on August 25, 2025. On May 8, 2026, the Company and Aljomaih entered into a Third Amended and Restated Convertible Promissory Note (the "Third A&R Note"). The Third A&R Note reduced the conversion price from $71.451 to$12.00 per share of Common Stock (subject to customary proportional adjustment). The Third A&R Note also adds a mandatory conversion feature to the Convertible Note 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.

Based on the Company’s strategies to raise funds as described above and Xos’s cash and cash equivalents as of June 30, 2026, the Company believes there is substantial doubt about such resources providing sufficient liquidity for the next twelve months following the date of the issuance of the unaudited condensed consolidated financial statements in this Report. Management is presently exploring options to increase liquidity to resolve this concern and facilitate further growth. As a result, it is not probable that Xos’s plans alleviate the substantial doubt about the Company’s ability to continue as a going concern for at least one year from the issuance of the unaudited condensed consolidated financial statements in this Report based on plans Management has been able to execute through the date of the issuance of the unaudited condensed consolidated financial statements in this Report, although additional actions are under review. Absent the Company being able to collect on its outstanding accounts receivable, obtain a sufficient level of new capital in the near-term and/or obtain replacement financing for, or further extend the maturity of, existing debt, the Company could be required to seek protection under Chapters 7 or 11 of the United States Bankruptcy Code. This could potentially cause the Company to cease operations.

Supply Chain Disruptions

While the Company’s ability to source certain critical inventory items has been steadily improving, it continues to experience the effects of global economic conditions, which have impacted the availability, cost, and lead times of certain components. The Company has also observed intermittent shortages of specific components, primarily in power electronics and harnesses, and disruptions to the supply of components.

Fluctuating tariff regimes, particularly those affecting power electronics, batteries and battery components, semiconductors, and structural materials, have increased variability in the Company's cost structure and procurement planning. Tariffs imposed under Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974 remained in effect during the period and applied to certain imported components used by the Company. Effective January 1, 2026, previously announced Section 301 tariff increases on certain Chinese-origin products took effect, including a significant increase in the rate applicable to certain lithium-ion batteries and new tariffs on natural graphite and permanent magnets. A temporary global import surcharge under Section 122 of the Trade Act of 1974 was also in effect from February 24, 2026, through July 24, 2026, subject to specified exemptions and limitations. Subsequent to the period, new Section 301 tariffs took effect on July 24, 2026, covering products from a broad group of trading partners, including an additional tariff on most Chinese-origin products, subject to specified exemptions; these tariffs may apply in addition to other applicable duties. Ongoing and potential trade actions, including active Section 232 and 301 investigations, could result in additional tariffs on supply chain components, increasing costs and disrupting sourcing, procurement, or production planning.

The Company has taken actions to mitigate these impacts, including qualifying alternative suppliers, renegotiating pricing and delivery terms, and managing inventory levels of critical components. However, ongoing supply chain disruptions, tariff measures, and supplier constraints may continue to affect the Company’s cost structure, production schedules, and ability to source components on commercially reasonable terms.

Note 2— Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

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

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. They do not include all of the information and footnotes required by U.S. GAAP for complete audited financial statements. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, all adjustments (primarily consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the years ended December 31, 2025 and 2024 presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 30, 2026, as amended by Amendment No. 1 thereto on Form 10-K/A filed with the SEC on April 21, 2026.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenues and expenses during the reporting periods. The areas with significant estimates and judgments include, among others, inventory valuation, incremental borrowing rates for assessing operating and financing lease liabilities, useful lives of property and equipment, stock-based compensation, and product warranty liability. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to the Company’s financial statements.

Reclassifications

Certain prior period balances have been reclassified to conform to the current period presentation in the unaudited condensed consolidated financial statements and the accompanying notes, including (i) classification of amounts comprising employee-related costs and stock-based compensation as described in Note 17 — Segment Reporting and (ii) classification of amounts comprising contract liabilities as described in Note 6 — Selected Balance Sheet Data. These reclassifications have no effect on previously reported total assets, total liabilities or net loss.

Revision of Previously Issued Financial Statements

The Company has identified an immaterial prior period revision with respect to the improper recording of vendor accrued purchases within other current liabilities, in its previously reported financial statements for the periods ended December 31, 2024, March 31, 2025, June 30, 2025, December 31, 2025, and March 31, 2026.

In accordance with Staff Accounting Bulletin ("SAB") 99, Materiality, and SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements, the Company evaluated the materiality of the errors from qualitative and quantitative perspectives, and concluded that the errors were immaterial to any prior annual and interim financial statements. Notwithstanding this conclusion, management has revised the accompanying unaudited condensed consolidated financial statements for the affected periods, and related notes included herein to correct the errors. Refer to Note 19 — Revision of Previously Reported Information in the unaudited condensed consolidated financial statements for further details.

Warranty Liability

The Company provides customers with a product warranty that assures that the products meet standard specifications and is free for periods typically between 2 to 5 years. The Company accrues a warranty reserve for the products sold, which includes its best estimate of the projected costs to repair or replace items under warranties and recalls, if identified. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain given the Company’s relatively short history of sales, and changes to its historical or projected warranty experience may cause material changes to the warranty reserve in the future. Claims incurred under the Company’s standard product warranty programs are recorded based on open claims. The Company recorded warranty liability within other current liabilities in the consolidated balance sheets as of June 30, 2026 and December 31, 2025.

