Financial Analysis

Commitments and Contingencies Legal Contingencies Legal claims may arise from time to time in the normal course of business, the results of which may have a material effect on the Companys accompanying consolidated financial statements. As of December 31, 2025, the Company was not a party to any legal proceedings, that individually or in the aggregate, are reasonably expected to have a material adverse effect on the Companys results of operations, financial condition or cash flows. On October 10, 2025, the Supreme Court of British Columbia (the BC Court) issued a judgment in favor of a former employee of EMV for the enforcement of a putative settlement agreement with respect to the employees severance arrangements, which required aggregate payments of approximately $0.5 million, including approximately $0.2 million paid in 2025 . A former employee has claimed certain amounts are due to such employee under a contract with the company related to such former employees separation from the company. The Company denies such claims. Although no settlement has been reached yet, the Company has reserved amounts that in the aggregate are not expected to have a material impact on the company for potential negotiated cash and equity payments to the former employee in settlement of the claims. Other Contingencies The Company enters into non-cancellable long-term purchase orders and vendor agreements in the normal course of business. As of December 31, 2025, non-cancellable purchase commitm …

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Convertible Notes Convertible Promissory Note On August 9, 2022, the Company entered into the Note Purchase Agreement with Aljomaih under which the Company agreed to sell and issue to Aljomaih a convertible promissory note with a principal amount of $20.0 million. On August 11, 2022, pursuant to the Note Purchase Agreement, the Company sold and issued $20.0 million in principal amount of a convertible promissory note (the Original Note) to Aljomaih. On September 28, 2022, the Company and Aljomaih agreed to amend and restate the Original Note (as amended and restated, the Note) to, among other things, adjust the calculation of the shares of the Companys Common Stock issuable as interest, as described further below. The Note, which was initially scheduled to mature on August 11, 2025, bears interest at a rate of 10.0% per annum, payable at maturity in validly issued, fully paid and non-assessable shares of Common Stock (Interest Shares), unless earlier converted or paid. If the 10-day VWAP ending on the trading day immediately prior to the applicable payment date is greater than or equal to the Minimum Price (as defined in Nasdaq Rule 5635(d)) or the Company has received the requisite approval from its stockholders (which it has), the number of Interest Shares to be issued will be calculated based on such 10-day VWAP; otherwise, the number of Interest Shares to be issued would have been based on the Nasdaq Minimum Price. The conversion price for the Note is initially equal to $ …

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Disaggregated revenues by major source for the years ended December 31, 2025 and 2024 consisted of the following ( in thousands ): Years Ended December 31, 2025 2024 Product and service revenue Stepvans & vehicle incentives (1) $ 35,832 $ 42,808 Powertrains & hubs (1) 7,170 8,740 Sales-type lease revenue 398 708 Other product revenue (2) 1,700 1,778 Total product and service revenue 45,100 54,034 Ancillary revenue 892 1,927 Total revenues $ 45,992 $ 55,961 ____________ (1) Amounts are net of returns and allowances. Stepvans & vehicle incentives and powertrains & hubs include revenue generated from operating leases. (2) Other product revenue for the year ended December 31, 2025 includes revenue related to non-recurring powertrain engineering services of $0.6 million. The remaining performance obligations for non-recurring engineering services total $0.2 million as of December 31, 2025 and are expected to be satisfied in 2026.

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Stock-Based Compensation 2018 Stock Plan On November 27, 2018, the Legacy Xoss 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. As of December 31, 2025 there were 1,211 Options outstanding under the 2018 Stock Plan. The amount and terms of Option grants were determined by the board of dir ectors of Legacy Xos. The Options granted under the 2018 Stock Plan generally expire within 10 years from the date of grant and generally vest over four years, at the rate of 25% on the fir st anniversary of the date of grant and ratably on a monthly basis over the remaining 36-month pe riod thereafter based on continued service. Stock option activity during the year ended December 31, 2025 consisted of the following: Options Weighted Average Fair Value Weighted Average Exercise Price Weighted Average Remaining Years Intrinsic Value December 31, 2024 Options outstanding 1,669 $ 0.54 $ 0.60 4.80 $ 4,404 Granted Exercised (406) 0.73 0.46 2,351 Forfeited (52) 0.64 0.46 143 December 31, 2025 Options outstanding 1,211 $ 0.47 $ 0.66 3.69 $ 1,399 December 31, 2025 Options vested and exercisable 1,211 $ 0.47 $ 0.66 3.69 $ 1,399 Aggregate intrinsic value represents the difference between the exercise price of the options and the fair value of the Companys Common Stock. The aggregate …

