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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

2022
OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  _________________ to _________________

Commission file number 001-39598
xos-20220630_g1.jpg
XOS, INC.

NextGen Acquisition Corporation

(Exact name of registrant as specified in its charter)

Cayman Islands001-3959898-1550505
Delaware98-1550505
(State or other jurisdiction of
incorporation or organization)		(Commission File Number)(I.R.S. Employer
Identification Number)

2255 Glades Road, Suite 324A
Boca Raton, FL		33431No.)
3550 Tyburn Street
Los Angeles, CA
90065
(Address of principal executive offices)Principal Executive Offices)(Zip Code)

(561) 208-8860

(Registrant’s telephone number, including area code)

code: (818) 316-1890

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading SymbolTrading Symbol(s)Name of each exchange on which registered
Units, each consisting of one Class A ordinaryCommon Stock, $0.0001 par value per share and one-third of one redeemable warrantXOSNGACUThe Nasdaq StockGlobal Market LLC
Class A ordinary shares, par value $0.0001 per shareNGACThe Nasdaq Stock Market LLC
Redeemable warrants,Warrants, each whole warrant exercisable for one Class A ordinary share of Common Stock at an exercise price of $11.50 per shareXOSWWNGACWThe Nasdaq StockGlobal Market LLC

Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),; and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒No ☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

(Check one):

Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☒
Emerging growth company☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☒ No ☐

   No  ☒

AsThe registrant had outstanding 166,092,078 shares of Common Stock, $0.0001 par value as of August 17,8, 2022.


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TABLE OF CONTENTS
Page
3
Item 1. Financial Statements (Unaudited)
6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
35
Item 3. Quantitative and Qualitative Disclosures About Market Risk
46
Item 4. Controls and Procedures
46
48
Item 1. Legal Proceedings
48
Item 1A. Risk Factors
48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
48
Item 3. Defaults Upon Senior Securities
48
Item 4. Mine Safety Disclosures
48
Item 5. Other Information
48
Item 6. Exhibits
49
50
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Forward-Looking Statements

This Quarterly Report on Form 10-Q (the “Report”), including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (“the Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of such terms or other similar expressions. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

•our ability to successfully commercialize our Fleet-as-a-Service offering to customers over time;

•delays in the design, manufacturing and wide-spread deployment of our vehicles, powertrains and battery packs;

•our ability to grow market share in our existing markets or any new markets we may enter;

•our ability to successfully complete strategic relationships and alliances with third parties or acquisitions in the future;

•our ability to recognize the anticipated benefits of the Business Combination (as defined below) and proceeds from the concurrent private placement, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably;

•changes in domestic and foreign business, market, financial, political and legal conditions;

•changes in applicable laws or regulations;

•the outcome of any legal proceedings against us;

•our financial and business performance, including financial projections and business metrics and any underlying assumptions thereunder;

•changes in our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

•our ability to maintain an effective system of internal controls over financial reporting;

•our ability to respond to general economic conditions, including supply chain delays or interruptions that may occur;

•our ability to manage our growth effectively;

•our ability to achieve and maintain profitability in the future;

•our ability to access sources of capital, including debt financing and other sources of capital to finance operations and growth;

•our ability to maintain and enhance our products and brand, and to attract customers;

•our ability to execute our business model, including market acceptance of our planned products and services and achieving sufficient production volumes at acceptable quality levels and prices;

•ability to source certain of our critical inventory items, including battery cells, semiconductor chips and vehicle bodies and aluminum;
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•our ability to successfully manage supply shortages and disruptions, product delivery delays, and anticipate costs and production timing in light of those challenges;

•our ability to scale in a cost-effective manner, including hiring qualified personnel, particularly during recent labor shortages, to meet our manufacturing and delivery goals;

•developments and projections relating to our competitors and industry;

•general economic and political conditions, such as the effects of the COVID-19 pandemic, recessions, interest rates, inflation, local and national elections, fuel prices, international currency fluctuations, corruption, political instability and acts of war or military conflict, including repercussions of the recent military conflict between Russia and Ukraine, or terrorism on our business and the actions we may take in response thereto;

•our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

•expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012, as amended;

•our future capital requirements and sources and uses of cash;

•the outcome of any known and unknown litigation and regulatory proceedings; and

•any other risks and uncertainties set forth in this Report in the section entitled “Risk Factors”.

A discussion of these and other factors affecting our business and prospects is set forth in Part II, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021 37,500,000 filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2022 (the “2021 Form 10-K”). We encourage investors to review these risk factors.

Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements included in this Report may not prove to be accurate. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.

Forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Report, and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except to the extent otherwise required by law.


Part I - Financial Information
Glossary of Terms
Unless otherwise stated in this Report or the context otherwise requires, reference to:

•“Business Combination” means the Domestication, the Merger and the other transactions contemplated by the Merger Agreement, collectively, including the PIPE Financing;

•“Class A ordinary5 to 8 Vehicles” means medium and heavy duty trucks that typically travel on predictable routes and cover less than 200 miles per day;

•“Closing” means the closing of the Business Combination;

•“Closing Date” means August 20, 2021;

•“Common Stock” means the shares of common stock, par value $0.0001 per share, of Xos;
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•“Domestication” means the transfer by way of continuation and 9,375,000deregistration of NextGen from the Cayman Islands and the continuation and domestication of NextGen as a corporation incorporated in the State of Delaware;

•“Energy Services” means our infrastructure-as-a-service offering which includes charging infrastructure deployment, energy procurement and management, and the Xos HubTM, our proprietary mobile charging unit deployable for on-demand charging requirements;

•“Fleet-as-a-Service” means our comprehensive suite of products and services facilitating commercial battery-electric fleet operations through a combination of in-house proprietary technology and turnkey solutions from industry-leading partners. The platform includes our X-Pack battery system, X-Platform modular chassis, Energy Services, service and maintenance, digital fleet management products, over-the-air software update technology, and a wide range of additional service products;

•“Flex Manufacturing Strategy” means leveraging smaller, more-nimble existing facilities and labor talent to assemble vehicles through our strategic manufacturing partnerships, while the Company coordinates other aspects of the manufacturing process, including supply chain logistics, quality control, and manufacturing engineering;

•“Founders” means Dakota Semler and Giordano Sordoni;

•“Founder Shares” means Class B ordinary shares, par value $0.0001 per share, of NextGen, which were converted into shares of Common Stock in connection with the Business Combination;

•“Initial Public Offering” means NextGen’s initial public offering that was consummated on October 9, 2020;

•“Legacy Xos Common Stock” means shares of common stock, par value $0.0001 per share, issued by Legacy Xos prior to the Business Combination;

•“Legacy Xos Preferred Stock” means Class A through A-10 shares of preferred stock, par value $0.0001 per share, issued by Legacy Xos prior to the Business Combination;

•“Legacy Xos” means Xos, Inc., a Delaware corporation, prior to the consummation of the Business Combination;

•“Merger” means the merger of NextGen Merger Sub with and outstanding.

into Legacy Xos pursuant to the Merger Agreement, with Legacy Xos as the surviving company in the Merger and, after giving effect to such Merger, Legacy Xos becoming a wholly owned subsidiary of Xos;

•“Merger Agreement” means that certain Merger Agreement, dated as of February 21, 2021, as amended on May 14, 2021, by and among NextGen, Sky Merger Sub I, Inc., a Delaware corporation and direct wholly owned subsidiary of NextGen, and Legacy Xos;


•“NextGen” means NextGen Acquisition Corp., a Cayman Islands exempted company, prior to the consummation of the Domestication;

•”NextGen Sponsor” means NextGen Sponsor LLC.

•“PIPE Financing” means the transactions contemplated by the Subscription Agreements, pursuant to which the PIPE Investors collectively subscribed for 21,600,000 shares of Common Stock for an aggregate purchase price of $216,000,000 in connection with the Closing;

•“PIPE Investors” means the investors who participated in the PIPE Financing and entered into the Subscription Agreements;

•“Powertrain” means an assembly of every component that pushes a vehicle forward. A vehicle’s powertrain creates power from the engine and delivers it to the wheels on the ground. The key components of a powertrain include an engine, transmission, driveshaft, axles, and differential;

•“Preferred Stock” means preferred stock, par value $0.0001 per share, authorized under the Certificate of Incorporation of Xos, Inc.;

•“Private Placement Warrants” means the warrants to purchase Common Stock originally issued in a private placement in connection with the Initial Public Offering;
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NEXTGEN ACQUISITION CORPORATION

Quarterly Report on Form 10-Q

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•“Public Warrants” means the redeemable warrants to purchase shares of Common Stock at an exercise price of $11.50 per share originally issued in connection with the Initial Public Offering;

•“Sponsor” means NextGen’s sponsor, NextGen Sponsor LLC;

•“Subscription Agreements” means the subscription agreements entered into by NextGen and each of the PIPE Investors in connection with the PIPE Financing;

•“Warrants” means Private Placement Warrants and Public Warrants;

•“X-Pack” means our proprietary battery system;

•“X-Platform” means our proprietary, purpose-built vehicle chassis platform; and

•“Xosphere Intelligence Platform” means our advanced connected vehicle ecosystem that combines our proprietary hardware and embedded software with a modern and intuitive user platform.

Item 1.    Financial Statements
Index to Unaudited Condensed Consolidated Financial Statements
Page No.
Item 1.Condensed Financial Statements1
CondensedConsolidated Balance Sheets as of June 30, 2021 (Unaudited)2022 and December 31, 20202021 (Unaudited)
17
28
39
410
512
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations21
Item 3.Quantitative and Qualitative Disclosures About Market Risk25
Item 4.Controls and Procedures25
PART II. OTHER INFORMATION
Item 1.Legal Proceedings26
Item 1A.Risk Factors26
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities26
Item 3.Defaults Upon Senior Securities26
Item 4.Mine Safety Disclosures26
Item 5.Other Information26
Item 6.Exhibits27
SIGNATURES28

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Xos, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets
Unaudited

(in thousands, except par value)

PART I - FINANCIAL INFORMATION

June 30, 2022December 31, 2021
Assets
Cash and cash equivalents$4,251 $16,142 
Restricted cash3,034 3,034 
Accounts receivable12,931 3,353 
Marketable debt securities, available-for-sale — short-term64,651 94,696 
Inventories, net62,197 30,883 
Prepaid expenses and other current assets20,971 17,850 
Total current assets168,035 165,958 
Marketable debt securities, available-for-sale — long-term13,218 54,816 
Property and equipment, net16,754 7,426 
Operating lease right-of-use assets, net7,306 — 
Other non-current assets1,504 506 
Total assets$206,817 $228,706 
Liabilities and Stockholders’ Equity
Accounts payable$8,761 $10,122 
Other current liabilities21,767 5,861 
Total current liabilities30,528 15,983 
Earn-out shares liability11,894 29,240 
Common stock warrant liability4,227 7,496 
Other non-current liabilities10,738 1,594 
Total liabilities57,387 54,313 
Commitments and Contingencies (Note 13)00
Stockholders’ Equity
Common Stock $0.0001 par value, authorized 1,000,000 shares,
  165,504 and 163,137 shares issued and outstanding at June 30, 2022
  and December 31, 2021, respectively
17 16 
Preferred Stock $0.0001 par value, authorized 10,000 shares, 0 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively— — 
Additional paid-in capital185,516 178,851 
Accumulated deficit(34,746)(4,093)
Accumulated other comprehensive loss(1,357)(381)
Total stockholders’ equity149,430 174,393 
Total liabilities and stockholders’ equity$206,817 $228,706 

Item 1. Condensed Financial Statements


NEXTGEN ACQUISITION CORPORATION

CONDENSED BALANCE SHEETS

  June 30,
2021		  December 31,
2020		 
  (Unaudited)    
Assets:      
Current assets:      
Cash $25,413  $821,331 
Prepaid expenses  362,076   443,165 
Total current assets  387,489   1,264,496 
Investments held in Trust Account  375,029,850   375,007,974 
Total Assets $375,417,339  $376,272,470 
         
Liabilities and Shareholders’ Equity:        
Current liabilities:        
Accounts payable $69,752  $5,497 
Due to related party  1,135   - 
Accrued expenses  80,452   117,238 
Note payable  440,000   - 
Total current liabilities  591,339   122,735 
Derivative warrant liabilities  

34,841,670

   28,500,590 
Deferred underwriting commissions in connection with the initial public offering  13,125,000   13,125,000 
Total liabilities  

48,558,009

   41,748,325 
         
Commitments and Contingencies        
         
Class A ordinary share, $0.0001 par value; 32,185,932 and 32,952,414 shares subject to possible redemption at $10.00 per share as of June 30, 2021 and December 31, 2020, respectively  

321,859,320

   329,524,140 
         
Shareholders’ Equity:        
Preference shares, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding  -   - 
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; 5,314,068 and 4,547,586 shares issued and outstanding (excluding 32,185,932 and 32,952,414 shares subject to possible redemption) as of June 30, 2021 and December 31, 2020, respectively  532   455 
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 9,375,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020  937   937 
Additional paid-in capital  

19,337,507

   11,672,764 
Accumulated deficit  

(14,338,966

)  (6,674,151)
Total shareholders’ equity  5,000,010   5,000,005 
Total Liabilities and Shareholders’ Equity $375,417,339  $376,272,470 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Xos, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss
Unaudited

(in thousands, except per share amounts)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Revenues$9,766 $596 $16,797 $1,389 
Cost of goods sold14,891 585 25,077 1,257 
Gross margin(5,125)11 (8,280)132 
Operating expenses
General and administrative12,093 4,599 23,415 6,953 
Research and development7,635 2,742 14,584 5,741 
Sales and marketing2,960 524 4,988 836 
Total operating expenses22,688 7,865 42,987 13,530 
Loss from operations(27,813)(7,854)(51,267)(13,398)
Other income (expense), net(226)126 (145)(91)
Change in fair value of derivative instruments3,703 (1,430)3,268 4,964 
Change in fair value of earn-out shares liability14,870 — 17,494 — 
Write off of subscription receivable— — — (379)
Realized loss on debt extinguishment— — — (14,104)
Loss before provision for income taxes(9,466)(9,158)(30,650)(23,008)
Provision for income taxes1 — 3 — 
Net loss$(9,467)$(9,158)$(30,653)$(23,008)
Other comprehensive loss
Marketable debt securities, available-for-sale
Change in net unrealized loss, net of tax of $0, for the three and six months ended June 30, 2022 and 2021
(150)— (976)— 
Total comprehensive loss$(9,617)$(9,158)$(31,629)$(23,008)
Net loss per share
Basic$(0.06)$(0.13)$(0.19)$(0.32)
Diluted$(0.06)$(0.13)$(0.19)$(0.32)
Weighted average shares outstanding
Basic164,041 72,389 163,606 72,372 
Diluted164,041 72,389 163,606 72,372 

NEXTGEN ACQUISITION CORPORATION


UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021

  For the
Three Months
Ended
June 30,
2021		  For the
Six Months
Ended
June 30,
2021		 
  (unaudited)  (unaudited) 
Operating expenses      
General and administrative expenses $531,773  $1,285,611 
General and administrative expenses - related party  30,000   60,000 
Total operating expenses  (561,773)  (1,345,611)
Other income (expense):        
Change in fair value of derivative warrant liabilities  1,282,520   (6,341,080)
Net gain from cash equivalents held in Trust Account  12,628   21,876 
Net income (loss) $733,375  $(7,664,815)
         
Weighted average shares outstanding of Class A ordinary shares subject to possible redemption, basic and diluted  32,113,401   32,525,950 
Basic and diluted net income per share, Class A ordinary shares subject to possible redemption $0.00  $0.00 
Weighted average shares outstanding of non-redeemable ordinary shares, basic and diluted  14,761,599   14,349,050 
Basic and diluted net income (loss) per share, non-redeemable ordinary shares $0.05  $(0.54)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Xos, Inc. and Subsidiaries

Condensed Consolidated Statements of Legacy Xos Preferred Stock and Stockholders’ Equity (Deficit)
Unaudited

(in thousands)
Legacy Xos
Preferred Stock
Common StockAdditional Paid-in CapitalAccumulated
Deficit		Accumulated Other Comprehensive LossTotal
Stockholders’
Equity (Deficit)
SharesAmountSharesPar Value
Balance at December 31, 20202,762 $7,862 72,277 $7 $290 $(27,494)$— $(27,197)
Payment of subscription receivable— 2,430 — — 380 — — 380 
Issuance of Legacy Xos Preferred Stock, including note conversion49,518 66,701 — — — — — — 
Stock options exercised— — 206 — 3 — — 3 
Stock repurchased and retired— — (94)— (1)— — (1)
Stock based compensation expense— — — — 2 — — 2 
Net loss— — — — — (13,850)— (13,850)
Balance at March 31, 202152,280 $76,993 72,389 $7 $674 $(41,344)$— $(40,663)
Stock based compensation expense— — — — 1 — — 1 
Stock options exercised— — 2 — — — — — 
Net loss— — — — — (9,158)— (9,158)
Balance at June 30, 202152,280 $76,993 72,391 $7 $675 $(50,502)$— $(49,820)