The reconciliation of the change in the Company’s product liability balances during thethree and six months ended June 30, 2026 and 2025 consisted of the following(in thousands):

Concentrations of Credit and Business Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation coverage limit of$250,000. As of June 30, 2026 and 2025, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

During the three months ended June 30, 2026, four customers accounted for 27%,15%,14%, and 13% of the Company’s revenues. During the three months ended June 30, 2025, one customer accounted for 70% of the Company’s revenues. During the six months ended June 30, 2026, two customers accounted for 38% and 22% of the Company’s revenues. During the six months ended June 30, 2025, one customer accounted for 53% of the Company’s revenues.

Accounts receivable totaled$4.5 million, net of allowance of$34,000,$6.0 million, net of allowance of$49,000, and$26.9 million, net of allowance of$0.2 million as of June 30, 2026, December 31, 2025 and December 31, 2024, respectively. As of June 30, 2026, five customers accounted for 19%,16%,15%,14%, and 13% of the Company’s accounts receivable. As of December 31, 2025, four customers accounted for 17%,14%,12%, and 10% of the Company’s accounts receivable.

Concentration of Supply Risk

The Company is dependent on its suppliers, the majority of which are single-source suppliers, and the inability of these suppliers to deliver necessary components of its products according to the schedule and at prices, quality levels and volumes acceptable to the Company, or its inability to efficiently manage these components, could have a material adverse effect on the Company’s results of operations and financial condition.

As of June 30, 2026, one vendor accounted for 14% of the Company’s accounts payable. As of December 31, 2025, two vendors accounted for 12%, and 11% of the Company’s accounts payable.

Segment Information

The Company operates underone segment as it has developed, marketed, and sold primarily only one class of similar products of electric stepvans, stripped chassis vehicles, battery systems, hubs, and other products. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer.

The CODM assesses performance of the segment and decides how to allocate resources based on revenue, gross profit, employee-related costs and net loss presented on a consolidated basis, for purposes of allocating resources and evaluating financial performance. The Company hasone business activity and there are no segment managers who are held accountable for operations, operating results and plans for products or components below the consolidated unit level. Accordingly, the Company reports under a single operating segment. The accounting policies of the segment are the same as those described in the summary of significant accounting policies.

Recent Accounting Pronouncements Issued and Adopted:

In July 2025, the FASB issued Accounting Standards Update ("ASU") No. 2025-05, Financial Instruments – Credit Losses (Topic 326), to allow entities to elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset when estimating expected credit losses for current accounts receivable and current contract assets. These amendments are effective for the Company for annual and interim periods in 2026 applied prospectively, with early adoption permitted.

We adopted this ASU on a prospective basis effective January 1, 2026 and elected the practical expedient permitted under this ASU. The impact of the adoption of the amendments in this update was not material to the Company’s unaudited condensed consolidated financial statements.

Recent Accounting Pronouncements Issued and not yet Adopted:

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses including purchases of inventory, employee compensation, depreciation and intangible asset amortization in commonly presented expense captions such as cost of sales, selling, general and administrative expense, and research and development. As clarified, these amendments are effective for the Company for annual periods in 2027, applied prospectively, with early adoption permitted, and interim periods beginning in 2028. The Company intends to adopt the amendments in this update prospectively in 2027 for annual periods and in 2028 for interim periods. The impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations, as the requirements only require more detailed disclosures in the footnotes to the Company’s consolidated financial statements.

In September 2025, the FASB issued ASU No. 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, to update the accounting for software developed for internal use to better align with software development as it has evolved from a sequential development method to incremental and iterative development methods. The amendments in this update require an entity to begin capitalizing internal-use software costs when management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. These amendments are effective for the Company for annual and interim periods in 2028, applied either prospectively, retrospectively, or by a modified approach, with early adoption permitted. As the Company does not currently have a material amount of software developed for internal use, the impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations.

In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, to update the disclosure requirements for interim reporting periods. The amendments in this update require additional disclosure of events since the end of the prior annual reporting period that have a material impact on the entity. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, applied either prospectively, with early adoption permitted, or by a retrospective approach. The Company intends to adopt the amendments in this update prospectively for interim periods in 2028. The impact of the adoption of the amendments in this update is not expected to be material to the Company’s unaudited condensed consolidated financial position and results of operations, as the requirements only require more detailed disclosures in the Company’s interim unaudited condensed consolidated financial statements and accompanying footnotes.

In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements, to address thirty-three items that clarify, correct errors, or make minor improvements to existing topics. Generally, the amendments in this update are not intended to result in significant changes for most entities. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2026, applied either prospectively, with early adoption permitted, or by a retrospective approach on an issue-by-issue basis. The Company is currently evaluating the provisions of this amendment and does not expect this amendment to have a material impact on our consolidated financial statements.

The Company is still evaluating all other applicable recently issued accounting pronouncements to evaluate the impact of the adoption of such pronouncements on its consolidated financial statements or notes thereto.

Note 3— Revenue Recognition

Disaggregated revenues by major source for thethree and six months ended June 30, 2026 and 2025 consisted of the following (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 thethree and six months ended June 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$8,000 as of June 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.