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Fair Value Measurements ASC 820, Fair Value Measurements and Disclosures , clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. U.S. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As presented in the tables below, this hierarchy consists of three broad levels: Level 1: Quoted prices in active markets for identical assets and liabilities. Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable. Level 3: Significant inputs to the valuation model are unobservable and significant to the overall fair value measurement of the assets or liabilities. Inputs reflect managements best estimate of what market participants would use in pricing the asset or liability at the measurement date. The Companys financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, other current liabilities, warrants and earn-out shares liability. The fair value of cash, cash equivalents, …

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Income Taxes Loss before provision for income taxes for the years ended December 31, 2025 and 2024 consisted of the following ( in thousands ): December 31, 2025 December 31, 2024 U.S. $ (25,343) $ (50,824) Foreign 46 702 Loss before provision for income taxes $ (25,297) $ (50,122) The income tax expense for the years ended December 31, 2025 and 2024 consisted of the following ( in thousands ): December 31, 2025 December 31, 2024 Current: Federal $ $ State 23 37 Foreign Total current income tax expense $ 23 $ 37 Deferred: Federal $ $ State Foreign Total deferred income tax expense Income tax expense $ 23 $ 37 The reconciliation between the provision for income tax expense and the amount of income tax computed by applying the U.S. federal statutory rate to income before provision for income taxes as shown in the accompanying consolidated statements of operations and other loss for the years ended December 31, 2025 and 2024 consisted of the following ( in thousands ): December 31, 2025 Amount Percent Tax provision at U.S. federal statutory rate $ (5,323) 21.00 % State and local income taxes (net of federal income tax effect) 1 13 (0.05) Tax credits (598) 2.36 Change in valuation allowance 5,040 (19.92) Nontaxable or nondeductible items Stock compensation 859 (3.40) Interest expense settled in stock 422 (1.67) Other permanent items 37 (0.15) Other reconciling items Prior year true up (469) 1.85 Other 42 (0.17) Provision for income taxes $ 23 (0.09) % 1 State taxes in California, …

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Leases A summary of the balances relating to the Companys lease assets and liabilities as of December 31, 2025 and 2024 consisted of the following (in thousands) : Balance Sheet Location December 31, 2025 December 31, 2024 Assets Operating leases Operating lease right-of-use assets, net $ 1,534 $ 3,193 Equipment finance leases Property and equipment, net 215 730 Total lease assets 1,749 3,923 Liabilities Current Operating leases Other current liabilities 1,836 3,028 Equipment finance leases Other current liabilities 292 1,054 Sub-total 2,128 4,082 Non-current Operating leases Other non-current liabilities 262 16,656 Equipment finance leases Other non-current liabilities 125 418 Sub-total 387 17,074 Total lease liabilities $ 2,515 $ 21,156 Operating Leases The Company has a 5-year office lease on its headquarter facility in Los Angeles, California, which commenced in January 2022, as well as certain other leases (both short-term and long-term) within the United States. In connection with the acquisition of ElectraMeccanica, the Company assumed the leases for a manufacturing facility in Mesa, Arizona and a service and distribution center in Huntington Beach, California, maturing in May 2033 and January 2027, respectively. On August 21, 2025, the Company entered into an agreement with the lessor of the Mesa facility, which resulted in the termination of such lease and provided that the Company shall make monthly payments to the lessor for 18 months following termination in an ag …

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Recent Accounting Pronouncements Issued and Adopted: In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires incremental annual income tax disclosures. This amendment includes disclosures of specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold; income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes, and also disaggregated by individual jurisdictions that meet a quantitative threshold; income (or loss) from continuing operations before income tax expenses (or benefit) disaggregated between domestic and foreign; and income tax expense (or benefit) from continuing operations disaggregated by federal, state and foreign. The guidance is effective for annual periods beginning after December 15, 2024. We adopted this ASU on a prospective basis effective January 1, 2025. Refer to Note 17 Income Taxes for the inclusion of new disclosures required. Recent Accounting Pronouncements Issued and not yet Adopted: In November 2024, the FASB issued ASU No. 2024-03, Income Statement -Reporting Comprehensive Income - Expense Disaggregation Disclosures , and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, to improve the disclosures about a public business entitys expenses …