NEXTGEN ACQUISITION CORPORATION

Balance at December 31, 2021— $— 163,137 $16 $178,851 $(4,093)$(381)$174,393 
Stock based compensation expense— — — — 1,068 — — 1,068 
Issuance of common stock for vesting of restricted stock units— — 133 — — — — — 
Shares withheld related to net share settlement of stock-based awards— — (36)— (97)— — (97)
Issuance of common stock for commitment shares under the Standby Equity Purchase Agreement— — 19 — 62 — — 62 
Net and comprehensive loss— — — — — (21,186)(826)(22,012)
Balance at March 31, 2022— $— 163,253 $16 $179,884 $(25,279)$(1,207)$153,414 
Stock options exercised— — 385 — 1 — — 1 
Stock based compensation expense— — — — 1,407 — — 1,407 
Issuance of common stock for vesting of restricted stock units— — 89 — — — — — 
Shares withheld related to net share settlement of stock-based awards— — (33)— (86)— — (86)
Issuance of common stock under the Standby Equity Purchase Agreement— — 1,810 1 4,310 — — 4,311 
Net and comprehensive loss— — — — — (9,467)(150)(9,617)
Balance at June 30, 2022— $— 165,504 $17 $185,516 $(34,746)$(1,357)$149,430 

UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021

  Ordinary Shares  Additional     Total 
  Class A  Class B  Paid-in  Accumulated  Shareholders’ 
  Shares  Amount  Shares  Amount  Capital  Deficit  Equity 
Balance - December 31, 2020  4,547,586  $455   9,375,000  $937  $11,672,764  $(6,674,151) $5,000,005 
Shares subject to possible redemption  839,819   84   -       8,398,105   -   8,398,189 
Net loss  -   -   -   -   -   (8,398,190)  (8,398,190)
Balance - March 31, 2021 (unaudited)  5,387,405   539   9,375,000   937   20,070,869   (15,072,341)  5,000,004 
Shares subject to possible redemption  (73,337)  (7)  -   -   (733,362)  -   (733,369)
Net loss  -   -   -   -   -   733,375   733,375 
Balance - June 30, 2021 (unaudited)  5,314,068  $532   9,375,000  $937  $19,337,507  $(14,338,966) $5,000,010 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Xos, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows
Unaudited

(in thousands, unaudited)
Six Months Ended
June 30,
20222021
OPERATING ACTIVITIES:
Net loss$(30,653)$(23,008)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation562 380 
Amortization of right-of-use assets815 — 
Inventory reserve2,212 — 
Write off of subscription receivable— 379 
Realized loss on debt extinguishment— 14,104 
Change in fair value of derivative instruments(3,268)(4,964)
Change in fair value of earn-out shares liability(17,494)— 
Net realized losses on marketable debt securities, available-for-sale69 — 
Stock-based compensation expense2,469 3 
Other non-cash items1,191 — 
Changes in operating assets and liabilities:
Accounts receivable(9,578)(392)
Inventories(33,058)(4,941)
Prepaid expenses and other current assets(3,121)(1,697)
Other assets(998)— 
Accounts payable(2,102)(581)
Other liabilities17,126 564 
Net cash used in operating activities(75,828)(20,153)
INVESTING ACTIVITIES:
Purchase of property and equipment(9,462)(702)
Proceeds from sales and maturities of marketable debt securities, available-for-sale69,561 — 
Net cash provided by (used in) investing activities60,099 (702)
FINANCING ACTIVITIES:
Proceeds from issuance of shares of Legacy Xos Preferred Stock— 31,757 
Proceeds from subscription receivable – preferred— 2,430 
Principal payment of equipment leases(289)(77)
Taxes paid related to net share settlement of stock-based awards(183)— 
Proceeds from stock option exercises— 3 
Proceeds from issuance of common stock under Standby Equity Purchase Agreement4,310 — 
Net cash provided by financing activities3,838 34,113 
Net (decrease) increase in cash, cash equivalents and restricted cash(11,891)13,258 
Cash, cash equivalents and restricted cash, beginning of period19,176 10,359 
Cash, cash equivalents and restricted cash, end of period$7,285 $23,617 
Reconciliation of Cash, Cash Equivalents and Restricted Cash to Unaudited Condensed Consolidated Balance Sheets:
Cash and cash equivalents$4,251 $23,617 
Restricted cash3,034 — 
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Total cash, cash equivalents and restricted cash$7,285 $23,617 
Supplemental disclosure of non-cash investing and financing activities
Purchase of property and equipment in accounts payable$741 $— 
Recognition of right-of-use asset and lease liabilities upon ASC 842 adoption$7,682 $— 
Right-of-use asset obtained in exchange for operating lease obligations$437 $— 
Conversion of notes payable to Legacy Xos Preferred Stock:
Issuance of redeemable convertible preferred stock$— $34,918 
Conversion of interest payable on convertible notes$— $2,453 
Conversion of notes payable into preferred stock$— $21,540 
Fair value adjustment of related party debt at conversion$— $3,763 

UNAUDITED CONDENSED STATEMENT OF CASH FLOWS


FOR THE SIX MONTHS ENDED JUNE 30, 2021

Cash Flows from Operating Activities:   
Net loss $(7,664,815)
Adjustments to reconcile net loss to net cash used in operating activities:    
Net gain from investments held in Trust Account  (21,876)
Change in fair value of derivative warrant liabilities  6,341,080 
Changes in operating assets and liabilities:    
Prepaid expenses  81,089 
Accounts payable  64,255 
Due to related party  1,135 
Accrued expenses  (36,786)
Net cash used in operating activities  (1,235,918)
     
Cash Flows from Financing Activities:    
Proceeds from note payable to related party  440,000 
Net cash provided by financing activities  440,000 
     
Net decrease in cash  (795,918)
     
Cash - beginning of the period  821,331 
Cash - end of the period $25,413 
     
Supplemental disclosure of noncash investing and financing activities:    
Change in value of Class A ordinary share subject to possible redemption $(7,664,820)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

statements
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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited

4

NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 1—1— Description of Organization, Business Operations


Xos, Inc. and Basis of Presentation

NextGen Acquisition Corporation (theits wholly owned subsidiaries (collectively, the “Company” or “Xos”) is a blank check companymobility solutions company. Xos manufactures Class 5 to 8 battery-electric commercial vehicles, facilitates fleet transition from traditional internal combustion engine vehicles to electric vehicles, and enables electric fleets to better manage their fleet operations through a portfolio of management tools. Xos developed the X-Platform (its proprietary, purpose-built vehicle chassis platform) and the X-Pack (its proprietary battery system) specifically for the medium- and heavy-duty commercial vehicle segment with a focus on last-mile commercial fleet operations. Xos’ “Fleet-as-a-Service” package offers customers a comprehensive suite of commercial products and services to facilitate electric fleet operations and seamlessly transition their traditional combustion-engine fleets to battery-electric vehicles.


Xos Fleet, Inc. (“Legacy Xos”), the new legal entity name of the legacy Xos operating entity and Xos Services, Inc. (“Xos Services”, formerly Rivordak, Inc.), the subsidiary holding a California dealer license to sell Xos vehicles, are wholly owned subsidiaries of Xos, Inc., and make up 100% of the operations of the Company.

Business Combination

Xos, Inc. was initially incorporated on July 29, 2020 as a Cayman Islands exempted company on July 29, 2020. The Company was incorporated forunder the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses that the Company has not yet identifiedname “NextGen Acquisition Corporation” (“Business Combination”NextGen”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.

As of June 30,On August 20, 2021, the Company had not commenced any operations. All activity for the period from July 29, 2020 (inception) through June 30, 2021 relates to the Company’s formation and the initial public offering (“Initial Public Offering”) and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.

The Company’s sponsor is NextGen Sponsor LLC, a Cayman Island exempted company (“Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on October 6, 2020. On October 9, 2020, the Company consummated its Initial Public Offering of 35,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $350.0 million, and incurring offering costs of approximately $19.8 million, inclusive of approximately $12.3 million in deferred underwriting commissions (Note 6). On November 13, 2020, the underwriters partially exercised the over-allotment option and on November 17, 2020, purchased an additional 2,500,000 Units (the “Over-Allotment Units”), generating gross proceeds of $25.0 million, and incurred additional offering costs of approximately $1.4 million in underwriting fees (inclusive of $875,000 in deferred underwriting fees) (the “Over-Allotment”).

Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 6,000,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $9.0 million (Note 4). Simultaneously with the closing of the Over-Allotment on November 17, 2020, the Company consummated the second closing of the Private Placement, resulting in the purchase of an aggregate of an additional 333,334 Private Placement Warrantstransactions contemplated by the Sponsor, generating gross proceeds to the Company of $500,000.

Upon the closing of the Initial Public Offering, the Over-Allotment and the Private Placement, $375.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement were placed in a trust account (“Trust Account”) with Continental Stock Transfer & Trust Company acting as trustee and invested in United States government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering, the Over-Allotment and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (as defined below) (excluding the amount of any deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time the Company signs a definitive agreement in connection with the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act 1940, as amended, or the Investment Company Act.

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NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The Company will provide its holders of Public Shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a shareholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The per-share amount to be distributed to Public Shareholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). These Public Shares will be recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is not required by law and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to the amended and restated memorandum and articles of association which will be adopted by the Company upon the consummation of the Initial Public Offering (the “Amended and Restated Memorandum and Articles of Association”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”), and file tender offer documents with the SEC prior to completing a Business Combination. If, however, a shareholder approval of the transactions is required by law, or the Company decides to obtain shareholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction. If the Company seeks shareholder approval in connection with a Business Combination, the holders of the Founder Shares prior to this Initial Public Offering (the “Initial Shareholders”) agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the Initial Shareholders agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination. In addition, the Company has agreed not to enter into a definitive agreement regarding an initial Business Combination without the prior consent of the Sponsor.

Notwithstanding the foregoing, the Company’s Amended and Restated Memorandum and Articles of Association provides for a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Class A ordinary shares sold in the Initial Public Offering, without the prior consent of the Company.

The Company’s Sponsor, executive officers and directors agreed not to propose an amendment to the Company’s Amended and Restated Memorandum and Articles of Association that would affect the substance or timing of the Company’s obligation to provide for the redemption of its Public Shares in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the Public Shareholders with the opportunity to redeem their Class A ordinary shares in conjunction with any such amendment.

If the Company is unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or October 9, 2022, (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.

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NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The Initial Shareholders agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Shareholders should acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00 per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Basis of Presentation

The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements contained in Amendment No. 1 to the Company’s Annual Report on Form 10-K/A filed with the SEC on May 14, 2021 (“Form 10-K/A”).

Risk and Uncertainties

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results of operations, financial position and cash flows may be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability to consummate an initial Business Combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.

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NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Liquidity and Capital Resources

As of June 30, 2021, the Company had approximately $25,000 in its operating bank account and a working capital deficit of approximately $204,000.

To date, the Company’s liquidity needs were satisfied through a payment of $25,000 from the Sponsor in exchange for the issuance of the Founder Shares (as defined below), the loan under the Note from the Sponsor of $300,000 (see Note 5) to the Company and the net proceeds from the consummation of the Private Placement not held in the Trust Account. The Company fully repaid the Note on October 8, 2020. In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s officers, directors and Initial Shareholders may, but are not obligated to, provide the Company Working Capital Loans (see Note 5).

On March 29, 2021, the Company issued a promissory note, pursuant to which the Company may borrow up to an aggregate principal amount of $1,000,000. The promissory note is non-interest bearing and payable on the earlier of (i) October 9, 2022 and (ii) the completion of the Company’s initial Business Combination. As of June 30, 2021, there was $440,000 outstanding under the promissory note.

In connection with the Company’s assessment of going concern considerations in accordance with ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” as of June 30, 2021, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing.

Proposed Business Combination

On February 21, 2021, the Company entered into an Agreement and Plan of Merger, as amended on May 14, 2021, (the “Merger Agreement”) withby 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”).

The Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, the following transactions will occur (together with the other agreements and transactions contemplated by the Merger Agreement, the “Xos Business Combination”):

(i) at the closing of the transactions contemplated by the Merger Agreement, were consummated (the “Closing”), upon the terms and subject to the conditions of the Merger Agreement, in accordance with the General Corporation Law of the State of Delaware, as amended (the “DGCL”),whereby Merger Sub will mergemerged with and into Legacy Xos, the separate corporate existence of Merger Sub will ceaseceased and Legacy Xos will bebecame the surviving corporation and a wholly owned subsidiary of NextGen (such transaction the Company’s wholly-owned subsidiary (the “Merger”);

(ii) as a result of the Merger, among other things and, after giving effect to the Company Recapitalization (as defined in the Merger Agreement), all outstanding shares of Xos common stock or resulting from the conversion of preferred stock of Xos into common stock of Xos, together with shares of Xos common stock reserved in respect of (a) options to purchase shares of Xos common stock (“Xos Options”), (b) restricted stock units based on shares of Xos common stock (“Xos RSUs”) and (c) restricted shares of Xos common stock (“Xos Restricted Stock Awards”) outstanding as of immediately prior to the Merger (together, the “Xos Awards”) that will be converted into awards based on new Xos common stock, will be cancelled in exchange for the right to receive an aggregate of 127,626,116 shares of new Xos common stock (at a deemed value of $10.00 per share), which, in the case of Xos Awards, will be shares underlying awards based on new Xos common stock representing a pre-transaction equity value of Xos of $1,276,261,160 (the “Aggregate Merger Consideration”). The portion of the Aggregate Merger Consideration reflecting the conversion of the Xos Awards is calculated assuming that all new Xos Options are net-settled (although new Xos Options may by their terms be cash exercised, resulting in additional dilution); and

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NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(iii) upon the effective time of the Domestication (as defined below), the Company will immediately be renamed “Xos, Inc.” or such other name as agreed to by us and Xos prior to Closing.

Prior to the Closing, subject to the approval of the Company’s shareholders, and in accordance with the DGCL, Cayman Islands Companies Act, as revised (the “CICA”) and the Company’s amended and restated memorandum and articles of association, the Company will effect a deregistration under the CICA and a domestication under Section 388 of the DGCL (by means of filing a certificate of domestication with the Secretary of State of Delaware), pursuant to which its jurisdiction of incorporation will be changed from the Cayman Islands to the State of Delaware (the “Domestication”).

In connectioncollectively with the Domestication, (i) each of the Company’s then issued and outstanding Class A ordinary shares, par value $0.0001 per share, will convert automatically, on“Business Combination”). As a one-for-one basis, into a share of common stock, par value $0.0001, per share ofresult, Xos became the Company (following its Domestication) (the “NextGen Common Stock”), (ii) each of the Company’s then issued and outstanding Class B ordinary shares, par value $0.0001 per share, will convert automatically, on a one-for-one basis, into a share of NextGen Common Stock, (iii) each of the Company’s then issued and outstanding warrant will convert automatically into a warrant to acquire one share of NextGen Common Stock (“Domesticated NextGen Warrant”), pursuant to the Warrant Agreement, dated October 6, 2020, between us and Continental Stock Transfer & Trust Company, as warrant agent, and (iv) each of the Company’s then issued and outstanding unit of NextGen (the “Cayman NextGen Units”), if any, will be cancelled and will entitle the holder thereof to one share of NextGen Common Stock and one-third of one Domesticated NextGen Warrant.

On February 21, 2021, concurrently with the execution of the Merger Agreement, NextGen entered into subscription agreements (the “Subscription Agreements”) with certain investors (collectively, the “PIPE Investors”), pursuant to, andpublicly traded entity listed on the terms and subject to the conditions of which, the PIPE Investors have collectively subscribed for 22,000,000 shares of the NextGen Common Stock for an aggregate purchase price equal to $220,000,000 (the “PIPE Investment”), a portion of which is expected to be funded by one or more affiliates of the Sponsor and certain additional investors (which may include mutual funds and existing shareholders). 2,000,000 of the shares of the NextGen Common Stock to be sold in the PIPE Investment are shares owned by certain Xos officers. The PIPE Investment will be consummated substantially concurrently with the Closing.

Nasdaq Global Market.

The consummation of the proposed Xos Business Combination is subject to certain conditions as further described in the Merger Agreement.


For more information about the Merger Agreement and the proposed Xos Business Combination, see the Company’s Current Reports on Form 8-K filed with the SEC on February 22, 2021 and on May 14, 2021, and the prospectus/proxy statement included in the Registration Statement on Form S-4 that the Company has filed with the SEC relating to our proposed business combination with Xos (the “Xos Disclosure Statement”). Unless specifically stated, this Quarterly Report does not give effect to the proposed Xos Business Combination and does not contain the risks associated with the proposed Xos Business Combination. Such risks and effects relating to the proposed Xos Business Combination are included in the Xos Disclosure Statement.

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NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 2—Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.


Further, Section 102(b)(1) of the Jumpstart its Business Startups Act (“JOBS ActAct”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or do not have a class of securities registered under the Securities Exchange Act)Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growtha company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. Thisstandard, until such time the Company is no longer considered to be an emerging growth company. At times, the Company may elect to early adopt a new or revised standard.


Risks and Uncertainties

COVID-19 and actions taken to mitigate its spread have had and may continue to have an adverse impact on the economies and financial markets of many countries, including the areas in which the Company operates. As the COVID-19 pandemic continues to evolve, the Company believes the extent of the pandemic’s impact to its business, operating results, cash flows, liquidity and financial condition will be primarily driven by the severity and duration of the COVID-19 pandemic, the pandemic’s impact on the United States and global economies and the timing, scope and effectiveness of federal, state and local governmental responses to the pandemic. Those primary drivers are beyond the Company’s knowledge and control, and as a result, at this time the Company is unable to predict the cumulative impact, both in terms of severity and duration, that the COVID-19 pandemic will have on its business, operating results, cash flows and financial condition. However, the impact of the COVID-19 pandemic could be material if the current circumstances continue to exist for a prolonged period of time or worsen.

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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Additionally, recent geopolitical events, such as the recent military conflict between Russia and Ukraine, may increase the severity of supply chain disruptions and further hinder our ability to source inventory for our vehicles. The conflict continues to evolve and its ultimate impact on the Company is uncertain, but a prolonged conflict 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.