The Company leases stepvans and hubs to customers under operating leases with terms ranging from 24 to 36 months. At the end of the lease term, customers are required to return the vehicles to Xos. During the three months ended June 30, 2026 and 2025, the Company recorded operating lease revenue of$0 and$4,000, respectively, on a straight-line basis over the contractual terms of the respective leases as part of stepvans & vehicle incentives, above. During the six months ended June 30, 2026 and 2025, the Company recorded operating lease revenue of$0 and$11,000, respectively, on a straight-line basis over the contractual terms of the respective leases as part of stepvans & vehicle incentives, above. During the three months ended June 30, 2026 and 2025, the Company recorded operating lease revenue of$80,000 and$11,000, respectively, on a straight-line basis over the contractual terms of the respective leases as part of powertrains & hubs, above. During thesix months ended June 30, 2026 and 2025, the Company recorded operating lease revenue of$109,000 and$22,000, respectively, on a straight-line basis over the contractual terms of the respective leases as part of powertrains & hubs, above.

Note 4— Lease Receivable

For deferred equipment agreements that contain embedded operating leases, upon lease commencement, the Company defers and records the equipment cost of operating lease assets within property and equipment, net of accumulated depreciation. These operating lease assets are subsequently amortized to cost of goods sold over the lease term on a straight-line basis.

For deferred equipment agreements that contain embedded sales-type leases, the Company recognizes lease revenue and costs, as well as a lease receivable, at the time the lease commences. Lease revenue related to both operating and sales-type leases for the three months ended June 30, 2026 and 2025 was approximately$80,000 and$15,000, respectively. Lease revenue related to both operating and sales-type leases for the six months ended June 30, 2026 and 2025 was approximately$109,000 and$33,000, respectively. Costs related to embedded leases within the Company’s deferred equipment agreements are included in cost of goods sold in the accompanying unaudited condensed consolidated statement of operations. Interest on the lease receivable was immaterial to the unaudited condensed consolidated financial statements for both the three and six months ended June 30, 2026 and 2025.

As of June 30, 2026, estimated future maturities of customer sales-type lease receivable and operating lease payments for each of the following fiscal years are as follows:

Note 5 — Inventories

Inventory amounted to$23.5 million and$25.0 million, respectively, as of June 30, 2026 and December 31, 2025 and consisted of the following(in thousands):

Inventories as of June 30, 2026 and December 31, 2025 were comprised of raw materials, work in process and finished goods related to the production of stepvans, powertrains, hubs, and other products for sale and finished goods inventory including vehicles in transit to fulfill customer orders, new vehicles, new vehicles awaiting final pre-delivery quality review inspection, and Xos Energy Solutions products available for sale. The remaining capitalized labor and overhead cost remaining in work in process and finished goods inventory is$0.7 million and$0.6 million as of June 30, 2026 and December 31, 2025, respectively.

Inventories are stated at the lower of cost or net realizable value. Cost is computed using average cost. Inventory write-downs are based on reviews for excess and obsolescence determined primarily by current and future demand forecasts. During the three months ended June 30, 2026 and 2025, the Company recorded a favorable change in our inventory reserves of$0.7 million and$1.7 million, respectively, to reflect inventories at their net realizable values and provide an allowance for any excess or obsolete inventories. During the six months ended June 30, 2026 and 2025, the Company recorded a favorable change in our inventory reserves of$0.9 million and$2.2 million, respectively, to reflect inventories at their net realizable values and provide an allowance for any excess or obsolete inventories.

Note 6 — Selected Balance Sheet Data

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets as of June 30, 2026 and December 31, 2025 consisted of the following (in thousands):

(1)

Primarily relates to prepayments for energy services projects, prepaid insurance, prepaid licenses and subscriptions, other receivables, and contract assets arising from contracts with customers. Contract assets arising from contracts with customers totaled$0,$0, and$1.1 million, as of June 30, 2026, December 31, 2025 and December 31, 2024, respectively.

(2)

Assets held for sale are comprised of manufacturing equipment no longer used in production and intended to be sold.

Other Non-Current Assets

Other non-current assets as of June 30, 2026 and December 31, 2025 consisted of the following (in thousands):

(1)

Primarily relates to security deposits for operating leases.

(2)

Represents the estimated amount that can be recovered from previously paid tariffs relating to crushed SOLO vehicles that were acquired in connection with the ElectraMeccanica acquisition.

Other Current Liabilities

Other current liabilities as of June 30, 2026 and December 31, 2025 consisted of the following(in thousands):

(1)

Primarily relates to other accrued expenses, accrued inventory purchases, remaining lease termination payments related to the Mesa Lease, and accrued professional fees.

(2)

Contract liabilities, current, arising from contracts with customers is$0.3 million as of December 31, 2024.

(3)

Represents accrued interest on the Convertible Promissory Note, which interest is convertible into shares of our Common Stock at maturity.

(4)

Primarily relates to payroll liabilities such as accrued payroll, accrued vacation, accrued bonuses and other payroll liabilities.

(5)

Customer deposits balance is$1.3 million as of December 31, 2024.

Revenue recognized from the customer deposits and contract liabilities balance for both of the three months ended June 30, 2026 and 2025 was$0.1 million. Revenue recognized from the customer deposits and contract liabilities balance for the six months ended June 30, 2026 and 2025 was$0.6 million and$0.4 million, respectively.

Other Non-Current Liabilities

Other non-current liabilities as of June 30, 2026 and December 31, 2025 consisted of the following (in thousands):

(1)

Contract liabilities, non-current, arising from contracts with customers is$0.4 million as of December 31, 2024.

