Xos, Inc. — filing summary
Important issuer context: This 10-Q is filed by NextGen Acquisition Corporation, a blank-check company and proposed merger partner of Xos, Inc.; it is not Xos’s operating-company 10-Q. The financial results below are NextGen’s results for the three months ended March 31, 2021. The filing was signed May 26, 2021.
Business context and proposed transaction
NextGen had not begun operating activities or generated operating revenue. Its activity consisted of formation, its 2020 IPO and the search for a business combination. On February 21, 2021, NextGen agreed to merge with Xos; the agreement was amended May 14. The proposed transaction contemplated 127,626,116 shares for Xos equity and awards, based on a stated pre-transaction equity value of approximately $1.276 billion, and a concurrent $220 million PIPE for 22 million shares. Completion remained subject to transaction conditions and shareholder approval. The filing does not treat the merger as completed.
Financial results and position
| Metric | Q1 2021 / March 31, 2021 |
|---|---|
| Operating revenue | None; NextGen expected no operating revenue before a business combination. |
| Net loss | $8.398 million, including a $7.624 million loss from the change in fair value of warrant liabilities, $783,838 of operating expenses, and $9,248 of trust-account investment gain. |
| Loss per share | $0.60 for non-redeemable ordinary shares; redeemable-share earnings per share rounded to zero. |
| Cash flow | $697,486 cash used in operating activities; cash declined from $821,331 at year-end 2020 to $123,845. |
| Cash and liquidity | $123,845 operating cash and approximately $358,000 working capital. Trust-account investments were $375.017 million and were restricted for the business-combination/redemption framework. |
| Liabilities and debt | Total liabilities were $49.456 million, including $36.124 million of warrant liabilities and $13.125 million of deferred underwriting commissions. No long-term debt was reported. A sponsor note allowed borrowings up to $1 million, but none was outstanding; no working-capital loans were outstanding. |
| Margins | Not meaningful because there was no operating revenue. |
Changes, outlook and risks
- Compared with December 31, 2020, operating cash fell by $697,486; total assets declined from $376.272 million to $375.582 million; and warrant liabilities rose from $28.501 million to $36.124 million. Redeemable Class A shares recorded as temporary equity declined from $329.524 million to $321.126 million.
- The reported quarterly loss was driven principally by noncash warrant remeasurement, rather than operating activity. Results are not comparable to an operating company’s revenue or profitability metrics.
- Management said available working capital and borrowing capacity should meet needs through the earlier of a business-combination closing or one year from the filing. It expected public-company, due-diligence and transaction costs to continue. This is management’s assessment, not a guarantee of funding.
- If no business combination is completed by October 9, 2022, NextGen must cease operations, redeem public shares from the trust subject to stated terms, and liquidate. Warrants may expire worthless if no transaction closes.
- COVID-19 effects on the search and transaction process were uncertain. The filing also identifies potential dilution from redemptions, warrant exercise, founder-share conversion and Xos awards; Xos options could create additional dilution if cash-exercised.
- Disclosure controls were assessed as ineffective because of a material weakness in accounting for IPO warrants, associated with the financial-statement restatement discussed in NextGen’s amended 2020 annual report. Management reported no material control changes during this quarter.
- NextGen reported no legal proceedings, no material changes to previously disclosed risk factors, no long-term contractual obligations of the listed types, and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the merger and $220 million PIPE closed, and whether all stated conditions and approvals were satisfied.
- Actual public-share redemptions, cash available to the combined company at closing, and any changes to PIPE subscriptions or funding sources.
- The final share count and dilution from Xos awards and options, founder-share anti-dilution terms, and public and private warrants.
- How management remediated the warrant-accounting material weakness and whether subsequent filings report effective controls.
- Whether the SPAC’s limited operating cash and borrowing capacity proved sufficient to fund transaction costs through closing.
- The merger’s final terms, transaction risks and updated Xos operating and financial information, which this SPAC filing does not provide.