What changed in this filing

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Item 1. Financial Statements

2022-05-09 compared with 2021-11-10 · 179 added, 228 removed, 130 unchanged (76% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands, except share and per share data)

September 30,

(Dollar amounts in thousands, except share data)

2022 December 31,

2 unchanged sentences

Accounts receivable 765 70

Inventory 186 114

Prepaid expenses and other current assets 8,865 9,068

14 unchanged sentences

Operating lease liabilities, net of current portion 8,222 8,623

Debt, net of current portion — 908

Other liabilities 1,015 667

Total liabilities 20,545 24,525

Commitments and contingencies (Note 8)

Stockholders’ equity

1 unchanged sentence

250,000,000 shares authorized;

173,120,988 and 169,316,421 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

173,805,134 and 173,468,979 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital 376,266 374,795

6 unchanged sentences

(Dollar amounts in thousands, except share and per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Product sales and other $ 340 $ —

Total revenues 340 —

Cost of revenues

Product sales and other 2,099 —

Total cost of revenues 2,099 —

Gross loss ( 1,759 ) —

Operating expenses

1 unchanged sentence

Selling, general and administrative ( 9,824 ) ( 7,399 )

Total operating expenses ( 25,632 ) ( 16,731 )

Loss from operations ( 27,391 ) ( 16,731 )

Other income (expense):

Interest expense — ( 2,230 ) — ( 5,458 )

Interest income 285 169

Change in fair value of convertible notes payable derivative liabilities — ( 1,813 ) — ( 1,358 )

Other expense — ( 12 ) — ( 12 )

Total other income (expense) 195 ( 4,055 ) 561 ( 6,828 )

Loss on disposal of assets ( 2 ) —

Net loss $ ( 27,108 ) $ ( 16,562 )

Weighted-average shares outstanding, basic and diluted 172,987,672 87,398,704 171,842,664 86,981,200

Net loss per share, basic and diluted $ ( 0.16 ) $ ( 0.10 )

Weighted-average shares outstanding, basic and diluted 173,584,573 170,249,708

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

HYLIION HOLDINGS CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollar amounts in thousands, except share data)

For the Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Common Stock Additional

2 unchanged sentences

Shares Amount

Balance - December 31, 2020 169,316,421 $ 19 $ 364,998 $ 275,151 $ 640,168

Common stock issued for warrants exercised, net of issuance costs 371,535 — 4,282 — 4,282

Exercise of common stock options 1,831,855 — 287 — 287

Share-based compensation — — 1,510 — 1,510

Net loss — — — ( 16,562 ) ( 16,562 )

Balance - March 31, 2021 171,519,811 19 371,077 258,589 629,685

Exercise of common stock options and vesting of restricted stock units 1,278,527 1 215 — 216

Share-based compensation — — 1,917 — 1,917

Net loss — — — ( 23,244 ) ( 23,244 )

Balance - June 30, 2021 172,798,338 20 373,209 235,345 608,574

Exercise of common stock options and vesting of restricted stock units 322,650 — 50 — 50

Balance at December 31, 2021 173,468,979 $ 17 $ 374,795 $ 179,103 $ 553,915

Exercise of common stock options and vesting of restricted stock units, net 336,155 — ( 92 ) — ( 92 )

Share-based compensation — — 1,563 — 1,563

Net loss — — — ( 27,108 ) ( 27,108 )

Balance - September 30, 2021 173,120,988 $ 20 $ 373,804 $ 208,730 $ 582,554

For the Nine Months Ended September 30, 2020

Balance at March 31, 2022 173,805,134 $ 17 $ 376,266 $ 151,995 $ 528,278

Three Months Ended March 31, 2021

Common Stock Additional

Capital Accumulated

Deficit Total

Capital Retained Earnings Total

Stockholders’

Shares Amount

Balance - December 31, 2019 86,762,463 $ 9 $ 30,888 $ ( 48,966 ) $ ( 18,069 )

Share-based compensation — — 57 — 57

Net loss — — — ( 5,562 ) ( 5,562 )

Balance - March 31, 2020 86,762,463 9 30,945 ( 54,528 ) ( 23,574 )

Exercise of common stock options 234,057 — 25 — 25

Share-based compensation — — 34 — 34

Net loss — — — ( 4,001 ) ( 4,001 )

Balance - June 30, 2020 86,996,520 9 31,004 ( 58,529 ) ( 27,516 )

Exercise of common stock options 878,103 — 94 — 94

Balance at December 31, 2020 169,316,421 $ 19 $ 364,998 $ 275,151 $ 640,168

Common stock issued for warrants exercised, net of issuance costs 371,535 — 4,282 — 4,282

Exercise of common stock options and vesting of restricted stock units, net 1,831,855 — 287 — 287

