Xos, Inc.XOS

Xos, Inc. Fair Value Disclosure

10-KFiled Mar 31, 20253 min read
Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability.

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

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

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

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

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

As required by ASC 820, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. 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 supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and liabilities carried at fair value on a recurring basis as of December 31, 2024 and 2023 consisted of the following (in thousands):

December 31, 2024
Fair ValueLevel 1Level 2Level 3
Financial Liabilities:
Private Placement Warrants$1 $— $1 $— 
Public Warrants120 120 — — 
Total Financial Liabilities$121 $120 $1 $— 

December 31, 2023
Fair ValueLevel 1Level 2Level 3
Financial Assets
Cash and Cash Equivalents(1):
Money market funds$2,917 $2,917 $— $— 
Total Financial Assets
$2,917 $2,917 $— $— 
Financial Liabilities:
Private Placement Warrants$4 $— 4 $— 
Public Warrants391 391 — — 
Contingent Earn-out Shares liability39 — — 39 
Total Financial Liabilities$434 $391 $4 $39 

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

The changes in the fair value of Level 3 financial liabilities during the year ended December 31, 2024 consisted of the following (in thousands):
Contingent Earn-out Shares Liability
Fair value at December 31, 2023
$39 
Recognition of earn-out RSUs— 
Change in fair value during the period(39)
Fair value at December 31, 2024
$— 
Significant unobservable inputs related to Level 3 Earn-out Shares liability consisted of the following:
December 31, 2024December 31, 2023
Stock price$3.24$7.98
Stock price volatility97%80%
Expected term1.64 years2.64 years
Risk-free interest rate4.2%4.1%
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About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Other Available Disclosures

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