Supply Chain Disruptions

Negative global economic conditions, which the COVID-19 pandemic has contributed to, has impacted the Company’s ability to source certain critical inventory items. The series of restrictions imposed and the speed and nature of the recovery in response to the pandemic have placed burdens on the Company’s supply chain management, such as the semiconductor chip and battery cell shortage and supply limitations on vehicle bodies and aluminum.

Despite supply chain disruptions, the Company has continued to source inventory for its vehicles and its purchasing team has been working with vendors to find alternative solutions to areas where there are supply chain constraints, and where appropriate and critical, has placed orders in advance of projected need to ensure inventory is able to be delivered in time for production plans.

Inflation and Other Risks

The Company is exposed to a variety of market and other risks, including the effects of changes in interest rates and inflation, as well as risks to the availability of funding sources, hazard events, and specific asset risks. The U.S. economy is experiencing broad and rapid inflation. The Company monitors inflation and the effects of changing prices. Inflation increases the cost of goods and services used. If the Company’s costs were to become subject to significant inflationary pressures, the Company may not be able to fully offset these higher costs through price increases or mitigate the impact through alternative solutions.

Note 2— Basis of Presentation and Summary of Significant Accounting Policies

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 accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“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, Legacy Xos and Xos Services. All significant intercompany accounts 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, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. 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, 2021 and 2020 presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 30, 2022.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make comparisoncertain 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, earn-out shares liability, stock-based compensation, common stock warrant liability and product warranty liability. Management bases its estimates on historical
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Notes to Condensed Consolidated Financial Statements
Unaudited
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 condensed consolidated 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 operating expenses in the unaudited condensed consolidated statements of operations and comprehensive loss and (ii) presenting equipment leases as part of other current and non-current liabilities. The Company reclassified a portion of its payroll related expenses in general and administrative to sales and marketing and research and development. Additionally, the Company reclassified depreciation expense to general and administrative expense. These reclassifications have no effect on previously reported net loss.

Inventory and Inventory Valuation

The Company’s inventory, which includes raw materials, work in-process, and finished goods, is carried at the lower of cost or net realizable value (“NRV”). Inventory is valued using average costing, as that method accurately reflects the frequency of the Company’s financial statement with another public company that is neitherinventory purchases. In the case of manufactured inventories and work in progress, cost includes an emerging growth company nor an emerging growth company that has opted outappropriate share of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

production overheads based on operating capacity.

Cash and Cash Equivalents


The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

10

NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Investments Held in the Trust Account

The Company’s portfolio of investments is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value atAt the end of each reporting period. Gainsperiod, the Company evaluates whether its inventories are damaged, obsolete, or have material changes in price or other causes, and losses resulting fromif so, a loss is recognized in the changeperiod in fairwhich it occurs. Inventory write-downs are also based on reviews for obsolescence determined primarily by future demand forecasts. If the Company’s inventory on-hand is in excess of future demand forecast, the excess amounts are written-off. The Company reserves for any excess or obsolete inventories when it is believed that the net realizable value of these securitiesinventories is included in Net gain from cash equivalents held in Trust Accountless than the carrying value.


The Company also reviews its inventory to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. NRV is the estimated selling price of inventory in the accompanying unaudited condensed statementordinary course of operations. Thebusiness, less estimated fair valuescosts of investments held in the Trust Account are determined using available market information.

Concentration of Credit 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, 2021, the Company has not experienced losses on this accountcompletion, disposal, and management believes the Company is not exposed to significant risks on such accounts.

Fair Value Measurement

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:

●Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
●Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
●Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

11

NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Fair Value of Financial Instruments

As of June 30, 2021 and December 31, 2020, the carrying values of cash, accrued expenses and accrued expenses – related party approximate their fair values due to the short-term nature of the instruments. As of June 30, 2021 and December 31, 2020, the Company’s portfolio of investments held in the Trust Account is comprised entirely of investments in money market funds that invest in U.S. government securities.

Derivative warrant liabilities

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed attransportation. At the end of each reporting period.

period, the Company determines the estimated selling price of its inventory based on market conditions. Once inventory is written-down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

Warranty Liability

Since 2021, the Company provides customers with a product warranty that assures that the products meet standard specifications and are free for periods typically between 2 to 5 years. The warrantsCompany accrues 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. Claims incurred in each of the three and six months ended June 30, 2022 were $6,000, respectively; no claims were incurred for the year ended December 31, 2021. The Company recorded warranty liability within other current liabilities in the consolidated balance sheets as of June 30, 2022 and December 31, 2021. The Company did not record warranty liability for the three or six months ended June 30, 2021 as the product warranty had not been established.

The reconciliation of the change in the Company’s product liability balances during the three months and six months ended June 30, 2022 consisted of the following (in thousands):
Three Months Ended June 30, 2022Six Months Ended June 30, 2022
Warranty liability, beginning of period$475 $177 
Reduction in liability (payments)(6)(6)
Increase in liability (new warranties)363 661 
Warranty liability, end of period$832 $832 

Leases
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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited

Upon inception of a contract, the Company evaluates if the contract, or part of the contract, contains a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Right-of-use (“ROU”) assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. The lease liability is measured as the present value of the unpaid lease payments, and the ROU asset value is derived from the calculation of the lease liability, including prepaid lease payments, if any. Lease payments include fixed and in-substance fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties, fees paid by the lessee to the owners of a special-purpose entity for restructuring the transaction, and probable amounts the lessee will owe under a residual value guarantee. Lease payments do not include (i) variable lease payments other than those that depend on an index or rate, (ii) any guarantee by the lessee of the lessor’s debt, or (iii) any amount allocated to non-lease components, if such election is made upon adoption, per the provisions of ASU 2016-02, Leases.

When the Company cannot determine the actual implicit rate in a lease, it uses its estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. The Company gives consideration to its recent debt issuances, if any, as well as publicly available data for instruments with similar characteristics when calculating its incremental borrowing rate. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. The Company's lease term includes any option to extend the lease when it is reasonably certain to be exercised based on considering all relevant economic factors. Operating expense charges from the lessor are accounted for on an accrual basis. The Company has elected not to separate the lease and non-lease components.

The leases have remaining initial terms ranging from less than 1 year to 5 years.

The Company reviews the carrying value of its right-of-use assets for impairment whenever events or changes in circumstances indicate that the recorded value may not be recoverable. Recoverability of assets is measured by comparing the carrying amounts of the assets to the estimated future undiscounted cash flows, excluding financing costs. If the Company determines that an impairment exists, any related impairment loss is estimated based on fair values.

Recent Accounting Pronouncements Issued and Adopted:

ASC 842, Leases: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as subsequently amended, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors), and replaces the existing guidance in ASC 840, Leases. The new standard also requires lessees to recognize operating and finance lease liabilities and corresponding ROU assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements.

On January 1, 2022, the Company adopted ASC 842 using the modified retrospective method. The Company has presented financial results and applied its accounting policies for the period beginning January 1, 2022 under ASC 842, while prior period results and accounting policies have not been adjusted and are reflected under legacy GAAP pursuant to ASC 840. In connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized as derivative liabilities in accordance withadoption of ASC 815. Accordingly,842, the Company recognizesperformed an analysis of contracts under ASC 840 to ensure proper assessment of leases (or embedded leases) in existence as of January 1, 2022. The Company elected the warrant instrumentspackage of practical expedients permitted under ASC 842, which allows the Company not to reassess 1) whether any expired or existing contracts as of the adoption date are or contain a lease, 2) lease classification for any expired or existing leases as of the adoption date and 3) initial direct costs for any existing leases as of the adoption date. The most significant impact of applying ASC 842 was the recognition of ROU asset and lease liabilities at fair valuefor operating leases in its condensed consolidated balance sheets. On January 1, 2022, the Company recognized an initial operating ROU asset of $7.7 million and adjustsassociated operating lease liabilities of $7.7 million.

Refer to Note 6 — Leases for further information regarding the instrumentsimpact of the adoption of ASU 2016-02 on the Company's financial statements, as well as its various accounting policies for each lease type.
Recent Accounting Pronouncements Issued and not yet Adopted:

ASU 2016-13, Financial Instruments — Credit Losses (“ASU 2016-13”): In June 2016, the FASB issued ASU 2016-13, which states the Company will be required to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any changeuse an expected-loss model for its marketable debt securities, available-for sale, which requires that credit losses be presented as an allowance rather than as an impairment write-down. Reversals of credit losses (in situations in fair valuewhich the estimate of credit losses declines) is recognizedpermitted in the Company’s statementreporting period that the change occurs. Current
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Table of operations. The fair valueContents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
U.S. GAAP prohibits reflecting reversals of credit losses in current period earnings. At June 30, 2022, the Public Warrants issuedCompany had $77.9 million in connection with the Public Offering and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants. The determination of the fair value of the warrant liability maymarketable debt securities, available for sale which would be subject to change as more current information becomesthis new standard. As of December 31, 2021, these marketable debt securities, available for sale have an average credit rating of A and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

Class A Ordinary Shares Subject to Possible Redemption

no impairment write-downs have been recorded. The Company accounts foris currently evaluating the impact of this new standard on its Class A ordinary shares subjectinvestment policy and investments and does not expect the standard to possible redemptionhave a material impact on its financial statements at adoption or in accordance withsubsequent periods. The Company expects to adopt the guidance in FASB ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instrumentsnew standard effective January 1, 2023.


Note 3— Revenue Recognition
Disaggregated revenues by major source during the three and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the controlsix months ended June 30, 2022 and 2021 consisted of the holder or subjectfollowing (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Product and service revenue
Stepvans & vehicle incentives$8,561 $— $15,424 $715 
Powertrains656 596 670 674 
Fleet-as-a-Service38 — 133 — 
Total product revenue9,255 596 16,227 1,389 
Ancillary revenue511 — 570 — 
Total revenues$9,766 $596 $16,797 $1,389 

Note 4 — Inventories
Inventory amounted to redemption upon the occurrence$62.2 million and $30.9 million, respectively, as of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at June 30, 2021,2022 and December 31, 2020, 32,185,9322021 and 32,952,414 Class A ordinary shares subject to possible redemption are presented as temporary equity, outsideconsisted of the shareholders’ equity sectionfollowing (in thousands):
June 30, 2022December 31, 2021
Raw materials$40,138 $20,382 
Work in process25,330 10,659 
Finished goods— 901 
Inventories, gross of reserves65,468 31,942 
Less: inventory reserve(3,271)(1,059)
Inventories, net$62,197 $30,883 

Note 5 — Selected Balance Sheet Data
Prepaid expenses and other current assets as of June 30, 2022 and December 31, 2021 consisted of the Company’s balance sheets.

following (in thousands):
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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
June 30, 2022December 31, 2021
Prepaid inventories$15,735 $7,303 
Prepaid insurance1,102 4,996 
Deposits (primarily relating to deposits on equipment purchases)
805 2,783 
Assets held for sale1,848 1,848 
Prepaid licenses and subscriptions741 801 
Others740 119 
Total$20,971 $17,850 
Other current liabilities as of June 30, 2022 and December 31, 2021 consisted of the following (in thousands):
June 30, 2022December 31, 2021
Accrued expenses and other(1)
$16,346 $4,303 
Lease liabilities, current3,520 482 
Customer deposits1,068 899 
Warranty liability833 177 
Total$21,767 $5,861 
____________
(1) Primarily relates to personnel costs — wages, health benefits, vacation and other accruals.

12

Note 6 — Leases

NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Offering Costs Associated withA summary of the Initial Public Offering

Offering costs consisted of legal, accounting, underwriting fees and other costs incurred in connection with the preparation for the Initial Public Offering. Offering costs are allocatedbalances relating to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating expenses in the statement of operations. Offering costs associated with the Public Shares were charged to shareholders’ equity upon the completion of the Initial Public Offering.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes.” Deferred taxCompany’s lease assets and liabilities are recognizedas of June 30, 2022 consisted of the following (in thousands):

Balance Sheet LocationJune 30, 2022
Assets
Operating leasesOperating lease right-of-use assets, net$7,306 
Equipment finance leasesProperty and equipment, net7,734 
Total Lease Assets$15,040
Liabilities
Current
Operating leasesOther current liabilities$1,484 
Equipment finance leasesOther current liabilities2,036 
Sub-total$3,520
Non-current
Operating leasesOther non-current liabilities$5,950 
Equipment finance leasesOther non-current liabilities4,788 
Sub-total$10,738
Total Lease Liabilities$14,258
Operating Leases

The Company has a 5-year office lease on its headquarter facility in Los Angeles, which commenced in January 2022, as well as certain other leases (both short-term and long-term) within the United States.

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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
The Company records lease expense on a straight-line basis over the lease term in general and administrative expense and cost of goods sold, depending on the nature and use of the leased asset. Total lease expense for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assetsthree months ended June 30, 2022 and liabilities2021 was $0.4 million and their respective tax bases. Deferred tax assets$0.1 million, respectively. Total lease expense recorded was $0.9 million and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

FASB ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of December 31, 2020. The Company’s management determined that the Cayman Islands is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts were accrued for interest and penalties$0.3 million, for the six months ended June 30, 2022 and 2021,respectively.


Lease terms include renewal or termination options that the Company is reasonably certain to exercise. For leases with a term of 12 months or less, the Company has made an accounting policy election to not record a ROU asset and associated lease liability on its unaudited condensed consolidated balance sheet. Total lease expense recorded for these short-term leases was $0.3 million and $0.4 million for the three and six months ended June 30, 2022, respectively.
Equipment Finance Leases

The Company leases certain equipment facilities under finance leases that expire on various dates through 2027. The finance lease cost during the three and six months ended June 30, 2022 and 2021 consisted of the following (in thousands):

Three Months Ended
June 30,
Six Months Ended
June 30,
Income Statement Location2022202120222021
AmortizationGeneral and administrative expense$78 $19 $238 $48 
Interest accretion on finance lease liabilitiesOther income (expense), net65 4 92 10 
Total$143 $23 $330 $58 
Supplemental Cash Flow Information, Weighted-Average Remaining Lease Term and Discount Rate
The weighted-average remaining lease term and discount rates, as well as supplemental cash flow information as of and for the six months ended June 30, 2022 consisted of the following (in thousands for the supplemental cashflow information):
Supplemental cashflow information:
Cash paid for amounts included in the measurement of operating lease liabilities$808 
ROU assets obtained in exchange for operating lease obligations$437 
Weighted average remaining lease term:
Operating leases4.4 years
Equipment finance leases3.1 years
Weighted average discount rate:
Operating lease - IBR5.5 %
Equipment finance leases - rate implicit in the lease7.8 %
Maturity Analysis
A summary of the undiscounted cash flows and a reconciliation to the Company’s lease liabilities as of June 30, 2022 consisted of the following (in thousands):
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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
June 30, 2022
 Operating LeasesEquipment Finance LeasesTotal
2022 (remaining six months)
$926 $1,311 $2,237 
20231,860 2,408 4,268 
20241,907 2,329 4,236 
20251,963 1,224 3,187 
20261,631 360 1,991 
Thereafter114 29 143 
Total future minimum lease payments$8,401 $7,661 $16,062 
Less: imputed interest967 837 1,804 
Present value of Lease Liabilities$7,434 $6,824 $14,258 
Schedule of future minimum lease payments for operating and finance leases as of December 31, 2021 consisted of the following (in thousands):
December 31, 2021
Operating LeasesEquipment Finance LeasesTotal
2022$1,167 $482 $1,649 
20231,158 442 1,600 
20241,192 386 1,578 
20251,228 401 1,629 
20261,265 339 1,604 
Thereafter106 27 133 
Total future minimum lease payments$6,116 $2,077 $8,193 

Note 7 — Recapitalization and Earn-out Shares Liability

Recapitalization

As discussed in Note 1, on August 20, 2021, Legacy Xos and NextGen consummated the Business Combination contemplated by the Merger Agreement. Xos has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

•Xos stockholders have the largest voting interest in the post-combination company;

•The board of directors of Xos is authorized to be up to 9 members and had 6 members designated at the time of closing, and Xos having the ability to nominate the majority of the members of the board of directors as of closing;

•Xos management holds executive management roles (including Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and Chief Technology Officer, among others) for the post-combination company and is responsible for the day-to-day operations;

•The post-combination company assumed the Xos name: “Xos, Inc.”; and

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Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
•The intended strategy of the post-combination entity continued Legacy Xos’ strategy of being a leader in the electric vehicle industry.

Accordingly, all historical financial information presented in these combined and consolidated financial statements represents the accounts of Legacy Xos and its wholly owned subsidiaries “as if” Legacy Xos is the predecessor and legal successor. The historical operations of Legacy Xos are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of Legacy Xos prior to the business combination; (ii) the combined results of NextGen and Legacy Xos following the Business Combination; and (iii) the assets and liabilities of Legacy Xos at their historical cost. No step-up basis of intangible assets or goodwill was recorded in the business combination transaction consistent with the treatment of the transaction as a reverse capitalization.

In connection with the Business Combination, each share of Legacy Xos Common Stock and Legacy Xos Preferred Stock issued and outstanding immediately prior to the Business Combination (with each share of Legacy Xos Preferred Stock being treated as if it were converted into Legacy Xos Common Stock immediately prior to the Business Combination) converted into the right to receive 1.956440 shares (the “Exchange Ratio”) of Common Stock.