Share-based compensation — — 1,510 — 1,510

Net loss — — — ( 16,562 ) ( 16,562 )

Balance - September 30, 2020 87,874,623 $ 9 $ 31,172 $ ( 67,633 ) $ ( 36,452 )

Balance at March 31, 2021 171,519,811 $ 19 $ 371,077 $ 258,589 $ 629,685

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

2 unchanged sentences

(Dollar amounts in thousands)

For the Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities

2 unchanged sentences

Depreciation and amortization 270 203

Amortization of investment premiums and discounts 1,318 —

Amortization and accretion of investments 578 —

Noncash lease expense 303 222

Paid-in-kind interest on convertible notes payable — 1,081

Amortization of debt discount — 4,237

Inventory write-down 1,325 —

Loss on disposal of assets 2 —

Share-based compensation 1,563 1,510

Change in fair value of convertible notes payable derivative liabilities — 1,358

Changes in operating assets and liabilities:

Accounts receivable ( 695 ) 12

Inventory ( 1,397 ) —

Prepaid expenses and other assets 98 817

Accounts payable ( 4,249 ) 132

Accrued expenses and other current liabilities 1,309 391

Accrued expenses and other liabilities 219 3,091

Operating lease liabilities ( 212 ) ( 182 )

2 unchanged sentences

Purchase of property and equipment ( 209 ) ( 358 )

Proceeds from sale of property and equipment — 22

Payments for security deposit, net ( 29 ) —

Purchase of investments ( 59,234 ) ( 219,460 )

3 unchanged sentences

Proceeds from exercise of stock warrants, net of issuance costs — 16,257

Proceeds from term loan — 10,100

(Payments for)/proceeds from Paycheck Protection Program loan ( 908 ) 908

Payments for Paycheck Protection Program loan — ( 908 )

Proceeds from exercise of common stock options 28 287

Proceeds from convertible notes payable issuance and derivative liabilities — 3,200

Payments for deferred transaction costs — ( 1,316 )

Payments for deferred financing costs — ( 468 )

Taxes paid related to net share settlement of equity awards ( 120 ) —

Repayments on finance lease obligations — ( 49 )

Net cash provided by financing activities 15,902 12,348

Net (decrease) increase in cash and cash equivalents and restricted cash ( 99,521 ) 1,280

Cash and cash equivalents - beginning of the period 389,705 6,285

Cash and cash equivalents and restricted cash - end of the period $ 290,184 $ 7,565

Net cash (used in) provided by financing activities ( 92 ) 15,587

Net decrease in cash and cash equivalents and restricted cash ( 31,338 ) ( 54,987 )

Cash and cash equivalents and restricted cash, beginning of period 259,110 389,705

Cash and cash equivalents and restricted cash, end of period $ 227,772 $ 334,718

Supplemental disclosure of noncash investing information:

Acquisitions of property and equipment included in accounts payable and other $ 282 $ —

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

Supplemental disclosures of noncash financing information:

Acquisitions of property and equipment included in accounts payable $ 20 $ —

Deferred transaction costs included in accounts payable $ — $ ( 2,990 )

HYLIION HOLDINGS CORP.

1 unchanged sentence

(Dollar amounts in thousands, except as separately indicated)

Description of Organization and Business Operations

On October 1, 2020, our predecessor company, Tortoise Acquisition Corp.

(“Tortoise”), consummated a business combination (the “Business Combination”) with Hyliion Inc., a Delaware corporation (“Legacy Hyliion”) pursuant to which Legacy Hyliion merged with and into SHLL Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Tortoise, with Legacy Hyliion surviving the merger (together with the related transactions, the “Business Combination”).

Upon consummation of the Business Combination, Legacy Hyliion became a direct wholly-owned subsidiary of Tortoise, and Tortoise was renamed Hyliion Holdings Corp.

References to the “Company” in this report refer to Tortoise before the consummation of the Business Combination or Hyliion Holdings Corp.

and its wholly-owned subsidiary (“Hyliion”, “we” or “us”) after the Business Combination, unless expressly indicated or the context otherwise requires.

Hyliion designs and develops hybrid and electrified powertrain systems for long haul “Class 8” semi-trucks which modify semi-tractors into hybrid and fully electric range extender vehicles, respectively.

The Company’s hybrid powertrain system "Hybrid eX" utilizes intelligent electric drive axles with advanced algorithms and battery technology to optimize fuel savings and vehicle performance with reduced emissions, enabling fleets to access an easy, efficient way to decrease fuel expenses, lower emissions and/or improve vehicle performance.

The Company’s fully electric range extender systems utilize an intelligent electric powertrain with advanced algorithms to optimize emissions performance and efficiency with no new infrastructure required.