(2)

Primarily relates to operating lease liabilities assumed in connection with the ElectraMeccanica acquisition.

Note 7 — Earn-out Shares Liability

The Company has a contingent obligation to issue 547,000 shares (the “Earn-out Shares”) of Common Stock and grant 8,700 restricted stock units (“Earn-out RSUs”) to certain stockholders and employees upon the achievement of certain market share price milestones within specified periods following the Business Combination on August 20, 2021.

The Earn-out Shares will be issued in tranches based on the following conditions:

i.

If the volume-weighted average closing share price (“VWAP”) of the Common Stock equals or exceeds $420.00 per share for any 10 trading days within any consecutive 20-trading day period between the Merger closing date and thefive year anniversary of such closing date (“Earn-out Period”), then the Company is required to issue an aggregate of 180,000 shares (“Tranche 1 Earn-out Shares”) of Common Stock to holders with the contingent right to receive Earn-out Shares (excluding any Earn-out RSUs). If after Closing and during the Earn-out Period, there is a Change in Control (as defined in the Merger Agreement), the Company is required to issue Tranche 1 Earn-out Shares when the value per share of the Company is equal to or greater than $420.00 per share, but less than $600.00. If there is a change in control where the value per share of Common Stock is less than $420.00, then the Earn-out Shares shall terminate prior to the end of the Earn-out Period and no Common Stock shall be issuable.

ii.

If the VWAP of the Common Stock equals or exceeds $600.00 per share for any 10 trading days within any consecutive 20-trading day period during the Earn-out Period, then the Company is required to issue an aggregate of 180,000 shares (“Tranche 2 Earn-out Shares”) of Common Stock to holders with the contingent right to receive Earn-out Shares (excluding any Earn-out RSUs). If after Closing and during the Earn-out Period, there is a Change in Control (as defined in the Merger Agreement), the Company is required to issue Tranche 2 Earn-out Shares when the value per share of the Company is equal to or greater than $600.00 per share, but less than $750.00.

iii.

If the VWAP of the Common Stock equals or exceeds $750.00 per share for any 10 trading days within any consecutive 20-trading day period during the Earn-out Period, then the Company is required to issue an aggregate of 180,000 shares (“Tranche 3 Earn-out Shares”) of Common Stock to holders with the contingent right to receive Earn-out Shares (excluding any Earn-out RSUs). If after Closing and during the Earn-out Period, there is a Change in Control (as defined in the Merger Agreement), the Company is required to issue Tranche 3 Earn-out Shares when the value per share of the Company is equal to or greater than $750.00 per share.

Pursuant to the guidance under ASC 815, Derivatives and Hedging, the right to Earn-out Shares was classified as a Level 3 fair value measurement liability, and the increase or decrease in the fair value during the reporting period is recognized in the unaudited condensed consolidated statement of operations accordingly. The fair value of the Earn-out Shares liability was estimated using the Monte Carlo simulation of the stock prices based on historical and implied market volatility of a peer group of public companies.

For each of the periods ended June 30, 2026 and December 31, 2025, the fair value of the Earn-out Shares liability was estimated to be $0. The Company recognized a change in fair value in Earn-out Shares liability of $0 in its unaudited condensed consolidated statements of operations during both the three and six months ended June 30, 2026 and 2025.

The allocated fair value to the Earn-out RSU component, which is covered by ASU 718, Compensation — Stock Compensation, is recognized as stock-based compensation expense over the vesting period commencing on the grant date of the award.

Note 8 — Convertible Notes

Convertible Promissory Note

On August 9, 2022, the Company entered into the Note Purchase Agreement with Aljomaih under which the Company agreed to sell and issue to Aljomaih a convertible promissory note with a principal amount of $20.0 million. On August 11, 2022, pursuant to the Note Purchase Agreement, the Company sold and issued $20.0 million in principal amount of a convertible promissory note (the “Original Note”) to Aljomaih. On September 28, 2022, the Company and Aljomaih agreed to amend and restate the Original Note (as amended and restated, the “Note”) to, among other things, adjust the calculation of the shares of the Company’s Common Stock issuable as interest, as described further below.

The Note, which was initially scheduled to mature on August 11, 2025, bears interest at a rate of 10.0% per annum, payable at maturity in validly issued, fully paid and non-assessable shares of Common Stock (“Interest Shares”), unless earlier converted or paid. If the 10-day VWAP ending on the trading day immediately prior to the applicable payment date is greater than or equal to the Minimum Price

(asdefined in Nasdaq Rule 5635(d)) or the Company has received the requisite approval from its stockholders (which it has), the number of Interest Shares to be issued will be calculated based on such 10-day VWAP; otherwise, the number of Interest Shares to be issued would have been based on the Nasdaq Minimum Price. The conversion price for the Note is initially equal to $71.451 per share, subject to adjustment in some events pursuant to the terms of the Note. The Company will have the right, in its sole discretion and exercisable at its election by sending notice of such exercise to Aljomaih, to irrevocably fix the method of settlement that will apply to all conversions of Notes. Methods of settlement include (i) physical settlement in shares of Common Stock, (ii) cash settlement determined by multiplying the principal being converted by the 10-day VWAP ending on the trading day immediately prior to the conversion date and dividing by the conversion price, or (iii) a combination of Common Stock and cash.