Also, in connection with the Business Combination, the following occurred:

•the merger of Legacy Xos into a wholly owned subsidiary of NextGen, with Legacy Xos surviving the merger as a wholly owned subsidiary of NextGen, with the combined company is referred to as “Xos”;

•142,584,621 shares of Common Stock issued, including: (i) the Legacy Xos’ Common Stock, and (ii) Legacy Xos’ Preferred Stock, including the exercise and conversion of Legacy Xos’ Preferred Stock warrant (as if the Legacy Xos Preferred Stock had converted into the Legacy Xos’ Common Stock immediately prior to the reverse merger);

•the issuance and sale of 19,600,000 shares of Common Stock (PIPE investment) for a purchase price of $10.00 per share and an aggregate purchase price of $196.0 million (which excludes the sale of 2,000,000 shares in the aggregate for a purchase price of $10.00 per share and an aggregate purchase price of $20.0 million pursuant to an offering of Common Stock by the Founders of Legacy Xos). On the Closing Date, one of the PIPE Investors, Grantchester C Change, LLC., did not fund their $4.0 million committed amount under the binding Subscription Agreement.;

•the settlement of the outstanding underwriting fees incurred in connection with the initial public offering of NextGen on October 9, 2020, for which the final cash amount owed was $11.2 million;

•the settlement of the direct and incremental transaction costs incurred prior to, or concurrent with, the closing of the business combination in the amount of $44.2 million, which are recorded as reduction to additional paid-in capital;

•the recognition of contingent earn-out interests provision as liability with a fair value of $101.7 million on the day of the merger consummation; and,

•the assumption of the Public Warrants (12,499,964 units) and Private Placement Warrants (6,333,334 units) at fair value of $17.9 million on the day of merger consummation.

Contingent Earn-out Shares Liability

The Company has a contingent obligation to issue 16.2 million shares (the “Earn-out Shares”) of Common Stock and grant 261,000 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 $14.00 per share for any 10 trading days within any consecutive 20-trading day period between the merger closing date and the five year anniversary of such closing date (“Earn-out Period”), then the Company is required to issue an aggregate of 5.4 million 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
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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
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 $14.00 per share, but less than $20.00. If there is a change in control where the value per share of commons stock is less than $14.00, 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 $20.00 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 5.4 million 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 $20.00 per share, but less than $25.00.

iii.If the VWAP of the Common Stock equals or exceeds $25.00 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 5.4 million 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 valuer per share of the Company is equal to or greater than $25.00 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 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.

The Company recognized a gain on the fair value change in Earn-out Shares liability of $14.9 million and $17.5 million in its unaudited condensed consolidated statements of operations during the three and six months ended June 30, 2022, respectively.
Note 8 — Investments
Amortized cost, gross unrealized gains/losses in accumulated other comprehensive loss and fair value of marketable debt securities, available-for-sale, by type of security as of June 30, 2022 and December 31, 2021 consisted of the following (in thousands):
June 30, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term investments:
Corporate debt security$42,945 $— $(695)$42,250 
U.S. treasuries5,608 — (74)5,534 
Asset-backed security and other5,868 — (77)5,791 
Non-U.S. government and supranational bonds9,179 — (107)9,072 
Certificate of deposit2,004 — — 2,004 
$65,604 $— $(953)$64,651 
Long-term investments:
Corporate debt security$11,580 $— $(349)$11,231 
Asset-backed security and other2,042 — (55)1,987 
$13,622 $— $(404)$13,218 
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Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
December 31, 2021
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Short-term investments:
Corporate debt security$71,406 $— $(57)$71,349 
U.S. treasuries3,415 — (7)3,408 
Asset-backed security and other2,555 — (4)2,551 
Non-U.S. government and supranational bonds16,405 1 (19)16,387 
Certificate of deposit1,001 — — 1,001 
$94,782 $1 $(87)$94,696 
Long-term investments:
Corporate debt security$42,703 $— $(246)$42,457 
U.S. treasuries2,201 — (5)2,196 
Asset-backed security and other5,438 — (28)5,410 
Non-U.S. government and supranational bonds3,769 — (16)3,753 
Certificate of deposit1,000 — — 1,000 
$55,111 $— $(295)$54,816 

The Company’s investments in marketable debt securities, available-for-sale that have been in a continuous unrealized loss position by type of security as of June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

June 30, 2022
Less than 12 months12 months or greaterTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Corporate debt security$53,481 $(1,044)$— $— $53,481 $(1,044)
US treasuries5,534 (74)— — 5,534 (74)
Asset-backed security and other7,778 (132)— — 7,778 (132)
Non-U.S. government and supranational bonds9,072 (107)— — 9,072 (107)
Certificates of deposit2,004 — — — 2,004 — 
$77,869 $(1,357)$— $— $77,869 $(1,357)
22
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
December 31, 2021
Less than 12 months12 months or greaterTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Corporate debt security$113,806 $(303)$— $— $113,806 $(303)
US treasuries5,604 (12)— — 5,604 (12)
Asset-backed security and other7,961 (32)— — 7,961 (32)
Non-U.S. government and supranational bonds20,140 (34)— — 20,140 (34)
Certificates of deposit2,001 — — — 2,001 — 
$149,512 $(381)$— $— $149,512 $(381)

Gross realized gains and gross realized losses from the sales of the Company’s marketable debt securities, available-for-sale for the three and six months ended June 30, 2022 and 2021 consisted of the following (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Gross realized gains$— $— $— $— 
Gross realized losses$(63)$— $(69)$— 

Amortized cost and fair value of marketable debt securities, available-for-sale by contractual maturity as of June 30, 2022 consisted of the following (in thousands, except weighted average data):

Amortized CostFair Value
Due in one year or less$65,604 $64,651 
Due after one year through five years13,622 13,218 
$79,226 $77,869 
Weighted average contractual maturity0.7 years

Amortized cost and fair value of marketable debt securities, available-for-sale by contractual maturity as of December 31, 2021 consisted of the following (in thousands, except weighted average data):    
Amortized CostFair Value
Due in one year or less$94,782 $94,696 
Due after one year through five years55,111 54,816 
$149,893 $149,512 
Weighted average contractual maturity0.8 years

Actual maturities may differ from contractual maturities because certain issuers may have the right or obligation to prepay certain obligations with or without penalties.
23
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Note 9 — Equity
Xos Common and Preferred Stock
The Company is currentlyauthorized to issue two 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 to 1 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 awarebe entitled to vote on any amendment to this Certificate of Incorporation (including any issues under reviewcertificate of designation filed with respect to any series of Preferred Stock) that could result in significant payments, accrualsrelates solely to the terms of one or material deviation from its position.

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 CompanyPreferred Stock may be subjectissued from time to potential examination by U.S. federal, U.S. statetime in one or foreign taxing authorities in the areamore series. The Board of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, U.S. state and foreign tax laws. There is currently no taxation imposed on income by the GovernmentDirectors of the Cayman Islands. In accordance with Cayman federal income tax regulations, income taxes are not levied onCompany (the “Board of Directors”) is hereby expressly authorized to provide for the Company. Consequently, deferred tax assets and income taxes are not reflected in the Company’s financial statements. The Company’s management does not expect that the total amountissue of unrecognized tax benefits will materially change over the next twelve months.

Net Loss Per Ordinary Share

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net loss per share is computed by dividing net loss by the weighted averageall or any number of ordinary shares outstanding during the period excluding ordinary shares subject to forfeiture. An aggregate of 32,185,932 Class A ordinary shares subject to possible redemption on June 30, 2021 has been excluded from the calculation of basic loss per ordinary share, since such shares, if redeemed, only participate in their pro rata share of the trust earnings. The Company has not considered the effect of the warrants sold in the Initial Public Offering (including the consummation of the Over-Allotment Units) and Private Placement to purchase an aggregate of 18,833,334 shares of the Company’s ordinaryPreferred 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 calculationresolution or resolutions adopted by the Board of diluted loss per share, sinceDirectors providing for the exerciseissuance 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 warrants are contingent uponclass) or decrease (but not below the occurrence of future events.

The Company applies the two-class method in calculating income (loss) per ordinary share. Net income (loss) per ordinary share, basic and diluted for Class A ordinary shares subject to possible redemption is calculated by dividing the proportionate share of income or loss on Investment held by the Trust Account, net of applicable franchise and income taxes, by the weighted average 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.

Legacy Xos’ Preferred Stock
During the fourth quarter of 2020, Legacy Xos executed a financing round and issued shares of preferred stock (the “Series A Financing’’). The Series A Financing included the authorization of 25,794,475 shares of Legacy Xos Preferred Stock in classes A through A-10. The shares of Class A ordinaryLegacy Xos Preferred Stock were allocated to investors who contributed new money to Legacy Xos, while the shares of Class A-1 through A-10 Legacy Xos Preferred Stock were issued in exchange to convertible note holders. As part of this raise, 1,411,764 shares of Class A Legacy Xos Preferred Stock and 1 warrant exercisable for 319,411 shares of Class A Legacy Xos Preferred Stock were issued for aggregate cash proceeds of $9.6 million and a subscription receivable for $2.4 million. During the quarter ended March 31, 2021, the Legacy Xos issued an additional 3,739,846 shares of Class A Legacy Xos Preferred Stock raising $31.8 million in cash proceeds, and the conversion of the SAFE agreement (Simple Agreement for Future Equity) issued to Elemental Excelerator (the “SAFE Note”).
As part of this transaction, Legacy Xos converted $21.5 million of convertible notes and $2.5 million in accrued interest into 21,570,308 shares of Class A-1 through A-10 Legacy Xos Preferred Stock. These exchanges from convertible notes into shares of Legacy Xos Preferred Stock included transactions with both related and unrelated parties (refer to Note 14). The differences between the total carrying value of the converted notes held by third parties, and the fair value of the issued shares of Legacy Xos Preferred stock, was recorded as realized loss on debt extinguishment in the consolidated statement of operations.
We have determined the fair value of the issued shares of Legacy Xos Preferred Stock in connection with the note conversion using market rates experienced in other non-related party transactions, through the issuance of shares of Legacy Xos Preferred Stock. As some of the converted third-party notes have voting rights and others do not, the fair value of non-voting shares were reduced by 3%.
Concurrent with the Business Combination, outstanding shares of Legacy Xos Preferred Stock were converted into shares of Common Stock in accordance with the Exchange Ratio.

24
Table of Contents
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Standby Equity Purchase Agreement

On March 23, 2022, the Company entered into a Standby Equity Purchase Agreement (the "SEPA") with YA II PN, Ltd. (“Yorkville”), whereby the Company has 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 during the 36 months following the execution of the SEPA, subject to possible redemption outstanding since original issuance.

certain conditions. The Company expects to use any net proceeds for working capital and general corporate purposes.

The

As consideration for Yorkville’s commitment to purchase shares of common stock at the Company’s net loss is adjusted fordirection upon the portion of income (loss) that is attributable to Class A ordinary sharesterms and subject to redemption, as these shares only participatethe conditions set forth in the earningspurchase agreement, upon execution of the Trust Account and notpurchase agreement, the income or lossesCompany issued 18,582 shares of common stock to Yorkville.

During the Company. Accordingly, basic and diluted loss per ordinary share is calculated as follows:

three months ended June 30, 2022, the Company issued 1,809,515 shares of Common Stock under the SEPA for proceeds of $4.3 million. As of June 30, 2022, the remaining commitment available under the agreement was $120.7 million.

13

Note 10 — Derivative Instruments

Public and Private Placement Warrants

NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

  For the
Three Months
Ended
June 30,
2021		  For the
Six Months Ended
June 30,
2021		 
Class A ordinary shares subject to possible redemption      
Numerator: Earnings allocable to ordinary shares subject to possible redemption      
Income from investments held in Trust Account $10,839  $18,776 
Less: Company’s portion available to be withdrawn to pay taxes  -   - 
Net income attributable to Class A ordinary shares subject to possible redemption $10,839  $18,776 
Denominator: Weighted average Class A ordinary shares subject to possible redemption        
Basic and diluted weighted average shares outstanding, Class A ordinary shares subject to possible redemption  32,113,401   32,525,950 
Basic and diluted net income per share, Class A ordinary shares subject to possible redemption $0.00  $0.00 
         
Non-redeemable ordinary shares        
Numerator: Net income (loss) minus Net Earnings        
Net income (loss) $733,375  $(7,664,815)
Net income allocable to Class A ordinary shares subject to possible redemption  10,839   18,776 
Non-redeemable net income (loss) $722,536  $(7,683,591)
Denominator: Weighted average non-redeemable ordinary shares        
Basic and diluted weighted average shares outstanding, non-redeemable ordinary shares  14,761,599   14,349,050 
Basic and diluted net income (loss) per share, non-redeemable ordinary shares $0.05  $(0.54)

Recent Accounting Standards

In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. AdoptionAs of the ASU did not impact the Company’s financial position, results of operations or cash flows.

The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

Note 3—Initial Public Offering

On October 9, 2020,June 30, 2022, the Company consummated its Initialhad 18,613,299 Public OfferingWarrants and 219,999 Private Placement Warrants outstanding, with fair values of 35,000,000 Units, at $10.00 per Unit, generating gross proceeds of $350.0$4.2 million and incurring offering costs of approximately $19.8 million, inclusive of approximately $12.3 million in deferred underwriting commissions. On November 13, 2020, the underwriters partially exercised the over-allotment option and on November 17, 2020, purchased an additional 2,500,000 Over-Allotment Units, generating gross proceeds of $25.0 million, and incurred additional offering costs of approximately $1.4 million in underwriting fees (inclusive of $875,000 in deferred underwriting fees).

$49,000, respectively.

Each Unit consists of one Class A ordinary share and one-third of one redeemable warrant (“

The Public Warrant”). Each whole Public Warrant will entitle the holder to purchase one Class A ordinary share atWarrants have an exercise price of $11.50 per share, subject to adjustment (see Note 7).

14

NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 4—Private Placement

Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 6,000,000 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $9.0 million. Simultaneously with the closing of the Over-Allotment on November 17, 2020, the Company consummated the second closing of the Private Placement, resulting in the purchase of an aggregate of an additional 333,334 Private Placement Warrants by the Sponsor, generating gross proceeds to the Company of $500,000.

Each whole Private Placement Warrant is exercisable for one whole share of Class A ordinary shares at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants to the Sponsor was added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrantsadjustments, and will expire worthless. The Private Placement Warrants will be non-redeemable for cash and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.

The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.

Note 5—Related Party Transactions

Founder Shares

On July 31, 2020, the Sponsor paid an aggregate of $25,000 in exchange for issuance of 10,062,500 Class B ordinary shares (the “Founder Shares”). The holders of the Founder Shares agreed to forfeit up to an aggregate of 1,312,500 Founder Shares, on a pro rata basis, to the extent that the option to purchase additional units is not exercised in full by the underwriters, so that the Founder Shares will represent 20% of the Company’s issued and outstanding shares after the Initial Public Offering. On November 17, 2020, the underwriters partially exercised the over-allotment option to purchase as additional 2,500,000 Units and forfeited the remaining option; thus, an aggregate of 687,500 Class B ordinary shares were forfeited accordingly.

The Initial Shareholders agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of (A) one year after the completion of the initial Business Combination; and (B) subsequent to the initial Business Combination (x) if the last reported sale price of Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for anyAugust 20, trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (y) the date on which the Company completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of the Public Shareholders having the right to exchange their ordinary shares for cash, securities or other property.

Related Party Loans

On March 29, 2021, the Company issued a promissory note to Sponsor (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $1,000,000. The Promissory Note is non-interest bearing and payable on the earlier of (i) October 9, 2022 and (ii) the completion of the Business Combination. As of June 30, 2021, there was $440,000 outstanding under the Promissory Note.

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, members of the Company’s founding team or any of their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. As of June 30, 2021, the Company had no borrowings under the Working Capital Loans.

15

NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 6—Commitments and Contingencies

Registration and Shareholder Rights

The holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration and shareholder rights agreement. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company registers such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The Company granted the underwriters a 45-day option from the date of this prospectus to purchase up to 5,250,000 additional Units at the Initial Public Offering price less the underwriting discounts and commissions. On November 13, 2020, the underwriters partially exercised the over-allotment option and on November 17, 2020, purchased an additional 2,500,000 Over-Allotment Units.

The underwriters were entitled to an underwriting discount of $0.20 per unit, or $7.00 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or $12.25 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

In connection with the consummation of the Over-Allotment on November 17, 2020, the underwriters were entitled to an additional fee of $500,000 paid upon closing, and $875,000 in deferred underwriting commissions.

Deferred Legal Fees

The Company’s legal counsel agreed to defer their fees in excess of $250,000 until the consummation of the Company’s initial Business Combination. In the event, either (x) the initial Business Combination is not consummated within two years of the Initial Public Offering and the proceeds of the Initial Public Offering are returned to investors, or (y) the legal counsel declined to represent the Company in the initial Business Combination due to a conflict, the legal counsel will write off such deferred amounts.

The deferred amount is an unrecognized contingent liability, as closing of a potential business combination was not considered probable as of June 30, 2021. As of June 30, 2021, there was approximately 5.0 million in deferred legal fees.

16

NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 7—Shareholders’ Equity

Preference Shares — The Company is authorized to issue 5,000,000 preference shares with a par value of $0.0001 per share. As of June 30, 2021, there were no preference shares issued or outstanding.

Class A Ordinary Shares — The Company is authorized to issue 500,000,000 Class A ordinary shares with a par value of $0.0001 per share. Holders of the Company’s Class A ordinary shares are entitled to one vote for each share. On June 30, 2021 and December 31, 2020, there were 37,500,000 Class A ordinary shares issued or outstanding, including 32,185,932 and 32,592,414 Class A ordinary shares subject to possible redemption, respectively.

Class B Ordinary Shares — The Company is authorized to issue 50,000,000 Class B ordinary shares with a par value of $0.0001 per share. As of June 30, 2021 and December 31, 2020, the Company had 9,375,000 Class B ordinary shares issued and outstanding.

Holders of the Class A ordinary shares and holders of the Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the shareholders, except as required by law. Each ordinary share will have one vote on all such matters.