The Hypertruck ERX system enables fleets to reduce the cost of ownership while providing the ability to deliver net-negative carbon emissions and operate fully electric when needed.

The Company recently launched its commercial Hybrid eX and the Hypertruck ERX system is in the prototype phase.

On October 1, 2020, the Company consummated a business combination which was accounted for as a reverse recapitalization.

For more details on the reverse recapitalization, see Note 3 to the Company's Consolidated Financial Statements as presented in its Annual Report, as amended on Form 10-K/A for the year ended December 31, 2020.

As a result of the reverse recapitalization, all references to numbers of common shares and per common share data for 2020 in these condensed consolidated financial statements and related notes have been retroactively adjusted to account for the effect of the reverse recapitalization.

These condensed consolidated financial statements have been prepared on a going con cern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business.

The Company is an early-stage growth company in the pre-commercialization stage of development and has generated negative cash flows from operating activities since inception.

As of September 30, 2021, the Company had a cash and cash equivalents balance of $ 289.5 million and total investments of $ 299.4 million.

Based on this, the Company has sufficient funds to continue to execute its bus iness strategy for the next twelve months.

Significant Accounting Policies

Hyliion is a Delaware corporation headquartered in Cedar Park, Texas.

On October 1, 2020 (the “Closing Date”), Tortoise Acquisition Corp (“TortoiseCorp”) entered into a business combination agreement (the “Business Combination”) with each of the shareholders of Hyliion Inc.

(“Legacy Hyliion”).

Pursuant to the Business Combination, TortoiseCorp acquired all of the issued and outstanding shares of common stock from the Legacy Hyliion shareholders.

In connection with the closing of the transaction, Tortoise Corp.

changed its name to Hyliion Holdings Corp.

References to the “Company,” Hyliion," "we," or "us" in this report refer to Hyliion Holdings Corp.

and its wholly-owned subsidiary after the Business Combination, unless expressly indicated or the context otherwise requires.

The Company designs and develops hybrid and electrified powertrain systems for Class 8 semi-trucks which modify semi-tractors into hybrid and fully electric range extender vehicles, respectively.

The Company’s hybrid system ("Hybrid") utilizes intelligent electric drive axles with advanced algorithms and battery technology to optimize vehicle performance, enabling fleets to access an easy, efficient way to decrease fuel expenses, lower emissions and/or improve vehicle performance.

The Company’s fully electric range extender system utilizes an intelligent electric powertrain with advanced algorithms to optimize emissions performance and efficiency with no new infrastructure required.

The Hypertruck ERX TM system enables fleets to reduce the cost of ownership while providing the ability to deliver net-negative carbon emissions and operate fully electric when needed.

The Company recently launched its commercial Hybrid system and the Hypertruck ERX system is in the design verification and product validation phase.

Summary of Significant Accounting Policies

Basis of Presentation

On October 1, 2020, the Company consummated the Business Combination which was accounted for as a reverse recapitalization with Legacy Hyliion being deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification (“ASC”) 805.

Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Hyliion issuing stock for the net assets of Tortoise, accompanied by a recapitalization.

The net assets of Tortoise are stated at historical cost, with no goodwill or other intangible assets recorded.

While Tortoise was the legal acquirer in the Business Combination, because Legacy Hyliion was deemed the accounting acquirer, the historical financial statements of Legacy Hyliion became the historical financial statements of the combined company, upon the consummation of the Business Combination.

As a result, the financial statements included in this report reflect (i) the historical operating results of Legacy Hyliion prior to the Business Combination;

(ii) the combined results of Tortoise and Legacy Hyliion following the closing of the Business Combination;

(iii) the assets and liabilities of Legacy Hyliion at their historical cost;

and (iv) the Company’s equity structure for all periods presented.

For more details on the reverse recapitalization, see Note 3 to the Company’s Consolidated Financial Statements as presented in its Annual Report, as amended on Form 10-K/A for the year ended December 31, 2020 which was filed with the Securities and Exchange Commission (“SEC”) on May 17, 2021 (the “2020 Amended Annual Report”).

These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary.

Intercompany accounts and transactions have been eliminated in consolidation.

These interim condensed consolidated statements have been prepared pursuant to the rules and regulations of the SEC, which permit reduced disclosure for interim periods.

The Consolidated Balance Sheet as of December 31, 2020 was derived from audited financial statements for the fiscal

HYLIION HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except as separately indicated)

year then ended, but does not include all necessary disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) with respect to annual financial statements.

In the opinion of management, these unaudited condensed consolidated financial statements include all recurring adjustments and normal accruals necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the dates and periods presented.

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s 2020 Amended Annual Report.

These condensed consolidated statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”), which permit reduced disclosure for interim periods.

All intercompany transactions and balances have been eliminated upon consolidation.