On August 8, 2025, the Company and Aljomaih entered into Amendment Number One to the Note Purchase Agreement and amended and restated the Convertible Note issued thereunder. On August 14, 2025, the Company and Aljomaih entered into a Letter Agreement regarding certain restrictions on convertibility of the Convertible Note. Among other things, the Aljomaih Amendments extended the maturity of the Convertible Note so that it is now due inten quarterly installments payable between November 11, 2025 and February 11, 2028. The first four such installments are $1.5 million each, the fifth through eighth installments are $2.0 million each and the final two installments are $3.0 million each; provided that such installments may be increased in the event certain financing activities result in proceeds to the Company in excess of four times the aggregate amount of Convertible Note principal payments otherwise required on or prior to any installment date. Pursuant to the Aljomaih Amendments, and notwithstanding the postponement of maturity of the Convertible Note, the interest accrued on the Convertible Note through August 11, 2025, of approximately$6.0 million in the aggregate, was converted into 1,803,262 shares of Common Stock at the 10-day VWAP (as defined in the Convertible Note) on August 25, 2025.

On May 8, 2026, the Company and Aljomaih entered into the Third A&R Note. The Third A&R Note reduced the conversion price from $71.451 to$12.00 per share of Common Stock (subject to customary proportional adjustment). The Third A&R Note also adds a mandatory conversion feature to the Convertible Note 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.

The future scheduled mandatory prepayments of principal as of June 30, 2026 were as follows (in thousands):

The Note also includes an optional redemption feature that provides the Company, on or after August 11, 2024, or as otherwise agreed to between the Company and Aljomaih in writing, the right to redeem the outstanding principal and accrued and unpaid interest, upon written notice not less than 5 trading days prior to exercise of the option, in full or in part and without penalty.

The Company accounts for the Note in accordance with the guidance contained in Accounting Standards Codification ("ASC") 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, under which the Note was analyzed for the identification of material embedded features that meet the criteria for equity treatment and/or bifurcation and must be recorded as a liability. The Company initially classified the Note as a non-current liability given a maturity date of greater than one year, however, during the quarter ended September 30, 2024, the Note was reclassified as a current liability since its maturity date is less than one year from September 30, 2024. On August 8, 2025, the Note was amended subject to Amendment Number One, and as a result of such amendment, a portion of the Note has been reclassified as a non-current liability at June 30, 2025, due to a change in the principal repayment schedule of the Note.

The Note will not be included in the computation of either basic or diluted EPS for the three and six months ended June 30, 2026 and 2025 in Note 16 — Net Loss per Share. This financial instrument is not included in basic EPS because it does not represent participating securities. Further, the Note is not included in diluted EPS because including these financial instruments would have an antidilutive effect on EPS for the three and six months ended June 30, 2026 and 2025.

As of June 30, 2026, the Company had a principal balance of$15.5 million. As of December 31, 2025, the Company had a principal balance of$18.5 million outstanding. The Company recorded interest expense of$0.4 million and$0.5 million in other expense, net, related to the Note during the three months ended June 30, 2026 and 2025, respectively. The Company recorded interest expense of$0.8 million and$1.0 million in other expense, net, related to the Note during the six months ended June 30, 2026 and 2025, respectively.

Note 9 — Equity

Xos Common and Preferred Stock

The Company is authorized to issuetwo classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Company is authorized to issue is 1,010,000,000 shares.1,000,000,000 shares shall be Common Stock, each having a par value of one-hundredth of one cent ($0.0001).10,000,000 shares shall be Preferred Stock, each having a par value of one-hundredth of one cent ($0.0001).

Voting Rights: Each outstanding share of Common Stock shall entitle the holder thereof toone vote on each matter properly submitted to the stockholders of the Company for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).

Preferred Stock: The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Company (the “Board of Directors”) is expressly authorized to provide for the issue of all or any number of the shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the Delaware General Corporation Law (the “DGCL”). The Board of Directors is also expressly authorized to increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.

Standby Equity Purchase Agreement

On March 23, 2022, the Company 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 the Company had the right, but not the obligation, to sell to Yorkville up to $125.0 million of shares of its Common Stock at its request any time until February 11, 2026, subject to certain conditions.

As consideration for Yorkville’s commitment to purchase shares of Common Stock at the Company’s direction upon the terms and subject to the conditions set forth in the SEPA, upon execution of the SEPA, the Company issued 619 shares of Common Stock to Yorkville.

On June 22, 2023, the Company and Yorkville entered into the First Amendment to Standby Equity Purchase Agreement (the “SEPA Amendment”), in which the Company and Yorkville amended the SEPA to: (1) change the calculation of the purchase price of an Option 1 Advance (as defined in the SEPA) from an average of the daily VWAP of the Common Stock during athree-day pricing period to the lowest VWAP during such three-day pricing period; (2) change the denomination of any requested advances from the Company to Yorkville under the SEPA from dollars to shares; (3) increase Yorkville’s beneficial ownership limitation under the SEPA from 4.99% to 9.99% of the outstanding Common Stock, provided that if any portion of an advance under the SEPA would cause Yorkville to exceed the beneficial ownership limitation due to Yorkville’s ownership of the Company’s securities convertible into Common Stock, then the maximum number of shares of Common Stock that such securities will be convertible into will be reduced by the number of shares of

Common Stock included in such advance for such period that Yorkville holds such shares of common stock covered by such advance and the number of shares of Common Stock covered by such advance would not be reduced; (4) extend the commitment period to February 11, 2026 and (5) make other administrative and drafting changes.