The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of the initial Business Combination,2026 or earlier at the option of the holder, on a one-for-one basis, subject to adjustment for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional Class A ordinary shares,upon redemption or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of the initial Business Combination, the ratio at which the Class B ordinary shares will convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the issued and outstanding Class B ordinary shares agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of all ordinary shares issued and outstanding upon the completion of the Initial Public Offering plus all Class A ordinary shares and equity-linked securities issued or deemed issued in connection with the initial Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than one to one.

Note 8—Warrants

As of June 30, 2021, the Company had 12,500,000 Public Warrants and 6,333,334 Private Placement Warrants outstanding.

liquidation. The Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Unitsunits and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering;became exercisable; provided in each case that the Company has an effective registration statement under the Securities Act covering the issuance of the Class A ordinary sharesCommon Stock issuable upon exercise of the warrantsWarrants 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 warrantsWarrants on a cashless basis under the circumstances specified in the warrant agreement). The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, the Company will use its commercially reasonable efforts to fileA registration statement was filed with the SEC a registration statement covering the issuance of the Class A ordinary sharesCommon Stock issuable upon exercise of the warrants,Warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of the initial Business Combination and to maintain the effectiveness of such registration statement and a current prospectus relating to those Class A ordinary shares of Common Stock until the warrantsPublic Warrants expire or are redeemed; provided that ifredeemed. If the Class A ordinary shares of Common Stock are at the time of any exercise of a warrantPublic 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, requires 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.


17

NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The warrants have an exercise price of $11.50 per share, subject to adjustments, and will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per ordinary share (with such issue price or effective issue price to be determined in good faith by the board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price described under “Redemption of warrants for cash when the price per Class A ordinary share equals or exceeds $18.00” and “Redemption of warrants for Class A ordinary shares when the price per Class A ordinary share equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price described under the caption “Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00” will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.

The Private Placement Warrants are identical to the Public Warrants, underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary sharesCommon Stock issuable upon exercise of the Private Placement Warrants willwere not be transferable, assignable or salable until 30 days after the completion of a Business Combination,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 such purchasers’their permitted transferees. If the Private Placement Warrants are held by someone other than the Initial Shareholdersinitial 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 warrantsWarrants for cash when the price per Class A ordinary shareCommon Stock equals or exceeds $18.00:


Once the warrantsWarrants become exercisable, the Company may redeem the outstanding warrantsWarrants (except as described hereinabove 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 Class A ordinary shares 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 $18.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations and the like).

•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 $18.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations and the like).

25
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
The Company will not redeem the warrantsWarrants as described above unless a registration statement under the Securities Act covering the issuance of the Class A ordinary sharesCommon Stock issuable upon exercise of the warrantsWarrants is then effective and a current prospectus relating to those Class A ordinary sharesCommon Stock is available throughout the 30-day redemption period. If and when the warrantsWarrants 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.


18

NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Redemption of warrantsWarrants for Class A ordinary sharesCommon Stock when the price per Class A ordinary share equals or exceeds $10.00:


Once the warrantsWarrants become exercisable, the Company may redeem the outstanding warrantsWarrants (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 Class A ordinary shares;
●if, and only if, the Reference Value equals or exceeds $10.00 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 $18.00 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.

•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 $10.00 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 $18.00 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 Class A ordinary sharesCommon Stock shall mean the average reported last sale price of Class A ordinary sharesCommon 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.

Warrants.

In no event will the Company be required to net cash settle any warrant. IfWarrant. The Warrants may also expire worthless.
Note 11 — Share-Based Compensation

2018 Stock Plan

On November 27, 2018, the Legacy Xos’ board of directors and stockholders adopted the 2018 Stock Plan. There are no 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.

Options

As of June 30, 2022, there were 1,786,679Options 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 4 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.

26
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Stock option activity during the six months ended June 30, 2022 consisted of the following:

OptionsWeighted Average Fair ValueWeighted Average Exercise PriceWeighted Average Remaining YearsIntrinsic Value
December 31, 2021 — Options outstanding1,838,759 $0.02 $0.02 8.22$5,756,797 
Granted— — — 
Exercised400 0.02 0.02 
Forfeited3,678 0.03 0.02 
March 31, 2022 — Options outstanding1,834,681 $0.02 $0.02 7.98$5,450,514 
Granted— — — 
Exercised38,693 0.02 0.04 
Forfeited9,309 0.02 0.03 
June 30, 2022 — Options outstanding1,786,679 $0.02 $0.02 7.69$3,253,977 
June 30, 2022 — Options vested and exercisable767,020 $0.02 $0.02 7.48$1,396,965 

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, 2022 and 2021 were approximately $114,000 and $0, respectively. The aggregate intrinsic value of options exercised during the six months ended June 30, 2022 and 2021 were approximately $115,000 and $6,000, respectively.

The Company estimates the 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 were no option grants during the three and six months ended June 30, 2022 and 2021.

2021 Equity Plan

On August 19, 2021 the Company’s stockholders approved 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 no statutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, RSUs, performance awards and other forms of awards to employees, directors and consultants, including employees and consultants of Xos’ affiliates.

As of June 30, 2022, there were 20,431,516 shares of Common Stock available for issuance under the 2021 Equity Plan.

RSU activity during the six months ended June 30, 2022 consisted of the following:
27
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
RSUsWeighted Average Grant Date Fair ValueWeighted Average Fair Value
December 31, 2021 — RSU outstanding1,844,820 $3.60 $5,811,183 
Granted1,618,442 2.67 3,960,984 
Vested133,349 3.21 347,382 
Forfeited117,532 3.38 279,746 
March 31, 2022 — RSU outstanding3,212,381 $3.27 $9,605,019 
Granted724,299 2.51 1,818,247 
Vested88,730 3.48 228,923 
Forfeited208,375 3.14 530,965 
June 30, 2022 — RSU outstanding3,639,575 $3.12 $6,696,818 

The Company’s recognized stock-based compensation expense (including earn-out RSUs) in the condensed consolidated statements of operations and comprehensive loss during the three and six months ended June 30, 2022, and 2021 consisted of the following (in thousands):

Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Cost of goods sold$198 $— $227 $— 
Research and development93 — 354 — 
Sales and marketing36 — 94 — 
General and administrative751 1 1,794 3 
Total$1,078 $1 $2,469 $3 

The unamortized stock-based compensation expense was $9.3 million as of June 30, 2022, and weighted average remaining amortization period as of June 30, 2022 was 3.12 years.

The aggregate fair value of RSUs that vested was $0.2 and $0.6 during the three and six months ended June 30, 2022, respectively.
Note 12 — Property and Equipment, net
Property and equipment, net consisted of the following at June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Equipment$8,985 $5,244 
Furniture & fixtures168 141 
Company vehicles629 153 
Leasehold improvements626 626 
Computers, software and related equipment1,762 1,289 
Construction in progress6,930 1,444 
Property and Equipment, gross19,100 8,897 
Accumulated depreciation(2,346)(1,471)
Property and Equipment, net$16,754 $7,426 

28
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Depreciation expense during each of the three months ended June 30, 2022 and 2021 totaled $0.3 million, respectively. Depreciation expense during the six months ended June 30, 2022 and 2021 totaled $0.6 million and $0.4 million, respectively.
Note 13 — Commitments and Contingencies
Operating and Finance Leases
Refer to Note 6, Leases for future minimum lease commitments.
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 consolidated financial statements. As of June 30, 2022 and December 31, 2021, 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.
Note 14 — Related Party Transactions

The Company leases property in North Hollywood, California from Valley Industrial Properties which is unableowned by the Sunseeker Trust. The Sunseeker Trust is an irrevocable trust with the beneficiary being the mother of the CEO, Dakota Semler. Rent expense during each of the three months ended June 30, 2022 and 2021 totaled $35,000, respectively. Rent expense during each of the six months ended June 30, 2022 and 2021 totaled $70,000, respectively.

The Company has contract manufacturing agreements with Metalsa S.A. de C.V. and Fitzgerald Manufacturing Partners. We utilize Metalsa, a Mexico-based automotive supplier, to completeprovide parts and manufacturing services. Metalsa had an investment in the Company in the form of a Business Combination withinconvertible note payable which was converted as part of the Combination PeriodSeries A Financing (see Note 9 above). Similarly, we utilize Fitzgerald Manufacturing Partners to provide parts and manufacturing services; the owner is a stockholder of the Company. We also have lease agreements with Fitzgerald Manufacturing Partners, for which we recorded rent expense of $189,000 and $361,000 during the three and six months ended June 30, 2022. No rent expense was recorded for these lease agreements during the three and six months ended June 30, 2021.

The Company had a partial recourse promissory note in the amount of $364,000 due from the COO, Giordano Sordoni. The note was utilized to exercise options provided to him by the Company. Interest is compounded annually at a rate of 2.38%. The note was issued in the amount of $364,000 on June 24, 2019. The full balance and interest of $15,000 was forgiven by the Company during the first quarter of 2021.

The Company converted 34 notes payable with outstanding carrying value of $18.9 million from related parties into 19,664,000 preferred shares of Legacy Xos Preferred Stock as described above in Note 9 - Equity. These related parties consisted of the CEO, COO, board members, board advisors, and various trusts whose beneficiaries are relatives of the CEO.

The Company utilized employees from an entity owned by the CEO in conducting repairs and maintenance at their headquarters. Amounts charged for these services were at the employees’ current salary rates including benefits and totaled $0 and $37,000 during the three months ended June 30, 2022 and 2021, respectively. Amounts charged totaled $0 and $74,000 during the six months ended June 30, 2022 and 2021, respectively.
Note 15 — Income Taxes

The effective tax rate during the three months ended June 30, 2022 and 2021 was (0.01)% and 0%, respectively. The effective tax rate during the six months ended June 30, 2022 and 2021 was (0.01)% and 0%, 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, 2022.
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, 2022 and December 31, 2021.

29
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
The Company files income tax returns with the Internal Revenue Service and the taxing authorities of various states. The tax periods 2018 through 2021 remain open in most jurisdictions. The Company liquidatesis not currently under examination by income tax authorities in any federal or state jurisdiction.

At June 30, 2022, the funds heldCompany'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, length of carryback and carryforward periods, as well as 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; and accordingly, for the periods ended June 30, 2022 and 2021, the Company has provided a valuation allowance against net US deferred tax assets.

Note 16 — Net Loss per Share

Basic and diluted net loss per share during the three and six months ended June 30, 2022 and 2021 consisted of the following (in thousands, except per share amounts):

Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Numerator:
Net income (loss)$(9,467)$(9,158)$(30,653)$(23,008)
Denominator:
Basic
Weighted average common shares outstanding — basic164,041 72,389 163,606 72,372 
Basic net loss per share$(0.06)$(0.13)$(0.19)$(0.32)
Diluted
Weighted average common shares outstanding from above164,041 72,389 163,606 72,372 
Add: dilutive effect of options— — — — 
Add: dilutive effect of RSUs— — — — 
Weighted average common shares outstanding164,041 72,389 163,606 72,372 
Diluted net loss per share$(0.06)$(0.13)$(0.19)$(0.32)

Potential weighted average shares that were excluded from the computation of diluted net income (loss) per share because their effect was anti-dilutive as of June 30, 2022 and 2021 consisted of the following (in thousands):

Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Contingent earn-out shares16,422 — 16,422 — 
Common stock public and private warrants18,833 — 18,833 — 
Restricted stock units708 — 717 — 
Stock options1,783 2,339 1,798 2,390 

Note 17 — 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,
30
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
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 Trust Account, holderstables 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, investments in marketable debt securities, available-for-sale, accounts payable, other current liabilities, public and private placement warrants, will not receive anyand the contingent earn-out shares liability. The fair value of such funds with respectcash and accounts receivable approximates carrying value due to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.

Note 9—Fair Value Measurements

short-term maturity.

The following table presents information about the Company’s financial

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. Derivative financial instruments which are required to be measured at fair value on a recurring basis are measured at fair value using Level 3 inputs for all periods presented. Level 3 inputs are unobservable inputs that are measuredsupported 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, 20212022 and December 31, 2020 by level within2021 consisted of the following (in thousands):

31
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
June 30, 2022
Fair ValueLevel 1Level 2Level 3
Financial Assets
Cash and Cash Equivalents(1):
Money market funds$2,207 $2,207 $— $— 
$2,207 $2,207 $— $— 
Short-Term Investments:
U.S. treasuries$5,534 $5,534 $— $— 
Corporate debt security42,250 — 42,250 — 
Asset-backed security and other5,791 — 5,791 — 
Non-U.S. government and supranational bonds9,072 — 9,072 — 
Certificate of Deposit2,004 — 2,004 — 
$64,651 $5,534 $59,117 $— 
Long-Term Investments:
Corporate debt security$11,231 $— $11,231 $— 
Asset-backed security and other1,987 — 1,987 — 
$13,218 $— $13,218 $— 
Total Financial Assets$80,076 $7,741 $72,335 $— 
Financial Liabilities:
Private Placement Warrants$49 $— $49 $— 
Public Warrants4,178 4,178 — — 
Contingent Earn-out Shares liability11,894 — — 11,894 
Total Financial Liabilities$16,121 $4,178 $49 $11,894 

____________
(1) Included in total cash and cash equivalents in the condensed consolidated balance sheets.
32
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
December 31, 2021
Fair ValueLevel 1Level 2Level 3
Financial Assets
Cash and Cash Equivalents(1):
Money market funds$5,868 $5,868 $— $— 
Non-U.S. government and supranational bonds647 — 647 — 
Corporate debt security1,805 — 1,805 — 
$8,320 $5,868 $2,452 $— 
Short-Term Investments:
U.S. treasuries$3,408 $3,408 $— $— 
Corporate debt security71,349 — 71,349 — 
Asset-backed security and other2,551 — 2,551 — 
Non-U.S. government and supranational bonds16,387 — 16,387 — 
Certificate of Deposit1,001 — 1,001 — 
$94,696 $3,408 $91,288 $— 
Long-Term Investments:
U.S. treasuries$2,196 $2,196 $— $— 
Corporate debt security42,457 — 42,457 — 
Asset-backed security and other5,410 — 5,410 — 
Non-U.S. government and supranational bonds3,753 — 3,753 — 
Certificate of Deposit1,000 — 1,000 — 
$54,816 $2,196 $52,620 $— 
Total Financial Assets$157,832 $11,472 $146,360 $— 
Financial Liabilities:
Private Placement Warrants$140 $— $140 $— 
Public Warrants7,356 7,356 — — 
Contingent Earn-out Shares liability29,240 — — 29,240 
Total Financial Liabilities$36,736 $7,356 $140 $29,240 

____________
(1) Included in total cash and cash equivalents in the condensed consolidated balance sheets.

The changes in the fair value hierarchy:

  Fair Value Measured as of June 30, 2021 
  Level 1  Level 2  Level 3 
Assets:         
Investments held in Trust Account $375,029,850  $
-
  $
-
 
Liabilities:            
Derivative warrant liabilities Public Warrants $23,125,000  $-  $- 
Derivative warrant liabilities Private Warrants $-  $-  $11,716,670 

December 31, 2020         
  Fair Value Measured as of December 31, 2020 
  Level 1  Level 2  Level 3 
Assets:         
Investments held in Trust Account $375,007,974  $-  $- 
Liabilities:            
Derivative warrant liabilities Public Warrants $18,683,920  $-  $- 
Derivative warrant liabilities Private Warrants $-  $-  $9,816,670 

19

NEXTGEN ACQUISITION CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Transfers to/from Levels 1, 2 andof Level 3 are recognized atfinancial liabilities during the beginning of the reporting period. There were no transfers between levels for thethree six months ended June 30, 2021.

2022 consisted of the following (in thousands):
Three months ended June 30, 2022Six months ended June 30, 2022
Fair value, beginning of period$26,938 $29,240 
Recognition of earn-out RSUs(174)148 
Change in fair value during the period(14,870)(17,494)
Fair value, end of period$11,894 $11,894 

33
Xos, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Unaudited
Significant unobservable inputs related to Level 3 earn-out shares liability consisted of the following as of June 30, 2022:

June 30, 2022
Stock price$1.84
Stock price volatility80.0%
Expected term4.14 years
Risk-free interest rate3.0%

Note 18 — Subsequent Events

Level 1 instruments include investments in mutual funds invested in government securities.

The Company uses inputs such as actual trade data, quoted market prices from dealersevaluated all events or brokers,transactions that occurred through August 11, 2022, the date the condensed consolidated financial statements were issued.
Convertible Debentures

On August 9, 2022, the Company entered into a securities purchase agreement with Yorkville for the issuance of convertible debentures in the principal amount of up to $35.0 million (the “Convertible Debentures”). $20.0 million in principal amount of Convertible Debentures was issued on August 11, 2022, and other similar sourcesan additional $15.0 million in principal amount will be issued to determineYorkville upon the fair value of its investments.

The fair valueeffectiveness of the Private Placement Warrants was measured using a Monte Carlo simulation model. registration statement registering the resale of Common Stock resulting from the conversion of the Convertible Debentures. The fair valuematurity date of Public Warrants issuedthe Convertible Debentures shall be November 11, 2023, which may be extended by an additional three months in connectioncertain instances. The Convertible Debentures bear interest at an annual rate of 6.0%, payable at maturity, which will increase to an annual rate of (i) 10.0% upon the occurrence and during the continuance of an event of default, and (ii) 7.5% for so long as “Registration Event” (as defined in the Convertible Debenture) remains in effect in accordance with the Initial Public Offering are measuredregistration rights agreement. The Convertible Debentures provide a conversion right, in which Yorkville may, at any time after the issuance date, convert any portion of the principal amount of the Convertible Debenture, together with any accrued but unpaid interest, into shares of Common Stock at the lower of (i) $2.4733 per share or (ii) 97% of the lowest daily volume weighted average price of the Common Stock during the three trading days immediately preceding the date of conversion (but not lower than a floor price of $0.50 per share, subject to adjustment in accordance with the terms of the Convertible Debentures).