The condensed consolidated balance sheet as of December 31, 2021 was derived from audited financial statements for the fiscal year then ended, but does not include all necessary disclosures required with respect to annual financial statements.

In the opinion of the Company, these condensed consolidated financial statements include all recurring adjustments and normal accruals necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the dates and periods presented.

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s 2021 Annual Report.

Results for interim periods are not necessarily indicative of the results to be expected for a full fiscal year or for any future period.

Emerging Growth Company:

Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) 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 registration statement under the Securities Act of 1933, as amended (the “Securities Act”) declared effective or do not have a class of securities registered under the Securities Exchange 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 a 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 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, until such time the Company is no longer considered to be an emerging growth company.

As of June 30, 2021, the last business day of our most recently completed second fiscal quarter, the market value of our common stock that was held by non-affiliates was greater than $700 million.

As a result, we will become a large accelerated filer and will no longer qualify as an emerging growth company on December 31, 2021, the end of our current fiscal year.

Accordingly, at that time we will no longer qualify for the provisions of the JOBS Act that allow companies to adopt new or revised accounting standards when required by private company accounting standards.

We have not elected to defer adoption of any new or revised accounting standards under the provisions of the JOBS Act.

These condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business.

The Company is an early-stage growth company and has generated negative cash flows from operating activities since inception.

At March 31, 2022, the Company had total equity of $ 528.3 million, inclusive of cash and cash equivalents of $ 227.1 million and investments of $ 300.1 million.

Based on this, the Company has sufficient funds to continue to execute its bus iness strategy for the next twelve months.

Use of Estimates and Uncertainty of the Coronavirus Pandemic

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of expenses during the reporting period.

The Company’s most significant estimates and judgments involve valuation of share-based compensation, including the fair value of common stock prior to the Business Combination, and the valuation of the convertible notes payable derivative liability.

Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Actual results could differ from those estimates, and such differences could be material to the Company’s condensed consolidated financial statements.

The Company’s most significant estimates and judgments involve revenue recognition, inventory, warranties, income taxes and valuation of share-based compensation, including the fair value of common stock prior to the Business Combination.

The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Actual results could differ from those estimates, and such differences could be material to the Company’s financial statements.

On January 30, 2020, the World Health Organization declared the coronavirus outbreak a “Public Health Emergency of International Concern” and on March 11, 2020, declared the coronavirus outbreak a pandemic.

3 unchanged sentences

and global economies.

This may require greater use of estimates and assumptions in the preparation of the unaudited condensed consolidated financial statements.

This has required greater use of estimates and assumptions in the preparation of the condensed consolidated financial statements.

As the coronavirus pandemic continues to evolve, the Company believes the extent of the impact to its businesses, operating results, cash flows, liquidity and financial condition will be primarily driven by the severity and duration of the coronavirus pandemic, the pandemic’s impact on the U.S.

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 coronavirus pandemic will have on its business, operating results, cash flows, liquidity, and financial condition, but it could be material if the current circumstances continue to exist for a prolonged period.

Although the Company has made its best estimates based upon current information, actual results could materially differ from the estimates and assumptions developed by management.

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 coronavirus pandemic will have on its business, operating results, cash flows and financial condition, but it could be material if the current circumstances continue to exist for a prolonged period.

Although the Company has made its best estimates based upon current information, actual results could materially differ from the estimates and assumptions.

If so, the Company may be subject to future impairment charges as well as changes to recorded reserves and valuations.

HYLIION HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except as separately indicated)

Concentration of Supplier Risk

The Company is dependent on certain suppliers, the majority of which are single source suppliers, and the inability of these suppliers to deliver necessary components of the Company’s products in a timely manner at prices, quality levels and volumes that are acceptable, or the Company’s inability to efficiently manage these components from these suppliers, could have a material adverse effect on the Company’s business, prospects, financial condition and operating results.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity date of 90 days or less at the time of purchase to be cash and cash equivalents only if in checking, savings or money market accounts.

Cash and cash equivalents include cash held in banks and money market accounts and are carried at cost, which approximates fair value.

The Company maintains cash in excess of federally insured limits at financial institutions which it believes are of high credit quality and has not incurred any losses related to these balances to date.

The Company believes its credit risk, with respect to these financial institutions to be minimal.

Restricted Cash

On July 2, 2021, the Company provided its corporate headquarters lessor with a letter of credit for $ 0.7 million to secure the performance of lease obligations.

The Company made a restricted cash deposit for its obligation to pay any draws on the letter of credit by the lessor.

Total cash and cash equivalents and restricted cash as presented in the condensed consolidated statements of cash flows are summarized as follows:

September 30, 2021 December 31, 2020 September 30, 2020 December 31, 2019

The Company has provided its corporate headquarters lessor with a letter of credit for $ 0.7 million to secure the performance of lease obligations, backed by a restricted cash deposit to pay any draws on the letter of credit by the lessor.