During both of the three months ended June 30, 2026 and 2025, the Company issued 0 shares of Common Stock under the SEPA. As of December 31, 2025, the remaining commitment available under the agreement was $119.4 million, However, our ability to utilize the remaining commitment amount was limited by various factors, including, but not limited to, the availability of an effective registration statement permitting the resale of such shares of Common Stock. Ultimately, the Company did not cause the effectiveness of any such registration statement during 2025 or thereafter, and the SEPA expired on February 11, 2026.

Common Stock Offering

On May 30, 2023, the Company filed a Registration Statement on Form S-3 (File No. 333-272284), to issue and sell from time to time, together or separately, certain securities at an aggregate public offering price that will not exceed $100 million (the "2023 Registration Statement"). The 2023 Registration Statement was declared effective on June 8, 2023. On August 14, 2025, the Company filed a prospectus supplement to the prospectus included in the 2023 Registration Statement for an at-the-market offering ("ATM Offering") by the Company of up to $5.4 million of its Common Stock. The Sales Agreement, dated August 14, 2025, with respect to the Company’s ATM Offering (the “Sales Agreement”) provides for the sale of the Company’s stock in at-the-market sales up to $20 million, subject to the amount available to be sold by the Company pursuant to its registration statement. On June 5, 2026, the Company filed a registration statement on Form S-3 (File No. 333-296569) to issue and sell from time to time, together or separately, certain securities at an aggregate public offering price that will not exceed $100 million (the “2026 Registration Statement”). The 2026 Registration Statement was declared effective on June 22, 2026, replacing the 2023 Registration Statement. On June 23, 2026, the Company filed a prospectus supplement to the prospectus included in the 2026 Registration Statement for an ATM Offering by the Company of up to$8.8 million of its Common Stock.

During both of the three and six months ended June 30, 2026,378,700 shares of Common Stock were sold under the ATM Offering program at an average price of$6.71 per share for aggregate net proceeds of$2.2 million after commissions of$0.1 million and legal, accounting, investor relations, and other offering costs of$0.2 million. During both of the three and six months ended June 30, 2025, no shares of Common stock were sold under the ATM Offering program. As of June 30, 2026, the Company had $8.8 million of shares of Common Stock available for future issuance under the ATM Offering pursuant to the Company’s prospectus supplement with respect to the ATM Offering, and $14.6 million remaining under the terms of the Sales Agreement.

Registered Direct Offering

On June 4, 2026, the Company entered into a Securities Purchase Agreement with institutional investors, pursuant to which the Company issued and sold 1,090,910 shares of its Common Stock at a purchase price of$5.50 per share for aggregate net proceeds of approximately$5.4 million after deducting placement agent fees of approximately$0.4 million and legal, investor relations, and other offering costs of$0.2 million.

Note 10 — Derivative Instruments

Public and Private Placement Warrants

As of June 30, 2026, the Company had 18,633,301 Public Warrants and 199,997 Private Placement Warrants outstanding, with fair values of$78,000 and $840, respectively.

Each Warrant is exercisable to purchase one-thirtieth of one share of Common Stock. The Public Warrants have an exercise price of $345.00 per whole share, subject to adjustments, and will expire on August 20, 2026 or earlier upon redemption or liquidation. The Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants were issued upon separation of the units and only whole Public Warrants trade. The Public Warrants became exercisable; provided that the Company has an effective registration statement under the Securities Act covering the issuance of the Common Stock issuable upon exercise of the Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or the Company permits holders to exercise their Warrants on a cashless basis under the circumstances specified in the warrant agreement). A registration statement was filed with the SEC covering the issuance of the Common Stock issuable upon exercise of the Warrants, and the Company undertook use its commercially reasonable efforts to maintain the effectiveness of such registration statement and a current prospectus relating to those shares of Common Stock until the Public Warrants expire or are redeemed. If the shares of Common Stock are at the time of any exercise of a Public Warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement.

The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the Common Stock issuable upon exercise of the Private Placement Warrants were not transferable, assignable or salable until September 19, 2021, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial shareholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

Redemption of Warrants for cash when the price per share of Common Stock equals or exceeds $540.00:

At any time that the Warrants are exercisable, the Company may redeem the outstanding Warrants (except as described above with respect to the Private Placement Warrants):

•

in whole and not in part;

•

at a price of $0.01 per Warrant;

•

upon not less than 30 days’ prior written notice of redemption to each Warrant holder; and

•

if, and only if, the last reported sale price of Common Stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders (the “Reference Value”) equals or exceeds $540.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations and the like).

The Company will not redeem the Warrants as described above unless a registration statement under the Securities Act covering the issuance of the Common Stock issuable upon exercise of the Warrants is then effective and a current prospectus relating to those Common Stock is available throughout the 30-day redemption period. If and when the Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

Redemption of Warrants for Common Stock when the price per share equals or exceeds $300.00:

At any time that the Warrants are exercisable, the Company may redeem the outstanding Warrants (including both Public Warrants and Private Placement Warrants):

•

in whole and not in part;

•

at $0.10 per Warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” of Common Stock;

•

if, and only if, the Reference Value equals or exceeds $300.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like); and

•

if the Reference Value is less than $540.00 per share (as adjusted), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.

The “fair market value” of Common Stock shall mean the average reported last sale price of Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Warrants.