Convertible Notes

On August 9, 2022, the Company entered into an agreement with Aljomaih Automotive Co. (“Aljomaih”) for the issuance of convertible note with a principal amount of $20.0 million and a maturity date of August 11, 2025 (the “Note”). The Note includes an option to issue and sell additional convertible notes in a principal amount of up to an additional $20.0 million, upon the mutual consent of both parties by November 30, 2022, on terms and conditions to be negotiated in good faith. The Note 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, calculated based on the listed market10-day volume weighted average price of such warrants, a Level 1 measurement. Forending on the six months ended June 30, 2021, the Company recognized a chargetrading day immediately prior to the statement of operations resulting from an increaseapplicable payment date, unless earlier converted or paid. The conversion price for the Note will initially be equal to $2.3817 per share, subject to adjustment in some events pursuant to the fair value of liabilities of $6.3 million presented as change in fair value of derivative warrant liabilities on the accompanying unaudited condensed statement of operations.

The estimated fair valueterms of the Private Placement Warrants, and the Public Warrants prior to being separately listed and traded, is determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatilityNote.

34

Table of its ordinary shares based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s ordinary shares that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:

  As of June 30,
2021		  As of March 31,
2021		 
Exercise price $11.50  $11.50 
Stock Price $9.94  $9.92 
Option term (in years)  5.09   5.34 
Volatility  26.00%  29.10%
Risk-free interest rate  0.88%  1.00%

The change in the fair value of the derivative warrant liabilities, measured using Level 3 inputs, for the three and six months ended June 30, 2021 is summarized as follows:

Warrant liabilities at January 1, 2021 $9,816,668 
Change in fair value of derivative warrant liabilities  2,913,334 
Derivative warrant liabilities at March 31, 2021 $12,730,001 
Change in fair value of derivative warrant liabilities  (1,013,331)
Derivative warrant liabilities at June 30, 2021 $11,716,670 

Note 10—Subsequent Events

Management has evaluated subsequent events to determine if events or transactions occurring through the date that the financial statements were issued, require potential adjustment to or disclosure in the financial statement and has concluded that all such events that would require recognition or disclosure have been recognized or disclosed.

20

Item 2.    Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations.

Operations
XOS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References to the “Company,” “our,” “us” or “we” refer to NextGen Acquisition Corporation.


The following discussion and analysis provides information which Xos’ management believes is relevant to an assessment and understanding of the Company’s financial condition andour consolidated results of operations and financial condition. The discussion should be read in conjunctiontogether with the unaudited condensed consolidated financial statements and therelated notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, possible business combinations, including our proposed Xos Business Combination, and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described inReport. You should read the “Risk Factors” section of our Form 10-K/A, in our Xos Disclosure Statement, and in our other filings with the SEC. Our filings with the SEC can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

We are a blank check company incorporated as a Cayman Islands exempted company on July 29, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses that the Company has not yet identified. Our Sponsor is NextGen Sponsor LLC, a Cayman Island exempted company.

The registration statement for our Initial Public Offering was declared effective on October 6, 2020. On October 9, 2020, we consummated the Initial Public Offering of 35,000,000 Units, at $10.00 per Unit, generating gross proceeds of $350.0 million, and incurring offering costs of approximately $19.8 million, inclusive of approximately $12.3 million in deferred underwriting commissions. On November 13, 2020, the underwriters partially exercised the over-allotment option and on November 17, 2020, purchased an additional 2,500,000 Over-Allotment Units, generating gross proceeds of $25.0 million, and incurred additional offering costs of approximately $1.4 million in underwriting fees (inclusive of approximately $875,000 in deferred underwriting fees).

Simultaneously with the closing of the Initial Public Offering, we consummated the private placement of 6,000,000 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant with our Sponsor, generating gross proceeds of $9.0 million. Simultaneously with the closing of the Over-allotment on November 17, 2020, we consummated the second closing of the Private Placement, resulting in the purchase of an aggregate of an additional 333,334 Private Placement Warrants by the Sponsor, generating gross proceeds to the Company of $500,000.

Upon the closing of the Initial Public Offering, the Over-Allotment and the Private Placement, $375.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement were placed in a Trust Account with Continental Stock Transfer & Trust Company acting as trustee and invested in United States government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

21

If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or October 9, 2022, we will (i) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law.

Proposed Xos Business Combination

On February 21, 2021, the Company entered into the Merger Agreement with Merger Sub and Xos.

The Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, the following transactions will occur:

(i) at the Closing, upon the terms and subject to the conditions of the Merger Agreement, in accordance with the DGCL, Merger Sub will merge with and into Xos, the separate corporate existence of Merger Sub will cease and Xos will be the surviving corporation and the Company’s wholly-owned subsidiary;

(ii) as a result of the Merger, among other things and after giving effect to the Company Recapitalization (as defined in the Merger Agreement), all outstanding shares of Xos common stock or resulting from the conversion of preferred stock of Xos into common stock of Xos, together with shares of Xos common stock reserved in respect of (a) Xos Options, (b) Xos RSUs and (c) Xos Restricted Stock Awards outstanding as of immediately prior to the Merger that will be converted into awards based on new Xos common stock, will be cancelled in exchange for the right to receive an aggregate of 127,626,116 shares of new Xos common stock (at a deemed value of $10.00 per share), which, in the case of Xos Awards, will be shares underlying awards based on new Xos common stock representing a pre-transaction equity value of Xos of $1,276,261,160. The portion of the Aggregate Merger Consideration reflecting the conversion of the Xos Awards is calculated assuming that all new Xos Options are net-settled (although new Xos Options may by their terms be cash exercised, resulting in additional dilution); and

(iii) upon the effective time of the Domestication, the Company will immediately be renamed “Xos, Inc.” or such other name as agreed to by the Company and Xos prior to Closing.

Prior to the Closing, subject to the approval of the Company’s shareholders, and in accordance with the DGCL, CICA and the Company’s amended and restated memorandum and articles of association, the Company will effect a deregistration under the CICA and a domestication under Section 388 of the DGCL (by means of filing a certificate of domestication with the Secretary of State of Delaware), pursuant to which its jurisdiction of incorporation will be changed from the Cayman Islands to the State of Delaware.

In connection with the Domestication, (i) each of the Company’s then issued and outstanding Class A ordinary shares, par value $0.0001 per share, will convert automatically, on a one-for-one basis, into a share of NextGen Common Stock, (ii) each of the Company’s then issued and outstanding Class B ordinary shares, par value $0.0001 per share, will convert automatically, on a one-for-one basis, into a share of NextGen Common Stock, (iii) each of the Company’s then issued and outstanding warrant will convert automatically into a Domesticated NextGen Warrant, pursuant to the Warrant Agreement, dated October 6, 2020, between the Company and Continental Stock Transfer & Trust Company, as warrant agent, and (iv) each of the Company’s then issued and outstanding Cayman NextGen Units, if any, will be cancelled and will entitle the holder thereof to one share of NextGen Common Stock and one-third of one Domesticated NextGen Warrant.

On February 21, 2021, concurrently with the execution of the Merger Agreement, NextGen entered into Subscription Agreements with the PIPE Investors, pursuant to, and on the terms and subject to the conditions of which, the PIPE Investors have collectively subscribed for 22,000,000 shares of the NextGen Common Stock for an aggregate purchase price equal to $220,000,000, a portion of which is expected to be funded by one or more affiliates of the Sponsor and certain additional investors (which may include mutual funds and existing shareholders). 2,000,000 of the shares of the NextGen Common Stock to be sold in the PIPE Investment are shares owned by certain Xos officers. The PIPE Investment will be consummated substantially concurrently with the Closing.

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The consummation of the proposed Xos Business Combination is subject to certain conditions as further described in the Merger Agreement.

For more information about the Merger Agreement and the proposed Xos Business Combination, see the Company’s Current Reports on Form 8-K filed with the SEC on February 22, 2021 and on May 14, 2021, and the Xos Disclosure Statement that the Company has filed with the SEC. Unless specifically stated, this Quarterly Report does not give effect to the proposed Xos Business Combination and does not contain the risks associated with the proposed Xos Business Combination. Such risks and effects relating to the proposed Xos Business Combination are included in the Xos Disclosure Statement.

Results of Operations

Our entire activity from July 29, 2020 (inception) through June 30, 2021 was in preparation for an Initial Public Offering, and since our Initial Public Offering, our activity has been limited to the search for a prospective initial Business Combination. We will not generate any operating revenues until the closing and completion of our initial Business Combination.

For the three months ended June 30, 2021, we had net income of approximately $733,000 which consisted mainly of an approximately $1,283,000 gain in change in fair value of derivative warrant liabilities and approximately $13,000 in net gain on investments held in Trust Account, partially offset by approximately $532,000 in general and administrative expenses, and $30,000 in general and administrative expenses – related party.

For the six months ended June 30, 2021, we had a loss of approximately $7.7 million, which consisted mainly of an approximately $6.3 million loss in change in fair value of derivative warrant liabilities, approximately $1.3 million in general and administrative expenses, and $60,000 in general and administrative expenses – related party, partially offset by approximately $22,000 in net gain on cash equivalents held in Trust Account.

Liquidity and Capital Resources

Our entire activity since inception through June 30, 2021 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after completion of our initial Business Combination. We will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

On March 29, 2021, we issued a promissory note, pursuant to which we may borrow up to an aggregate principal amount of $1,000,000. The promissory note is non-interest bearing and payable on the earlier of (i) October 9, 2022 and (ii) the completion of our initial Business Combination. As of June 30, 2021, there was $440,000 outstanding under the promissory note.

In connection with our assessment of going concern considerations in accordance with ASU 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” as of June 30, 2021, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing.

We continue to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the balance sheet. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Contractual Obligations

We do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or long-term liabilities.

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Critical Accounting Policies

This management’s discussion and analysis of our financial condition and results of operations together with our unaudited interim 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, 2021 filed with the SEC on March 30, 2022. 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 “Xos 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.

Overview

We are a leading technology company which provides fleet services, software solutions, and manufactures 100% battery-electric Class 5 to Class 8 commercial vehicles. We facilitate the transition of fleets from internal combustion engine vehicles to zero-emission vehicles with proprietary technology suited to the commercial use case. We also provide a range of services to facilitate the transition of fleets to electric vehicles, including charging infrastructure, vehicle maintenance, financing and service.

Our X-Platform (our proprietary, purpose-built vehicle chassis platform) and X-Pack (our proprietary battery system) provide modular features that allow us to accommodate a wide range of last-mile applications and enable us to offer clients at a lower total cost of ownership compared to traditional diesel fleets. The X-Platform and X-Pack are available for purchase as part of the Xos vehicle. The X-Platform and X-Pack were both engineered to be modular in nature to allow fleet operators to customize their vehicles to fit their commercial applications (e.g., upfitting with a specific vehicle body and/or tailoring battery range). In addition to a competitive vehicle purchase price, our technology can also drive savings throughout ownership through increased vehicle uptime, greater payload capacity and reduced service and maintenance expense. Ninety percent of vehicles in our targeted segments operate on routes under 200 miles per shift (referred to as “last-mile” routes). Vehicles that fulfill these predictable last-mile routes generally return to base hubs on a daily basis. Such vehicles are ideal candidates for electrification as operators are able to connect the vehicles to dedicated charging infrastructure at return-to-base hubs. Our modular and cost-effective vehicles have been on the road and in customers’ hands since 2018, further validating the durability of satisfaction with our vehicles. During the six months ended June 30, 2022, we sold 127 vehicles and 2 powertrains. During the six months ended June 30, 2021, we sold 3 vehicles and 6 powertrains.

We have taken a conservative approach to capital investment with our Flex Manufacturing Strategy, which leverages our strategic partners’ existing facilities and labor to assemble up to 5,000 vehicles annually per facility once fully ramped up. This strategy will enable us to scale our operations in a capital efficient manner and in lockstep with market demand. We have partnered with two third-party contract manufacturer partners to operate two Flex facilities. Our Flex facilities are currently tooled to produce up to approximately 2,000 vehicles per annum in total, assuming we are able to mitigate current supply chain constraints.

Our Fleet-as-a-Service product facilitates the transition from traditional internal combustion engine vehicles to battery electric vehicles and provides fleet operators with a comprehensive set of solutions and products (including, but not limited to, Energy Services, service and maintenance, vehicle telematics, OTA updates and financing) to transition to and to operate an electric fleet. This product offering will combine traditionally disaggregated services into a bundled service package, thus reducing the cost and friction associated with electrifying commercial fleets. Services to be offered in our Fleet-as-a-Service offerings include our proprietary technologies and in-house services and offerings from our industry partners. Our Fleet-as-a-Service offering includes (i) Energy Services (on-site vehicle charging infrastructure as well as our proprietary mobile charging unit Xos HubTM); (ii) service and maintenance (provided by our internal maintenance team and industry partners); (iii) replacement parts; (iv) financing via our external partners; (v) risk mitigation products (e.g., GAP insurance and warranties); and (vi) our telematics unit, the Xosphere Intelligence Platform. Fleet-as-a-Service is expected to increase the lifetime revenue of each vehicle sold by us. During the six months ended June 30, 2022, we have generated $16.2 million in revenue (or 97% of revenue) from vehicle sales and Fleet-as-a-Service and $0.6 million from ancillary revenue (or 3% of revenue). During the six months ended June 30, 2021, we generated $1.4 million (or 100% of revenue) from vehicle sales.

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We believe our growth in the coming years is supported by the strong secular tailwinds of an increased focus on the impact of climate change and the growth of e-commerce and last-mile delivery. Commercial trucks are the largest emitters of greenhouse gases per capita in the transportation industry. The U.S. federal, state and foreign governments, along with corporations such as FedEx, UPS and Amazon, have set ambitious goals to reduce greenhouse gas emissions. Simultaneously, e-commerce continues to grow rapidly and has been accelerated by changes in consumer purchasing behavior during the COVID-19 pandemic. We believe the increased regulation relating to commercial vehicles, the launch of sustainability initiatives from leading financial and corporate institutions and the rapid growth of last-mile logistics will fuel accelerated adoption of our products worldwide.

We expect both our capital and operating expenditures will increase significantly in connection with our ongoing activities, as we:

•continue to invest in research and development and further develop and commercialize our core proprietary technologies, including our X-Platform chassis platform, X-Pack battery system and Fleet-as-a-Service platform;

•increase our investment in marketing and advertising, sales and distribution infrastructure to accelerate the growth in sales of our products and services;

•continue to invest in servicing our growing portfolio of vehicles on the road including account management, maintenance and service technicians and the Xosphere Intelligence Platform;

•continue to build out our supply chain team as well as additional battery and vehicle Flex assembly lines to bolster manufacturing capacity and meet demand targets, and to adjust to macroeconomic changes, including supply chain shortages;

•continue to build out finance operations to maintain and improve financial controls, financial planning and risk management;

•invest in operations functions including IT, administration and human resources to maintain and improve our operational systems, processes and procedures;

•obtain, maintain, expand, and protect our intellectual property portfolio including patents, trade secrets, trademarks and copyrights; and

•further invest in infrastructure to operate in accordance with public company standards and guidelines.

Business Combination

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 transfer by way of continuation and deregistration of NextGen from the Cayman Islands and the continuation and domestication of NextGen as a corporation incorporated in the State of Delaware (the “Domestication”), the “Business Combination”). As a result of the Merger, NextGen completed the Domestication, Merger Sub merged with and into Xos Fleet, Inc. (which was formerly known as Xos, Inc.), the separate corporate existence of Merger Sub ceased and Xos Fleet, Inc. was to be the surviving corporation and a wholly owned subsidiary of NextGen, and NextGen changed its name to “Xos, Inc.” Xos Fleet, Inc. is the accounting predecessor and the combined entity will be the successor SEC registrant, and Xos’ financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC.
The Business Combination is accounted for as a reverse recapitalization. Under this method of accounting, NextGen has been treated as the acquired company for financial statement reporting purposes. The most significant change in the successor’s future reported financial position and results is an increase in cash by $216.7 million, net of transaction costs and redemptions. Total non-recurring transaction costs was approximately $55.4 million.

As a consequence of the completion of the Business Combination, we became the successor to an SEC-registered and Nasdaq-listed company with ticker “XOS”, which has required us and will continue to require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We have incurred and expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.
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Recent Developments

On August 9, 2022, we entered into a securities purchase agreement with YA II PN, Ltd. (“Yorkville”) for the issuance of convertible debentures in the principal amount of up to $35.0 million. Also on August 9, 2022, we entered into a note purchase agreement with Aljomaih Automotive Co. (“Aljomaih”) for the issuance of a convertible promissory note with a principal amount of $20.0 million. For more information related to these agreements, refer to Note 18 - Subsequent Events in the accompanying unaudited condensed consolidated financial statements.
Key Factors Affecting Operating Results
We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed in this Report.
Successful Commercialization of our Products and Services

We expect to derive future revenue from sales of our vehicles, battery systems and Fleet-as-a-Service offering. 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 our operations through commercialization and production with proceeds from the Business Combination as well as additional subsequent financing transactions. 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.

Customer Demand

We have sold a limited number of our vehicles to our existing customers, have agreements with future customers and have received interest from other potential customers. We expect that the sales of our vehicles and services to our existing and future customers will be an important indicator of our performance.