Total cash and cash equivalents and restricted cash presented in the condensed consolidated statements of cash flows is summarized as follows:

March 31, 2022 December 31, 2021 March 31, 2021 December 31, 2020

Cash and cash equivalents $ 227,107 $ 258,445 $ 334,718 $ 389,705

Restricted cash included in other non-current assets 665 665 — —

Total presented in the condensed consolidated statements of cash flows $ 290,184 $ 389,705 $ 7,565 $ 6,285

Recently Adopted Accounting Pronouncements:

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes.

The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020.

The Company adopted ASU 2019-12 on January 1, 2021.

However, there is no impact to the Company as a result of the adoption in the current quarter, nor is there an expected impact to the Company for the remainder of the year.

Convertible Notes Payable:

During January 2020, the Company issued a convertible note payable in exchange for cash totaling $ 3.2 million (the “January 2020 Note”).

The January 2020 Note bore interest at 6 % per annum and would have matured in January 2025 ( five years after its issuance date).

The January 2020 Note was only prepayable with the consent of the holder.

The January 2020 Note was secured by a first priority, senior secured interest in substantially all the assets of the Company.

The January 2020 Note included the following embedded features:

(a) Optional conversion upon the next equity financing of at least $ 15.0 million in proceeds.

The conversion price was based on the per share price of the next equity financing, with a 50 % discount.

(b) Optional conversion upon a subsequent equity financing of at least $ 15.0 million if the holder did not elect to convert upon the next equity financing, at the price that is set by the subsequent equity financing (no discount).

In the event of a change in control, the holder could elect to convert the January 2020 Note into shares of common stock at a conversion price equal to (i) the product of the change in control purchase price multiplied by 50 %, divided by (ii) the total number of outstanding shares of capital stock of the Company (on a fully diluted basis).

(d) Optional redemption upon a change in control.

In the event of a change in control, the holder could elect to request payment of all outstanding principal (with no penalty) and unpaid accrued interest.

(e) Optional redemption upon the Company obtaining at least $ 10.0 million in commercial debt which would result in the January 2020 Note having the same priority or being treated as subordinate to the commercial debt.

In such scenario, the holder could elect to request payment of all outstanding principal (with no penalty) and unpaid accrued interest.

(f) Automatic or optional redemption upon an event of default.

Upon the occurrence of an event of default, the January 2020 Note would either automatically become due and payable or could become due and payable at the holder’s option (based on the nature of the event of default).

Upon such acceleration, all outstanding principal (with no penalty) and unpaid accrued interest would become payable.

(g) Additional interest of 3 % (or a total of 9 %) upon an event of default.

In addition, in the event the holder did not convert upon an equity financing or change in control event, the noteholder could extend the maturity date of the January 2020 Note by five years beyond the original maturity date.

In addition, in the event the holder did not convert upon an equity financing, the interest rate on the January 2020 Note would automatically be adjusted to a rate of 4 % per annum.

The Company assessed the embedded features within the January 2020 Note and determined that the automatic and optional conversion features upon the next equity financing (share-settled redemption features), the additional interest feature and the term extension feature met the definition of a derivative and were not clearly and closely related to the host contract and

HYLIION HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except as separately indicated)

required separate accounting.

The Company also concluded that the conversion features did not represent beneficial conversion features.

At issuance, the Company estimated the fair value of the automatic and optional conversion features to be approximately $ 2.7 million.

At issuance, the Company concluded the fair value of the additional interest and term extension features was de minimis.

The terms of the convertible notes payable include certain restrictive covenants related to the Company’s ability to enter into certain transactions or agreements, pay dividends, or take other similar corporate actions.

In connection with the reverse recapitalization, immediately prior to the closing of the Business Combination, these convertible notes, plus accrued paid-in-kind interest, were converted into the Company’s common stock on the closing date.

Payroll Protection Program Loan:

During May 2020, the Company received loan proceeds in the amount of $ 0.9 million under the Payroll Protection Program (the “PPP”).

The PPP was established as part of Coronavirus Aid, Relief, and Economic Security Act and provides for loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses of the business, subject to certain limitations.

The loans and accrued interest are forgivable after eight weeks so long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and so long as the borrower maintains its pre-funding employment and wage levels.

Although the Company used the PPP loan proceeds for purposes consistent with the provisions of the PPP and such usage met the criteria established for forgiveness of the loan, the Company repaid the balance of the PPP loan plus accrued interest during the three months ended March 31, 2021.