In no event will the Company be required to net cash settle any Warrant. The Warrants may also expire worthless.

Note 11 — Share-Based Compensation

2018 Stock Plan

On November 27, 2018, the Legacy Xos’s board of directors and stockholders adopted the 2018 Stock Plan. There areno shares available for issuance under the 2018 Stock Plan; however, the 2018 Stock Plan continues to govern the terms and conditions of the outstanding awards granted under the 2018 Stock Plan.

As of June 30, 2026, there were 1,165 Options outstanding under the 2018 Stock Plan. The amount and terms of Option grants were determined by the board of directors of Legacy Xos. The Options granted under the 2018 Stock Plan generally expire within 10 years from the date of grant and generally vest over four years, at the rate of 25% on the first anniversary of the date of grant and ratably on a monthly basis over the remaining 36-month period thereafter based on continued service.

Stock option activity during thethree months ended June 30, 2026 consisted of the following:

Aggregate intrinsic value represents the difference between the exercise price of the options and the fair value of the Company’s Common Stock. The aggregate intrinsic value of options exercised during the three months ended June 30, 2026 and 2025 was approximately$35 and$0, respectively. The aggregate intrinsic value of options exercised during the six months ended June 30, 2026 and 2025 was approximately$35 and$2,351, respectively.

The Company estimates the grant date fair value of options utilizing the Black-Scholes option pricing model, which is dependent upon several variables, including expected option term, expected volatility of the Company's share price over the expected term, expected risk-free rate and expected dividend yield rate. There wereno option grants during thethree and six months ended June 30, 2026 and 2025.

2021 Equity Plan

On August 19, 2021 the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Equity Plan”), which was ratified by the Company’s board of directors on August 20, 2021. The 2021 Equity Plan provides for the grant of incentive stock options (“ISOs”), within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) to employees, including employees of any parent or subsidiary, and for the grant of non-statutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance awards and other forms of awards to employees, directors and consultants, including employees and consultants of Xos’s affiliates. On June 24, 2024, the Company’s stockholders approved the Xos, Inc. Amended and Restated 2021 Equity Incentive Plan (the “A&R 2021 Equity Plan”) to increase the aggregate number of shares of Common Stock reserved for issuance under the 2021 Equity Plan by 1,180,819 shares. On June 24, 2025, the Company’s stockholders approved the 2025 Amendment to the Xos, Inc. Amended and Restated 2021 Equity Incentive Plan (the “2025 Amendment”) to increase the aggregate number of shares of Common Stock reserved for issuance under the 2021 Equity Plan by 3,100,000 shares. On June 23, 2026, the Company’s stockholders approved the 2026 Amendment to the Xos, Inc. Amended and Restated 2021 Equity Incentive Plan (the “2026 Amendment”) to increase the aggregate number of shares of Common Stock reserved for issuance under the 2021 Equity Plan by 3,740,000 shares.

As of June 30, 2026, there were 5,972,396 shares of Common Stock available for issuance under the A&R 2021 Equity Plan, as amended.

RSU activity during thethree months ended June 30, 2026 consisted of the following:

The Company recognized stock-based compensation expense (including Earn-out RSUs) in the unaudited condensed consolidated statements of operations for thethree and six months ended June 30, 2026 totaling approximately$2.0 million and$4.1 million, respectively, and June 30, 2025, totaling approximately$1.6 million and$3.1 million, respectively, which consisted of the following (in thousands):

We allocate stock-based compensation expense to cost of goods sold, research and development expense, sales and marketing expense and general and administrative expense, based on the roles of the applicable recipients of such stock-based compensation. The unamortized stock-based compensation expense was$6.3 million as of June 30, 2026, and weighted average remaining amortization period as of June 30, 2026 was 1.39 years.

The aggregate fair value of RSUs that vested was$2.2 million and$4.1 million during the three and six months ended June 30, 2026, respectively.

Note 12 — Property and Equipment, net

Property and equipment, net consisted of the following at June 30, 2026 and December 31, 2025(in thousands):

(1)

Amounts include operating lease assets (stepvans and hubs) for which the Company is a lessor. As of June 30, 2026, gross operating lease assets and accumulated depreciation on operating lease assets were$0.9 million and$0.2 million, respectively. As of December 31, 2025, gross operating lease assets and accumulated depreciation on operating lease assets were $0.3 million and $0.1 million, respectively.

Depreciation expense during the three months ended June 30, 2026 and 2025 totaled$0.5 million and$0.6 million, respectively. Depreciation expense during both the six months ended June 30, 2026 and 2025 totaled$1.1 million.

Note 13 — Commitments and Contingencies

Legal Contingencies

Legal claims may arise from time to time in the normal course of business, the results of which may have a material effect on the Company’s accompanying unaudited condensed consolidated financial statements. As of June 30, 2026 and December 31, 2025, the Company was not a party to any legal proceedings, that individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

Other Contingencies

The Company enters into non-cancellable long-term purchase orders and vendor agreements in the normal course of business. As of June 30, 2026, non-cancellable purchase commitments with three of the Company’s vendors totaled approximately$31,000.

Note 14 — Related Party Transactions

The Company has lease agreements with Fitzgerald Manufacturing Partners. The owner of Fitzgerald Manufacturing Partners is a stockholder of the Company. For each of the three months ended June 30, 2026 and 2025, the Company incurred rent expense of$0.1 million and$0.2 million, respectively, related to these agreements. For the six months ended June 30, 2026 and 2025, the Company incurred rent expense of$0.3 million and$0.4 million, respectively, related to these agreements.