Production of Lyra Series, Improved Battery Pack System

We started the production of the Lyra Series of battery packs during the fourth quarter of 2021. The Lyra series of battery packs features a 52% improvement in gravimetric energy density and a 45% improvement in volumetric energy density, and is compatible with all Xos on-highway vehicles. The battery packs come in two configurations: Lyra 30 (29.4kWh) and Lyra 60 (61.8kWh) offering 25 and 50 miles of range, respectively. Each pack features individual, recirculated air cooling and an independent battery management system, offering improved reliability and the ability to mix-and-match packs to cater to each customer’s unique range requirements.

Supply Chain Management

As described more fully below, there are certain areas in our supply chain management that have been disrupted due to global economic conditions and the prolonged effect of the COVID-19 pandemic. Our ability to find alternative solutions to meet customer demands will affect our financial performance.

Global economic conditions, which the COVID-19 pandemic has contributed to, has impacted our ability to source certain of our critical inventory items. The series of restrictions imposed and the speed and nature of the recovery in response to the pandemic has placed a burden on our supply chain management, including but not limited to the following areas:

•Semiconductor chip shortage: The global silicon semiconductor industry has experienced a shortage in supply and difficulties in its ability to meet customer demand. This shortage has led to an increase in lead-times of production of semiconductor chips and components since the beginning of 2020.

•Battery cells:The battery cell industry is facing a shortage in supply which is causing suppliers to limit customer allocations.

•Supply limitation on vehicle bodies and aluminum: Vehicle body suppliers are currently experiencing elevated pricing or a shortage of key materials such as aluminum.

Additionally, recent geopolitical events, such as the recent military conflict between Russia and Ukraine, may increase the severity of supply chain disruptions and further hinder our ability to source inventory for our vehicles. The conflict continues to evolve and its ultimate impact on the Company is uncertain, but a prolonged conflict may have a material negative impact to our business, operating results, cash flows, liquidity and financial condition.
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Despite supply chain disruptions, we have continued to source inventory for our vehicles and our purchasing team has been working with vendors to find alternative solutions to areas where there are supply chain constraints. Where appropriate and critical, we have placed orders in advance of projected need to try and offset disruptions. While we are working to minimize the impact of these supply limitations, we cannot be certain that all inventory will be able to be delivered in time for production plans.

Tightness in supply availability could lead to previously unforeseen cost and delivery pressures on certain material and logistical costs in 2022. As the Company accelerates execution of its strategic plans, we will endeavor to be strategic in our cost action plans, including working with various vendors and service providers to provide us cost-effective arrangements.

Impact of COVID-19

As the COVID-19 pandemic continues to evolve, the ultimate extent of the impact on our businesses, operating results, cash flows, liquidity and financial condition will be primarily driven by the severity and duration of the pandemic as well as the pandemic’s impact on the U.S. and global economies. During the six months ended June 30, 2022, despite the continued COVID-19 pandemic, we continued to operate our business at full capacity, including all of our manufacturing and research and development operations, with the adoption of enhanced health and safety practices. Although we have made our best estimates based upon current information, actual results could materially differ from the estimates and assumptions developed by management. Accordingly, it is reasonably possible that the estimates made in the financial statements have been, or will be, impacted in the near term as a result of these conditions.
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of Xos and its wholly owned subsidiaries, Legacy Xos and Xos Services. All significant intercompany accounts and transactions have been eliminated in consolidation. All long-lived assets are maintained in, and all losses are attributable to, the United States.
Currently, we conduct business through one operating segment. We are an early-stage growth company with minimal commercial operations and our activities to date have been conducted primarily within North America. For more information about our basis of operations, refer to Note 1 - Description of Business in the accompanying unaudited condensed consolidated financial statements.
Components of Results of Operations

Revenues

To date, we have primarily generated revenues from the sale of electric stepvan and stripped chassis vehicles and battery systems and the licensing of our software systems. Our stripped chassis is our vehicle offering that comprises 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 will offer a full suite of service offerings including Energy Services, service and maintenance, telematics and financing.

Revenue consists of product sales, inclusive of shipping and handling charges, net of estimates for customer allowances. 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. 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.

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Cost of Goods Sold

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. 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 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 income (loss), allocated to cost of goods sold.

Cost of goods sold also includes reserves to write down the carrying value of our inventory to their net realizable value and to provide for obsolete and on-hand inventory in excess of forecasted demand.

We are continuing to undertake efforts to find more cost-effective vendors and sources of parts to lower our overall cost of production. Direct labor and overhead costs relate primarily to expenses incurred through our third-party manufacturing partners. We expect these expenses to increase in future periods as production volume increases to meet expected growth in customer demand.

General and Administrative Expenses

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 the consolidated statements of operations and comprehensive income (loss), allocated to G&A.

We expect our G&A to increase for the foreseeable future as we scale headcount with the growth of our business, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services.

Research and Development Expenses

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

•Expenses related to materials and supplies consumed in the development and modifications to existing vehicle designs, new vehicle designs contemplated for additional customer offerings, and our battery pack design;

•Fees paid to third parties such as consultants and contractors for engineering and computer-aided design (“CAD”) work on vehicle designs and other third-party services; and,

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

We expect our research and development costs to increase materially for the foreseeable future as we continue to invest in research and development of our battery systems, chassis design and certain other technologies. As such, we expect salaries, benefits, and expenses related to those employees whose primary function is in the design and development of new and redesigned vehicle and battery design (primarily in our engineering department) to increase and be allocated.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of expenses related to our marketing of vehicles and brand initiatives, which includes:
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•Travel expenses of our sales force who are primarily responsible for introducing our platform and offerings to potential customers.

•Web design, marketing and promotional items, and consultants who assist in the marketing of the Company.

•Payroll expense for employees primarily engaged in sales and marketing activities, including allocation of stock-based compensation expense.

•Depreciation expense on property and equipment related to sales and marketing 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 income (loss), allocated to sales and marketing.

We expect these expenses to increase for the foreseeable future as travel expands due to the planned expansion of our sales team and increasing deployment of both direct and indirect marketing efforts. We expect an increase in our cost of sales and marketing expenses as we expand our ongoing hybrid distribution strategy that utilizes both direct distribution and indirect distribution through partnerships with our dealer network.

Other Income (Expense), Net

Other income (expense), net primarily includes interest income from our investments in marketable debt securities, available-for-sale and interest paid on our equipment leases.
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2022 and 2021
The following table sets forth our historical operating results for the periods indicated:
For the Three Months Ended June 30,
(in thousands)20222021$ Change% Change
Revenues$9,766 $596 $9,170 
nm(1)
Cost of goods sold14,891 585 14,306 nm
Gross margin(5,125)11 (5,136)nm
Operating expenses
General and administrative12,093 4,599 7,494 163 %
Research and development7,635 2,742 4,893 178 %
Sales and marketing2,960 524 2,436 nm
Total operating expenses22,688 7,865 14,823 188 %
Loss from operations(27,813)(7,854)(19,959)254 %
Other income (expense), net(226)126 (352)(279)%
Change in fair value of derivative instruments3,703 (1,430)5,133 (359)%
Change in fair value of earn-out interests liability14,870 — 14,870 100 %
Loss before provision for income taxes(9,466)(9,158)(308)3 %
Provision for income taxes1 — 1 100 %
Net Loss$(9,467)$(9,158)$(309)3 %
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For the Six Months Ended June 30,
(in thousands)20222021$ Change% Change
Revenues$16,797 $1,389 $15,408 
nm(1)
Cost of goods sold25,077 1,257 23,820 nm
Gross margin(8,280)132 (8,412)nm
Operating expenses
General and administrative23,415 6,953 16,462 237 %
Research and development14,584 5,741 8,843 154 %
Sales and marketing4,988 836 4,152 nm
Total operating expenses42,987 13,530 29,457 218 %
Loss from operations(51,267)(13,398)(37,869)283 %
Other income (expense), net(145)(91)(54)59 %
Change in fair value of derivative instruments3,268 4,964 (1,696)(34)%
Change in fair value of earn-out interests liability17,494 — 17,494 100 %
Write-off of subscription receivable— (379)379 (100)%
Realized loss on debt extinguishment— (14,104)14,104 (100)%
Loss before provision for income taxes(30,650)(23,008)(7,642)33 %
Provision for income taxes3 — 3 100 %
Net Loss$(30,653)$(23,008)$(7,645)33 %
___________
(1)Percentage changes greater than or equal to 400% are not meaningful and noted as “nm” in the table above.
Revenues
Our total revenues increased by $9.2 million, from $0.6 million in the three months ended June 30, 2021 to $9.8 million in the three months ended June 30, 2022 primarily driven by an increase in unit sales. During the three months ended June 30, 2022, we sold 71 stepvans and 2 powertrains, compared to 5 powertrains during the three months ended June 30, 2021.
Our total revenues increased by $15.4 million, from $1.4 million in the six months ended June 30, 2021 to $16.8 million in the six months ended June 30, 2022 primarily driven by increase in unit sales. During the six months ended June 30, 2022, we sold 127 stepvans and 2 powertrains, compared to 3 stepvans and 6 powertrain during the six months ended June 30, 2021.
Cost of Goods Sold
Cost of goods sold increased by $14.3 million, from $0.6 million in the three months ended June 30, 2021 to $14.9 million in the three months ended June 30, 2022. The increase in cost of goods sold is directly attributable to the increase in our product revenues and increases of (i) $1.0 million in the inventory reserve with no such comparable reserve during the three months ended June 30, 2021 and (ii) $13.3 million in direct materials, direct labor, and manufacturing overhead.
Cost of goods sold increased by $23.8 million, from $1.3 million in the six months ended June 30, 2021 to $25.1 million in the six months ended June 30, 2022. The increase in cost of goods sold is directly attributable to the increase in our product revenues and increases of (i) $2.2 million in the inventory reserve with no such comparable reserve during the six months ended June 30, 2021 and (ii) $21.6 million in direct materials, direct labor, and manufacturing overhead.

The increase in direct labor encompasses both employee and subcontractor labor costs. The direct labor costs are primarily attributable to an increased headcount and the temporary labor used to manufacture and fulfill current and future orders. Additionally, the use of our contract manufacturing partners to assist in our chassis production line has increased direct labor costs. The increase in direct material costs, is due to limited supplier contract agreements necessary to get competitive pricing for raw materials. As production increases and we order materials in larger quantities, we expect to have supply contract agreements that decrease the costs of raw materials. 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
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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.
General and Administrative
General and administrative expenses increased by $7.5 million, or 163%, from $4.6 million in the three months ended June 30, 2021 to $12.1 million in the three months ended June 30, 2022, attributable to increases of (i) $3.8 million in headcount and personnel cost for supply chain, sales, legal, accounting, information technology and general and administrative functions necessary to support our business growth, (ii) $2.0 million in insurance costs driven by overall coverage increase and the amortization expense of Directors & Officers (“D&O”) insurance, (iii) $0.5 million in consulting and professional service expenses related to the implementation of our new ERP system and financial processes, (iv) $0.3 million in investment for equipment and technology driven by an increase in our headcount and (v) $1.1 million in other operating expenses, including, travel, recruiting, freight and sales tax. These increases were offset by a $0.2 million decrease in depreciation expense due to the allocation of overhead costs to cost of goods sold.
General and administrative expenses increased by $16.5 million, or 237%, from $7.0 million in the six months ended June 30, 2021 to $23.4 million in the six months ended June 30, 2022, attributable to increases of (i) $8.7 million in headcount and personnel cost for supply chain, sales, legal, accounting, information technology and general and administrative functions necessary to support our business growth, (ii) $3.9 million in insurance costs driven by overall coverage increase and the amortization expense of D&O insurance, (iii) $1.7 million in consulting and professional services expenses related to the implementation of our new ERP system and financial processes, (iv) $0.6 million in investment for equipment and technology driven by an increase in our headcount and (v) $1.7 million in other operating expenses, including depreciation, travel, recruiting, freight and sales tax. These increases were offset by a $0.1 million decrease in depreciation expense due to the allocation of overhead costs to cost of goods sold.
Research and Development
Research and development expenses increased by $4.9 million, or 178%, from $2.7 million in the three months ended June 30, 2021 to $7.6 million in the three months ended June 30, 2022. The growth was primarily due to increases of (i) $2.4 million in allocation of personnel costs driven by higher headcount in engineering, including the allocation of stock-based compensation expense, and (iii) $2.5 million in net other costs, driven by equipment and material purchases used solely for R&D purposes.
Research and development expenses increased by $8.8 million, or 154%, from $5.7 million in the six months ended June 30, 2021 to $14.6 million in the six months ended June 30, 2022. The growth was primarily due to increases of (i) $4.9 million in allocation of personnel costs driven by higher headcount in engineering, including the allocation of stock-based compensation expense, and (iii) $3.9 million in net other costs, driven by equipment and material purchases used solely for R&D purposes.
Sales and Marketing
Sales and marketing expense increased by $2.4 million, from $0.5 million in the three months ended June 30, 2021 to $3.0 million in the three months ended June 30, 2022. The growth was primarily due to increases of (i) $1.4 million in allocation of personnel costs driven by higher headcount, including the allocation of stock-based compensation expense and (ii) $1.0 million related to consulting fees, public relations costs, participation in tradeshows and general marketing efforts to enhance brand recognition.
Sales and marketing expense increased by $4.2 million, from $0.8 million in the six months ended June 30, 2021 to $5.0 million in the six months ended June 30, 2022. The growth was primarily due to increases of (i) $3.0 million in allocation of personnel costs driven by higher headcount, including the allocation of stock-based compensation expense and (ii) $1.2 million related to consulting fees, public relations costs, participation in tradeshows and general marketing efforts to enhance brand recognition.
Other Income (Expense), net
Other income (expense), net increased by $0.4 million, or 279%, from $0.1 million of income in the three months ended June 30, 2021 to $(0.2) million of expense in the three months ended June 30, 2022.
Other income (expense), net increased by an immaterial amount from the six months ended June 30, 2021 as compared to the six months ended June 30, 2022.
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Change in Fair Value of Derivatives
The gain on the change in fair value of derivative instruments increased by $5.1 million, or 359%, from $(1.4) million in the three months ended June 30, 2021 to $3.7 million in the three months ended June 30, 2022. This represents changes in the fair value of the derivatives, including the common stock warrant liability assumed as part of the Business Combination and the conversion feature on the convertible notes issued in prior years.
The gain on change in fair value of derivative instruments decreased by $1.7 million, or 34%, from $5.0 million in the six months ended June 30, 2021 to $3.3 million in the six months ended June 30, 2022. This represents changes in the fair value of the derivatives, including the common stock warrant liability assumed as part of the Business Combination and the conversion feature on the convertible notes issued in prior years and released in the prior year.
Change in Fair Value of Contingent Earn-out Interests Liability
The gain on the change in fair value of contingent earn-out interests liability was $14.9 million and $17.5 million for the three and six months ended June 30, 2022, respectively. The contingent earn-out interest liability was established as part of the Business Combination and therefore, no balances were recorded for the three and six months ended June 30, 2021. The change in fair value for the three and six months ended June 30, 2022 is mainly attributable to the change in our stock price and the resulting valuation at the respective reporting period.
Write-off of Subscription Receivable
In 2020, the Company had a promissory note receivable in the amount of $364,000 due from the Company’s COO, Giordano Sordoni. The note was utilized to exercise options granted to him by the Company. The principal balance of the note and the associated accrued interest was subsequently forgiven during the six months ended June 30, 2021. No similar transaction occurred during the six months ended June 30, 2022.
Realized Loss on Debt Extinguishment
This represents the loss on the conversion of convertible debt into preferred shares during the six months ended June 30, 2021. No similar transaction occurred during the six months ended June 30, 2022.
Provision for income taxes
The Company recorded income tax provision of $1,000 and $0 during the during the three months ended June 30, 2022 and 2021, respectively. The Company recorded income tax provision of $3,000 and $0 during the during the six months ended June 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

We consummated the Business Combination, which resulted in net cash proceeds of approximately $216.7 million. As of June 30, 2022, our principal sources of liquidity were our cash and cash equivalents (excluding restricted cash) and investments in marketable debt securities, available-for-sale aggregating $82.1 million. In December 2020, we had the initial closing of our Series A Financing, and in the first quarter of 2021, we completed the Series A Financing, including the conversion of all our convertible notes into shares of Legacy Xos preferred stock. Prior to our Series A Financing in December 2020 and the Business Combination, we had financed our operations primarily from the sales of convertible notes.

As an early stage growth company, the net losses and cash outflows we have incurred since inception are consistent with our strategy and budget. We will continue to incur net losses and cash outflows in accordance with our operating plan as we continue to expand our research and development activities with respect to our vehicles and battery systems, scale our operations to meet anticipated demand and establish our Fleet-as-a-Service product offering. Our ability to access capital when needed is not assured and, if capital is not available to us when and in the amounts needed, we could be required to delay, scale back or abandon some or all of our development programs and other operations, which could materially harm our business, prospects, financial condition and operating results.

We believe that our existing cash resources, including capital raised in the Series A Financing and Business Combination, are sufficient to support planned operations for the next 12 months. Additionally, on March 23, 2022, the Company entered into a Standby Equity Purchase Agreement (the "SEPA") with Yorkville, whereby the Company shall have the right, but not the obligation, to sell to Yorkville up to $125.0 million of its shares of common stock at the Company's request during the 36 months following the execution of the SEPA, subject to certain conditions. As of June 30, 2022, remaining commitment of
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$120.7 million was available under the SEPA, provided that, pursuant to the issuance of convertible debentures to Yorkville described below, the Company shall not effect any advance under the SEPA without the prior mutual consent of Yorkville and the Company until the earliest of the date (i) all such convertible debentures have been repaid or converted into common stock or (ii) Yorkville no longer has any right or ability to convert any portion of the convertible debentures into common stock. In connection with the foregoing, the term set forth in the SEPA will be extended for a corresponding number of days. The Company has used the net proceeds received from sales of common stock pursuant to the SEPA to date for working capital and general corporate purposes and expects similar use of proceeds going forward. Further, on August 9, 2022, the Company entered into an agreement with Yorkville for the issuance of convertible debentures in the principal amount of up to $35.0 million, subject to certain conditions, with a maturity date of November 11, 2023. Also on August 9, 2022, we entered into a note purchase agreement with Aljomaih for the issuance of convertible notes with a principal amount of $20.0 million (with an option for Aljomaih to purchase additional convertible notes, on terms and conditions to be negotiated in good faith, in a principal amount of up to an additional $20.0 million) and a maturity date of August 11, 2025, subject to certain conditions.