The amortized cost, unrealized gains and losses, and fair value, and maturities of our held-to-maturity investments at September 30, 2021 and December 31, 2020 are summarized as follows:

Fair Value Measurements as of September 30, 2021

$ 227,772 $ 259,110 $ 334,718 $ 389,705

Accounts Receivable

Accounts receivable are stated at gross invoice amount, net of an allowance for doubtful accounts.

The allowance for doubtful accounts is maintained at a level considered adequate to provide for potential account losses on the balance based on the Company’s evaluation of the anticipated impact of current economic conditions, changes in the character and size of the balance, past and expected future loss experience, among other pertinent factors.

At March 31, 2022 and December 31, 2021, accounts receivable included amounts receivable from customers of $ 0.2 million and $ 45.0 thousand, respectively.

At March 31, 2022 and December 31, 2021, there was no allowance for doubtful accounts required based on the Company's evaluation.

The Company’s investments consist of corporate bonds, U.S.

treasury and agency securities, state and local municipal bonds and commercial paper, all of which are classified as held-to-maturity, with a maturity date of 36-months or less at the time of purchase.

The Company determines the appropriate classification of investments at the time of purchase and re-evaluates such designation as of each balance sheet date.

Investments are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity.

Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity.

Such amortization, along with interest, is included in interest income.

The Company uses the specific identification method to determine the cost basis of securities sold.

Investments are impaired when a decline in fair value is judged to be other-than-temporary.

The Company evaluates investments for impairment by considering the length of time and extent to which market value has been less than cost or amortized cost, the financial condition and near-term prospects of the issuer as well as specific events or circumstances that

may influence the operations of the issuer and the Company’s intent to sell the security or the likelihood that it will be required to sell the security before recovery of the entire amortized cost.

Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to other income and a new cost basis in the investment is established.

Fair Value Measurements

ASC 820, Fair Value Measurements , 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.

As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company can access at the measurement date;

Significant other observable inputs other than level I prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data;

Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company believes its valuation methods are appropriate and consistent with other market participants, however the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The Company’s financial instruments consist of cash and cash equivalents and restricted cash, accounts receivable, investments, accounts payable and accrued expenses for which the carrying value approximates fair value, exclusive of any interim unrealized gains or losses, because of the short-term nature of the instruments.

The fair value of investments are based on quoted prices for identical or similar instruments in markets that are not active.

As a result, investments are classified within Level II of the fair value hierarchy.

The Company follows five steps to recognize revenue from contracts with customers under ASC 606, Revenue from Contracts with Customers , which are:

Identify the contract(s) with a customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to the performance obligations in the contract;

Recognize revenue when (or as) a performance obligation is satisfied.

Revenue is comprised of sales of Hybrid systems for Class 8 semi-trucks and specific other features and services that meet the definition of a performance obligation, including internet connectivity and data processing.

We provide installation services for the Hybrid system onto the customers’ vehicle.

The Company’s products are marketed and sold to end-user fleet customers in North America.

When our contracts with customers contain multiple performance obligations and where material, the contract transaction price is allocated on a relative standalone selling price basis to each performance obligation.

There is no meaningful basis on which to disaggregate revenue in the current period.

We recognize revenue on Hybrid system sales upon delivery and acceptance of the vehicle to the customer, which is when control transfers.

Contracts are reviewed for significant financing components and payments are typically received within 30 days of delivery.

The sale of a Hybrid system to an end-use fleet customer consists of a completed modification to the customer vehicle and the installation services involve significant integration of the Hybrid system with the customer’s vehicle.

Installation services are not distinct within the context of the contract and together with the sale of the Hybrid system represent a single performance obligation.

We do not offer any sales returns.

Amounts billed to customers related to shipping and

handling are classified as revenue, and we have elected to recognize the cost for freight and shipping when control has transferred to the customer as a cost of revenue.

Our policy is to exclude taxes collected from customers from the transaction price of contracts.

In the fourth quarter of fiscal 2021, we began taking deposits to secure future Hypertruck ERX production slots.

We provide limited assurance-type warranties under our contracts and do not offer extended warranties or maintenance contracts.

The warranty period typically extends for the lesser of two years or 200,000 miles following transfer of control and solely relate to correction of product defects during the warranty period.

We recognize the cost of the warranty upon transfer of control based on estimated and historical claims rates and fulfillment costs, which are variable.

Should product failure rates and fulfillment costs differ from these estimates, material revisions to the estimated warranty liability would be required.

Warranty expense is recorded as a component of cost of revenue.

The amortized cost, unrealized gains and losses, fair value and maturities of our held-to-maturity investments at March 31, 2022 and December 31, 2021 are summarized as follows:

Fair Value Measurements at March 31, 2022

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Commercial paper $ 63,643 $ — $ ( 237 ) $ 63,406

government agency bonds 4,450 — ( 182 ) 4,268

State and municipal bonds 22,776 — ( 406 ) 22,370

Corporate bonds and notes 209,249 — ( 3,073 ) 206,176

Total held-to-maturity investments $ 299,446 $ 37 $ ( 289 ) $ 299,194

As of September 30, 2021, the Company has determined that the unrealized losses totaling $ 0.3 million are temporary and fully expects to recover the cost basis.