Note 15 — Income Taxes

The Company’s effective tax rate during the three months ended June 30, 2026 and 2025 was(0.39%) and(0.17%), respectively. The Company’s effective tax rate during the six months ended June 30, 2026 and 2025 was(0.27%) and(0.14%), respectively. State taxes coupled with losses not benefited resulted in an effective tax rate below the statutory tax rate of 21% for the six months ended June 30, 2026.

The Company recognizes tax benefits related to positions taken, or expected to be taken, on its tax returns, only if the positions are “more-likely-than-not” sustainable. Once this threshold has been met, the Company’s measurement of its expected tax benefits is recognized in its financial statements. The Company does not have any uncertain tax positions that meet this threshold as of June 30, 2026 and December 31, 2025.

The Company is subject to income taxation and files tax returns with the U.S. Internal Revenue Service and various state jurisdictions. The Company is not currently under audit or examination by any income tax authorities, except for an audit of its 2020 California state income tax return by the California Franchise Tax Board. Management does not believe that any uncertain tax benefits require recognition. Generally, the Company is no longer subject to examination for tax years prior to 2021, except for California.

At June 30, 2026, the Company’s deferred income taxes were in a net asset position mainly due to deferred tax assets generated by net operating losses. The Company assesses the likelihood that its deferred tax assets will be realized. A full review of all positive and negative evidence needs to be considered, including the Company's current and past performance, the market environments in which the Company operates, the utilization of past tax credits, the length of carryback and carryforward periods, and tax planning strategies that might be implemented. Management believes that, based on a number of factors, it is more likely than not that all or some portion of the deferred tax assets may not be realized; accordingly, the Company has provided a valuation allowance against its net deferred tax assets at June 30, 2026 and December 31, 2025.

One Big Beautiful Bill Act

On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense . The Act modifies various energy credits to accelerate the phase out of these credits. The Act also includes certain changes to the US taxation of foreign activity, including changes to foreign tax credits, Global Intangible Low-Taxed Income (GILTI), Foreign-Derived Intangible Income (FDII), and Base Erosion and Anti-Abuse Tax (BEAT), amongst other changes. These changes are generally effective for tax years beginning after December 31, 2025. The Company evaluated the impact of the legislation in accordance with ASC 740 and determined that it did not have a material effect on the Company’s unaudited condensed consolidated financial statements for the period ended June 30, 2026 and the legislation did not result in the recognition or remeasurement of deferred tax liabilities or current income taxes.

Note 16 — Net Loss per Share

Basic and diluted net loss per share during thethree and six months ended June 30, 2026 and 2025 consisted of the following (in thousands, except per share amounts):

(1)

Net loss attributable to common stockholders, diluted during both thethree and six months ended June 30, 2026 and 2025, excludes adjustments related to the change in fair value of derivative liabilities, interest expense and amortization of discounts and issuance costs related to Convertible Note. These adjustments were excluded from the calculation of diluted net loss per share as they would have an antidilutive effect (see Note 8 — Convertible Notes).

Potential ending shares outstanding that were excluded from the computation of diluted net income (loss) per share because their effect was anti-dilutive as of June 30, 2026 and 2025 consisted of the following(in thousands):

Note 17 — Segment Reporting

The following table presents segment revenue, gross profit, and net loss for the periods presented (in thousands):

(1)

Stock-based compensation includes general and administrative, sales and marketing, and research and development-related stock-based compensation that was previously consolidated in employee related costs.

(2)

Other includes general and administrative freight, as well as travel & entertainment, property/franchise taxes, merchant fees, and bad debt expense.

(3)

Other (income) expense, net includes $1.2 million in recoveries associated with previously paid import duties for both of thethree and six months ended June 30, 2026.

Note 18 — Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability.

U.S. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As presented in the tables below, this hierarchy consists of three broad levels:

•

Level 1: Quoted prices in active markets for identical assets and liabilities.

•

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.

•

Level 3: Significant inputs to the valuation model are unobservable and significant to the overall fair value measurement of the assets or liabilities. Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, other current liabilities, convertible debt, warrants and earn-out shares liability. The fair value of cash, cash equivalents, accounts receivable, accounts payable, other current liabilities, and convertible debt approximates carrying value due to their short-term maturity.

As required by ASC 820, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities carried at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 consisted of the following(in thousands):

There was no change in the fair value of Level 3 financial liabilities during the three and six months ended June 30, 2026. The fair value of Earn-out Shares liability was immaterial to the consolidated financial statements for each of the periods ended June 30, 2026 and December 31, 2025.

Note 19 — Revision of Previously Reported Information

In connection with the preparation of the Report, the Company identified immaterial errors in its previously reported financial statements for the periods ended December 31, 2024, March 31, 2025, June 30, 2025, December 31, 2025, and March 31, 2026 relating to the improper recording of vendor accrued purchases.

In accordance with SAB 99, Materiality, and SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements, the Company evaluated the materiality of the errors from qualitative and quantitative perspectives, and concluded that the errors were immaterial to any prior interim financial statements. Notwithstanding this conclusion, management has revised the accompanying unaudited condensed consolidated financial statements for the affected periods, and related notes included herein to correct the errors.

The following tables present the effect of correcting this error on the Company's previously issued financial statements (in thousands).