As a result, our management believes that our current financial resources are sufficient to continue operating activities for at least 12 months past the issuance date of the financial statements. For more information related to these agreements, refer to Note 18 - Subsequent Events in the accompanying unaudited condensed consolidated financial statements.
Cash Flows Summary
Summary of cash flow data consisted of the following (in thousands):
Six Months Ended
June 30,
(in thousands)20222021
Net cash used in operating activities$(75,828)$(20,153)
Net cash provided by (used in) investing activities60,099 (702)
Net cash provided by financing activities3,838 34,113 
Net increase (decrease) in cash and cash equivalents$(11,891)$13,258 
Cash Flows from Operating Activities
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.
Net cash used in operating activities was $75.8 million for the six months ended June 30, 2022, primarily consisting of a net loss excluding non-cash expenses and gains of $44.1 million, and net changes in operating assets and liabilities of $31.7 million, including $33.1 million in inventory cost build-up as production ramps up.
Net cash used in operating activities was $20.2 million for the six months ended June 30, 2021, primarily consisting of a net loss excluding non-cash expenses and gains of $13.1 million, and net changes in operating assets and liabilities of $7.0 million, including $4.9 million in inventory cost build-up in anticipation of production ramp-up.
Cash Flows from Investing Activities
Cash flows from investing activities primarily relate to the sales and maturities of marketable securities, offset by capital expenditures to support our growth. Net cash used in capital expenditures is expected to continue to expand.
Net cash provided by investing activities was $60.1 million for the six months ended June 30, 2022, due to net proceeds from sale of investments in marketable debt securities of $69.6 million, offset by property and equipment additions of $9.5 million.
Net cash used in investing activities was $0.7 million for the six months ended June 30, 2021, due to property and equipment additions.
Cash Flows from Financing Activities
Net cash provided by financing activities was $3.8 million for the six months ended June 30, 2022, primarily related to proceeds from the issuance of common stock under the SEPA of $4.3 million, offset by taxes paid relating to net-settlement of stock-based awards of $0.2 million and equipment lease principal payments of $0.3 million.
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Net cash provided by financing activities was $34.1 million for the six months ended June 30, 2021, which primarily related to the Series A Financing in December 2020, resulting in the receipt of $34.1 million in cash and subscription receivables. As part of this financing, we also converted all of our convertible debt and accrued interest to additional shares of Legacy Xos Preferred Stock in January 2021.
Contractual Obligations and Commitments
We did not have any material contractual obligations or other commitments as of June 30, 2022, other than what’s disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined under the applicable rules and regulations of the SEC.
Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP. The preparation of our financial statementsGAAP”) which requires usmanagement to make certain estimates and judgmentsassumptions that affect the reported amounts of assets and liabilities revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate ouras of the balance sheet date, as well as reported amounts of revenues and expenses during the reporting periods. Our most significant estimates and judgments including those related to fair valueinvolve inventory valuation, incremental borrowing rates for assessing operating and financing lease liabilities, useful lives of financial instrumentsproperty and accrued expenses.equipment, earn-out shares liability, stock-based compensation, common stock warrant liability and product warranty liability. We base our estimates on historical experience known trends and events andon various other factors that we believeassumptions believed to be reasonable, under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.liabilities. Actual results maycould differ from thesethose estimates, under different assumptions or conditions. We have identified the following asand such differences could be material to our financial statements.

There were no material changes in our critical accounting policies:

Derivative warrant liabilities

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualifypolicies, as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

The 12,500,000 Public Warrants and the 6,333,334 Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, the we recognize the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognizeddisclosed in our statementAnnual Report on Form 10-K for the year ended December 31, 2021.

Recent Accounting Pronouncements
See Note 2 — Basis of operations. The fair valuePresentation and Summary of Significant Accounting Policies to our unaudited condensed consolidated financial statements included in this filing for more information about recent accounting pronouncements, the Public Warrants issued in connection with the Public Offeringtiming of their adoption, and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants.

Class A Ordinary Shares Subject to Possible Redemption

We account for Class A ordinary shares subject to possible redemption in accordance with the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subjectassessment, to the occurrenceextent we have made one, of uncertain future events. Accordingly,their potential impact on June 30, 2021our financial condition and December 31, 2020, 32,185,932 and 32,952,414 Class A ordinary shares subject to possible redemption are presented as temporary equity, outsideour results of the shareholders’ equity section of the Company’s condensed balance sheets.

Net Income (Loss) Per Ordinary Share

We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net loss per share is computed by dividing net loss by the weighted average number of shares of ordinary shares outstanding during the period excluding ordinary shares subject to forfeiture. An aggregate of 32,185,932 Class A ordinary shares subject to possible redemption on June 30, 2021 have been excluded from the calculation of basic loss per ordinary share, since such shares, if redeemed, only participate in their pro rata share of the trust earnings. We have not considered the effect of the warrants sold in the Initial Public Offering (including the consummation of the Over-Allotment Units) and Private Placement to purchase an aggregate of 18,833,334 ordinary shares in the calculation of diluted loss per share, since the exercise of the warrants are contingent upon the occurrence of future events. As a result, diluted net loss per ordinary share is the same as basic net loss per ordinary share for the period presented.

We apply the two-class method in calculating income (loss) per ordinary share. Net income (loss) per ordinary share, basic and diluted for Class A ordinary shares subject to possible redemption is calculated by dividing the proportionate share of income or loss on Investment held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of shares of Class A ordinary shares subject to possible redemption outstanding since original issuance.

Net income (loss) per ordinary share, basic and diluted for non-redeemable ordinary share is calculated by dividing net income (loss) less income attributable to Class A ordinary shares subject to possible redemption by the weighted average number of shares of non-redeemable ordinary shares outstanding for the period presented.

operations.

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Internal Control Over Financial Reporting

Recent Accounting Pronouncements

In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—ContractsAs disclosed in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”)our 2021 Form 10-K, which simplifies accounting for convertible instruments by removing major separation modelswe were not required under current U.S. GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. We adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact our financial position, results of operations or cash flows.

Our management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

Off-Balance Sheet Arrangements

As of June 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

JOBS Act

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncementsthe rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act, based on the effectiveour business combination date for private (not publicly traded) companies. Weand are electing to delay the adoption of new or revised accounting standards, and as a result, we maytherefore not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to among other things, (i) provide an auditor’s attestationmake a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. We excluded management’s report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all215.02 of the compensation disclosureSEC’s Compliance and Disclosure Interpretations. We are required to disclose changes made in our internal controls and procedures on a quarterly basis, we are not required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC post-merger, which is December 31, 2022. We have begun the process of establishing a system of internal control to support management’s evaluation of internal control subsequent to the completed Business Combination on August 20, 2021.


Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. Any inability to provide reliable financial reports or prevent fraud could harm our business. Any system of internal controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that may be requiredthe objectives of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii)system are met. As part of our process to establish an effective system of internal controls, management has identified areas of improvement in our preliminary system of internal control over financial reporting that we are working diligently to address.

If we cannot conclude that we have effective internal control over our financial reporting, investors could lose confidence in the reliability of our financial statements, which could lead to a decline in our stock price. Failure to comply with any requirement that may be adoptedreporting requirements could also subject us to sanctions and/or investigations by the PCAOB regarding mandatory audit firm rotationSEC, the NASDAQ or a supplementother regulatory authorities. If we fail to remedy any deficiencies or maintain the auditor’s report providing additional information about the audit and theadequacy of our internal controls, we could be subject to regulatory
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scrutiny, civil or criminal penalties or stockholder litigation. In addition, failure to maintain adequate internal controls could result in financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion ofthat do not accurately reflect our Initial Public Offeringoperating results or until we are no longer an “emerging growth company,” whichever is earlier.

financial condition.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a smaller reporting companyvariety of market and other risks, including the effects of changes in interest rates, inflation, and foreign currency exchange rates, as defined by Rule 12b-2well as risks to the availability of funding sources, hazard events, and specific asset risks.

Interest Rate Risk
The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. We maintain a portfolio of investments in a variety of fixed and variable debt rate securities, including, U.S. treasuries, corporate debt, asset-backed securities, non-U.S. government and supranational bonds and certificate of deposit. As of June 30, 2022, the fair value of investments in marketable debt securities, available-for-sale was $77.9 million. The primary objective of our investment activity is to maintain the safety of principal, and to provide for future liquidity requirements while maximizing yields without significantly increasing risk. While some investments may be securities of companies in foreign countries, all investments are denominated and payable in U.S. Dollars. We do not enter into investments for trading or speculative purposes. While our intent is not to sell these investment securities prior to their stated maturities, we may choose to sell any of the Exchange Actsecurities for strategic reasons including, but not limited to, anticipated capital requirements, anticipation of credit deterioration, duration management and because a security no longer meets the criteria of our investment policy. We do not use derivatives or similar instruments to manage our interest rate risk. We seek to invest in high quality investments. The weighted average rating (exclusive of cash and cash equivalents) was A as of June 30, 2022. Maturities are maintained consistent with our short-, medium- and long-term liquidity objectives.

The following table sets forth the impact on the fair value of our investments as of June 30, 2022 from changes in interest rates based on the weighted average duration of the debt securities in our portfolio (dollars in thousands):
Approximate Change in Fair Value of Investments
Change in Interest RateIncrease (Decrease)
2% Decrease$945 
1% Decrease$472 
1% Increase$(467)
2% Increase$(931)
Foreign Currency Risk
There was no material foreign currency risk for the three and six months ended June 30, 2022 and 2021.
Inflation Risk
We monitor inflation and the effects of changing prices. Inflation increases the cost of goods and services used. If our costs were to become subject to significant inflationary pressures, we may not requiredbe able to providefully offset these higher costs through price increases or mitigate the information otherwise required under this item.

impact through alternative solutions. Our inability to do so could harm our business, financial condition and results of operations.

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

UnderDisclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the supervisionExchange Act, is recorded, processed, summarized and withreported within the participation of ourtime periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officerChief Executive Officer and principal financialChief Financial Officer, to allow timely decisions regarding required disclosure.

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As required by Rules 13(a)-15(e) and accounting officer, we conducted an evaluation15(d)-15(e) under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out evaluations of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.2022. Based upon this evaluationeach of their evaluations, our Chief Executive Officer and in light of the material weakness in internal controls described below, our certifying officerChief Financial Officer concluded that during the period covered by this report our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Exchange Act) were not effective.

effective as of the end of the quarter ended June 30, 2022.

Changes in Internal Control over Financial Reporting

There was no changeDuring the quarter ended June 30, 2022, we continue to be engaged in the process of design and implementation of our internal control over financial reporting that occurred duringin a manner commensurate with the fiscal quarter ended June 30, 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likelyscale of our operations subsequent to materially affect,the business combination, including the enhancement of our internal and external technical accounting resources.


Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control over financial reporting asobjectives. Because of the circumstancesinherent limitations in all control systems, no evaluation of controls can provide absolute assurance that ledall control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to the restatement of our financial statements described in our Form 10-K/A haderror or fraud may occur and not yet been identified. Due solely to the events that led to our restatement of our financial statements, management identified a material weakness in internal controls related to the accounting for warrants issued in connection with our Initial Public Offering, as described in Note 2 to the Notes to Consolidated Financial Statements entitled “Restatement of Previously Issued Financial Statements” in our Form 10-K/A.

be detected.
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25

Part II - Other Information

PART II – OTHER INFORMATION

Item 1.

Item1.    Legal Proceedings

NextGen has received six demand letters from putative stockholders of NextGen dated June 2, 2021, June 11, 2021, June 25, 2021, June 29, 2021, June 30, 2021 and July 6, 2021 (the “Demands”) generally alleging that the proxy statement/prospectus forming part of the registration statement on Form S-4 that NextGen filed with the SEC on May 14, 2021 omits material information with respectFrom time to NextGen’s proposed business combination with Xos. The Demands seek the issuance of corrective disclosurestime, we may become involved in an amendmentlegal proceedings or supplementbe subject to the proxy statement/prospectus. One of the Demands further alleges that the merger consideration with respect to the business combination with Xos is inadequate, and asserts that an increase in consideration should be negotiated.

On June 14, 2021, a complaint was filed against NextGen and the members of its board of directorsclaims arising in the Supreme Courtordinary course of New York underour business. We are not currently a party to any legal proceedings, the caption Green v. NextGen Acquisition Corp., et al., Index No. 653766/2021 (N.Y. Sup. Ct.). The complaint alleges thatoutcome of which, if determined adversely to us, would individually or in the proxy statement/prospectus forming partaggregate have a material adverse effect on our business, financial condition or results of the registration statement on Form S-4 that NextGen filed with the SEC on May 14, 2021 omits material information, rendering the proxy statement/prospectus false and misleading. The complaint seeks an order enjoining the proposed Business Combination unless and until additional disclosures are issued; rescinding the proposed Business Combination, to the extent it closes; directing the defendants to disseminate a proxy statement that does not contain any untrue statements of material fact; declaring that the board of directors of NextGen violated their fiduciary duties; awarding costs, including attorneys’ fees and expert fees; and awarding such other relief as the court deems proper. Defendants have not yet responded to such complaint.

operations.

Item 1A.    Risk Factors.

Factors

Our risk factors are described in the “Risk Factors” section of our 2021 Form 10-K. There have been no material changes from theto our risk factors previously disclosed insince the Company’sfiling of the 2021 Form 10-K/A. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

10-K.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

Unregistered Sales

On February 21, 2021, concurrentlyMarch 23, 2022, we entered into the SEPA with Yorkville, whereby we shall have the right, but not the obligation, to sell to Yorkville up to $125.0 million of shares of our Common Stock at our request during the 36 months following the execution of the Merger Agreement, we entered into the Subscription Agreements, pursuant to, and on the terms andSEPA, subject to certain conditions.

In consideration for Yorkville’s commitments under the conditions of which, the PIPE Investors have collectively subscribed for 22,000,000SEPA, we issued 18,582 shares of the Company’s Common Stock for an aggregate purchase price equal to $220,000,000, a portion of which is expected to be funded by one or more affiliates of our Sponsor and certain additional investors (which may include mutual funds and existing shareholders of NextGen). 2,000,000 of the shares of the NextGen Common Stock to be soldYorkville on March 23, 2022. We did not receive any cash proceeds in connection with this issuance.
During the PIPE Investment are shares owned by certain Xos officers. The PIPE Investment will be consummated substantially concurrentlythree months ended June 30, 2022, we received cash proceeds of $4.3 million in connection with the Closing. These issuances wereissuance of 1,809,515 shares of common stock under the SEPA. We expect to use any net proceeds for working capital and general corporate purposes.

The issuance of the securities in this transaction was made pursuant toin reliance on the exemption from registration contained in Section 4(a)(2) ofunder the Securities Act.

No underwriting discounts or commissions were paid with respect to such sales.

Use of Proceeds

On October 9, 2020, the Company consummated its Initial Public Offering of 35,000,000 Units, at $10.00 per Unit, generating gross proceeds of $350.0 million. Goldman Sachs & Co. LLC and Credit Suisse Securities (USA) LLC acted as the book-running managers for the Initial Public Offering. The securities sold in the Initial Public Offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-248921). The SEC declared the registration statements effective on October 6, 2020. On November 13, 2020, the underwriters partially exercised the over-allotment option and on November 17, 2020, purchased an additional 2,500,000 Over-Allotment Units, generating gross proceeds of $25.0 million.

There has been no material change in the planned use of the proceeds from the Initial Public Offering and Private Placement as is described in the Company’s final prospectus related to the Initial Public Offering.

Item 3.    Defaults Upon Senior Securities

None.

None.

Item 4.    Mine Safety Disclosures

Not applicable.

Item 5.    Other Information

None.

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None.

26

Table of Contents

Item 6.    Exhibits
(a)Exhibits.

Exhibit
Number		Description
3.1
Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on August 26, 2021).
31.1*3.2
4.1
4.2
10.1
10.2
10.3
10.4
31.1
Certification of Principalthe Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2
Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1
Certification of the Chief Executive Officer and PrincipalChief Financial Officer Pursuant to Rules 13a-14(a)required by Rule 13a-14(b) or Rule 15d-14(b) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200218 U.S.C. 1350..
32.1**101.INSCertification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*Inline XBRL Instance Document.
101.SCH*Inline XBRL Taxonomy Extension Schema Document.
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


*Filed herewith.
**Furnished herewith.
49

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SIGNATURES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 17th day of August, 2021.

authorized.

NEXTGEN ACQUISITION CORPORATIONXOS, INC.
Date: August 11, 2022By:/s/ Patrick T. FordDakota Semler
Name:Patrick T. FordDakota Semler
Title:Chief Executive Officer
(Principal Executive Officer)
Date: August 11, 2022By:/s/ Kingsley E. Afemikhe
Name:Kingsley E. Afemikhe
Title:Chief Financial Officer
(Principal Financial Officer and SecretaryPrincipal Accounting Officer)

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50

iso4217:USD xbrli:shares