Fair Value Measurements as of December 31, 2020

$ 300,118 $ — $ ( 3,898 ) $ 296,220

Fair Value Measurements at December 31, 2021

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Treasury securities $ 149,996 $ — $ ( 1 ) $ 149,995

Commercial paper $ 73,908 $ 2 $ ( 31 ) $ 73,879

government agency bonds 4,450 — ( 7 ) 4,443

State and municipal bonds 17,797 — ( 115 ) 17,682

Corporate bonds and notes 202,849 3 ( 953 ) 201,899

Total held-to-maturity investments $ 237,851 $ — $ ( 79 ) $ 237,772

September 30, 2021 December 31, 2020

$ 299,004 $ 5 $ ( 1,106 ) $ 297,903

March 31, 2022 December 31, 2021

Amortized Cost Fair Value Amortized Cost Fair Value

1 unchanged sentence

Due after one year through five years 165,958 162,673 180,217 179,189

Total held-to-maturity investments $ 299,446 $ 299,194 $ 237,851 $ 237,772

HYLIION HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except as separately indicated)

$ 300,118 $ 296,220 $ 299,004 $ 297,903

Fair Value Measurements

ASC Topic 820, Fair Value Measurements and Disclosures, establishes a framework for measuring fair value and the corresponding disclosure requirements around fair value measurements.

This topic applies to all financial instruments that are being measured and reported on a fair value basis.

The fair value measurements of the Company's assets as of September 30, 2021 and December 31, 2020 are summarized as follows:

Fair Value Measurements as of September 30, 2021

The fair value measurements of our financial assets at March 31, 2022 and December 31, 2021 are summarized as follows:

Fair Value Measurements at March 31, 2022

Level I Level II Level III Total

3 unchanged sentences

Commercial paper — 63,406 — 63,406

government agency bonds — 4,268 — 4,268

State and municipal bonds — 22,370 — 22,370

Corporate bonds and notes — 206,176 — 206,176

Total assets $ 290,184 $ 299,194 $ — $ 589,378

Fair Value Measurements as of December 31, 2020

$ 227,772 $ 296,220 $ — $ 523,992

Fair Value Measurements at December 31, 2021

Level I Level II Level III Total

Cash and cash equivalents $ 258,445 $ — $ — $ 258,445

Restricted cash 665 — — 665

Held-to-maturity investments:

Treasury securities — 149,995 — 149,995

Commercial paper — 73,879 — 73,879

government agency bonds — 4,443 — 4,443

State and municipal bonds — 17,682 — 17,682

Corporate bonds and notes — 201,899 — 201,899

Total assets $ 389,705 $ 237,772 $ — $ 627,477

$ 259,110 $ 297,903 $ — $ 557,013

The carrying value of our inventory at March 31, 2022 and December 31, 2021 is summarized as follows:

March 31, 2022 December 31, 2021

Raw materials $ — $ —

Work in process — 4

Finished goods 186 110

During the three months ended March 31, 2022 and 2021, we recorded inventory write-downs of $ 1.3 million and nil , respectively, included in cost of revenues.

Share-Based Compensation

During the three months ended March 31, 2022 and 2021, the Company granted 2.0 million and 1.5 million , respectively, restricted stock units which will vest over a period of one to four years , some of which include performance criteria based on the achievement of key Company milestones.

During the three months ended March 31, 2022 and 2021, 0.4 million and 40 thousand, respectively, restricted stock units and options were forfeited.

Share-based compensation expense for the three months ended March 31, 2022 and 2021 was $ 1.6 million and $ 1.5 million, respectively.

The change in warranty liability for the three months ended March 31, 2022 and 2021 is summarized as follows:

Three Months Ended March 31,

Balance at beginning of period $ 44 $ —

Provision for new warranties 207 —

Net changes in accrual related to pre-existing warranties ( 9 ) —

Warranty costs incurred ( 4 ) —

Balance at end of period $ 238 $ —

Commitments and Contingencies

1 unchanged sentence

The Company is periodically involved in legal proceedings, legal actions and claims arising in the normal course of business, including proceedings relating to product liability, intellectual property, safety and health, employment and other matters.

Management believes that the outcome of such legal proceedings, legal actions and claims will not have a significant adverse effect on the Company’s financial position, results of operations or cash flows.

HYLIION HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except as separately indicated)

On November 30, 2020, the Company issued a notice of redemption of all its outstanding Public Warrants and Forward Purchase Warrants which was completed in December 2020.