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Related Party Transactions The Company has lease agreements with Fitzgerald Manufacturing Partners. The owner of Fitzgerald Manufacturing Partners is a stockholder of the Compan y. During each of the years ended December 31, 2025 and 2024, the Company incurred rent expense of $0.6 million and $0.7 million, respectively, related to these agreements. During the year ended December 31, 2024, the Company sold two Hubs to Xcel Energy, resulting in $0.5 million in revenue, with no similar transaction occurring in the year ended December 31, 2025. A member of the Company's Board of Directors served as the Senior Vice President, System Strategy and Chief Planning Officer of Xcel Energy through March 17, 2025. Management believes these transactions were conducted on terms consistent with those that prevail in arm's length transactions with unrelated third-parties.

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Revenue Recognition Disaggregated revenues by major source for the years ended December 31, 2025 and 2024 consisted of the following ( in thousands ): Years Ended December 31, 2025 2024 Product and service revenue Stepvans & vehicle incentives (1) $ 35,832 $ 42,808 Powertrains & hubs (1) 7,170 8,740 Sales-type lease revenue 398 708 Other product revenue (2) 1,700 1,778 Total product and service revenue 45,100 54,034 Ancillary revenue 892 1,927 Total revenues $ 45,992 $ 55,961 ____________ (1) Amounts are net of returns and allowances. Stepvans & vehicle incentives and powertrains & hubs include revenue generated from operating leases. (2) Other product revenue for the year ended December 31, 2025 includes revenue related to non-recurring powertrain engineering services of $0.6 million. The remaining performance obligations for non-recurring engineering services total $0.2 million as of December 31, 2025 and are expected to be satisfied in 2026. The Company leases stepvans and Hubs to customers under operating leases with terms ranging from 24 to 36 months. At the end of the lease term, customers are required to return the vehicles to Xos. During the years ended December 31, 2025 and December 31, 2024, the Company recorded operating lease revenue of $11,000 and $35,000, respectively, on a straight-line basis over the contractual terms of the respective leases as part of Stepvans & vehicle incentives , above. During the years ended December 31, 2025 and Dece …

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Segment Reporting The following table presents segment revenue, gross profit, and net loss for the periods presented (in thousands): December 31, 2025 December 31, 2024 Revenues $ 45,992 $ 55,961 Cost of goods sold 43,268 51,996 Gross profit 2,724 3,965 less: Employee related 18,076 27,400 Facility and rent 3,917 4,530 Insurance 3,183 3,693 Depreciation 1,984 3,088 Professional services 1,625 3,093 Computer and software as a service 2,053 2,439 Research and development materials 1,656 1,603 Other (1) 3,313 3,993 Gain on operating lease terminations (9,875) Other expense, net 2,137 4,561 Change in fair value of derivative instruments (48) (274) Change in fair value of earn-out shares liability (39) Provision for income taxes 23 37 Segment net loss $ (25,320) $ (50,159) ____________ (1) Other includes $0.9 million and $0 of financed equipment lease expense during the years ended December 31, 2025 and 2024, respectively, as well as bad debt expense, travel & entertainment, general and administrative freight, property/franchise taxes, and merchant fees …

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"Equity Xos Common and Preferred Stock The Company is authorized 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 one vote on each matter properly submitted to the stockholders of the Company for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock). Preferred Stock : The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Company (the Board of Directors) is expressly authorized t …

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Subsequent Events Windrose Resale Agreement In the first quarter of 2026, the Company entered into an agreement to serve as a dealer for Windrose Technology, Inc.s electric long-haul truck products (the Windrose Dealer Agreement). Through this relationship, the Company seeks to be able to address customer and prospect demand for heavy duty long-range electric trucks that its own manufactured vehicles may not meet. The Windrose Dealer Agreement does not include any minimum volume requirements, and the Company cannot predict what volumes or revenues it might achieve from this arrangement, if any. …

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