However, the Private Warrants held by the initial holders thereof or permitted transferees of the initial holders were not subject to this redemption.

As of December 31, 2020, all outstanding Public Warrants and Forward Purchase Warrants were either exercised or redeemed by the holder.

As of December 31, 2020, the Company’s transfer agent received gross proceeds of $ 140.8 million corresponding to the exercise of 15,786,127 warrants.

However, due to the timing of the receipt of the warrant exercise and the cash, the Company’s transfer agent issued 15,414,592 shares of common stock as of December 31, 2020.

The remaining 371,535 shares of common stock were issued in January 2021.

Additionally, as of December 31, 2020, the Company’s transfer agent had not yet remitted $ 12.0 million of the gross proceeds associated with the shares of issued common stock to the Company and is included within prepaid expenses and other current assets on the accompanying consolidated balance sheets as of December 31, 2020.

There were 281,065 warrants not exercised by the end of the redemption period that were redeemed for a price of $ 0.01 per warrant, and subsequently cancelled by the Company.

The Company made the redemption payment on these cancelled warrants in January 2021.

Certain holders of the warrants elected a cashless exercise, resulting in the forfeiture of 3,118,445 shares.

The accrued liability totaling $ 4.3 million for warrants exercised but not settled represents all warrants that were exercised as of December 31, 2020 under broker protects resulting in cash collection and share issuance being delayed until January 4, 2021.

HYLIION HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except as separately indicated)

Share-Based Compensation

During the nine months ended September 30, 2021, the Company granted 3,754,228 restricted stock units and performance stock units to certain employees some of which will vest over a period of three or four years , and some of which will vest based on achievement of performance criteria.

The criteria for the performance stock unit awards is based on the achievement of key milestones based on the Company's performance.

During the nine months ended September 30, 2020, the Company awarde d 1,920,000 options to certain employees and non-employees, which will vest over a period of four years .

The estimated grant date fair value of the options granted during the nine months ended September 30, 2020 totaled $ 0.4 million.

Share-based compensation expense for the three and nine months ended September 30, 2021 was $ 0.5 million and $ 4.0 million, respectively.

Share-based compensation expense for the three and nine months ended September 30, 2020 was $ 0.1 million and $ 0.2 million, respectively.

The Company has operating and finance leases for its corporate office, temporary office, vehicles, and equipment.

In June 2021, the Company amended the lease for its corporate office.

This amendment increased the amount of space under the original lease, adjusted the monthly lease payments, and extended the term of the lease through 2028.

The Company accounted for this extension as a lease modification and recorded an increase to the operating lease right-of-use ("ROU") asset and lease liability of approximately $ 4.1 million in the condensed consolidated balance sheets.

The lease amendment includes the option to extend the term for up to two consecutive terms of five years each.

When an implicit rate is not provided, the Company uses its incremental borrowing rate based on the information available at the lease commencement of modification date in determining the present value of the lease payments.

Supplemental cash flow information for the nine months ended September 30, 2021 and 2020 is summarized as follows:

Nine Months Ended September 30,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ ( 977 ) $ ( 1,125 )

Operating cash flows from finance leases $ ( 1 ) $ ( 27 )

Right-of-use assets obtained in exchange for lease obligations $ 4,139 $ —

The Company believes that the outcome of such legal proceedings, legal actions and claims will not have a significant adverse effect on the Company’s financial position, results of operations or cash flows.

Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share of common stock for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

(Dollar amounts in thousands, except share data)

The computation of basic and diluted net loss per share for the three months ended March 31, 2022 and 2021 is summarized as follows (in thousands, except share and per share data):

Three Months Ended March 31,

Net loss attributable to common stockholders $ ( 27,108 ) $ ( 16,562 )

1 unchanged sentence

Net loss per share, basic and diluted $ ( 0.16 ) $ ( 0.10 )

The Company excluded 3,551,320 and 7,051,237 potential common shares from unexercised incentive and non-qualified stock options for the period ended September 30, 2021 and 2020, respectively, and 3,604,614 and no potential common shares from

HYLIION HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except as separately indicated)

unvested restricted stock units for the period ended September 30, 2021 and 2020, respectively, from the computation of diluted net loss per share because including them would have had an anti-dilutive effect.

Potential common shares excluded from the computation of diluted net loss per share because including them would have had an anti-dilutive effect for the three months ended March 31, 2022 and 2021 are summarized as follows:

Three Months Ended March 31,

Unexercised stock options 2,928,756 4,360,010

Unvested restricted stock units* 4,260,994 3,174,341

7,189,750 7,534,351

* Potential common shares from unvested restricted stock units for the three months ended March 31, 2022 and 2021 include 1,345,000 and 1,721,250 shares, respectively, where no accounting grant date has been established.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements