What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-28 compared with 2022-02-24 · 203 added, 181 removed, 782 unchanged (33% of the section changed)

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We have audited the accompanying consolidated balance sheets of Hyliion Holdings Corp.

and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of IPR&D

As described further in Note 3 to the financial statements, in September 2022 the Company acquired certain assets of General Electric Company’s GE Additive business.

As a result of the Acquisition, the Company acquired in-process research and development (“IPR&D”) with an estimated fair value of $28.8 million.

We identified the valuation of IPR&D as a critical audit matter.

The principal considerations for our determination that performing procedures relating to the valuation of acquired IPR&D is a critical audit matter are the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management's significant assumptions used in developing the revenue growth rate and discount rate related to the acquired IPR&D.

In addition, there is limited historical information available to evaluate the reasonableness of the revenue growth rate and discount rate.

Our audit procedures related to the valuation of acquired IPR&D included the following:

• We tested the operating effectiveness of controls relating to accounting for the transaction, including management's valuation of acquired IPR&D and the development of the revenue growth rate and discount rate.

• We evaluated the reasonableness of the revenue growth rate by comparing to external market and industry data, as well as to evidence obtained in other areas of the audit.

• We utilized an internal valuation specialist to assist in evaluating the appropriateness of management’s valuation methodology and the reasonableness of the discount rate.

• We evaluated the qualifications of the third-party valuation firm engaged by the Company based on their knowledge, skill, and ability.

/s/ GRANT THORNTON LLP

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Cash and cash equivalents $ 119,468 $ 258,445

Accounts receivable 70 92

Accounts receivable, net 1,136 70

Inventory 74 114

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Other liabilities 1,515 667

Debt, net of current portion — 908

Total liabilities 23,169 24,525

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Change in fair value of warrant liabilities — — 363,299

Other (expense) income — ( 12 ) 27

Other expense, net ( 32 ) — ( 12 )

Loss on extinguishment of debt — — ( 10,170 )

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(Dollar amounts in thousands, except share data)

Series A-1 Redeemable,

Convertible Preferred Stock Series A-2 Redeemable,

Convertible Preferred Stock Series A-3 Redeemable,

Convertible Preferred Stock Common Stock Additional

Common Stock Additional

Capital Retained Earnings (Deficit) Total Stockholders’

Equity (Deficit)

Shares Amount Shares Amount Shares Amount Shares Par Value

Balance at December 31, 2018 23,460,903 $ 20,750 8,793,755 $ 3,893 2,545,155 $ 2,026 24,453,750 $ 24 $ 4,072 $ ( 34,853 ) $ ( 30,757 )

Retroactive application of recapitalization (See Note 3) ( 23,460,903 ) ( 20,750 ) ( 8,793,755 ) ( 3,893 ) ( 2,545,155 ) ( 2,026 ) 61,890,680 ( 15 ) 26,684 — 26,669

Adjusted balance, beginning of period — — — — — — 86,344,430 9 30,756 ( 34,853 ) ( 4,088 )

Exercise of common stock options — — — — — — 418,033 — 7 — 7

Share-based compensation — — — — — — — — 125 — 125

Net loss — — — — — — — — — ( 14,113 ) ( 14,113 )

Shares Par Value

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

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

Exercise of common stock options and vesting of restricted stock units — — — — — — 3,781,023 ( 2 ) 593 — 591

Exercise of common stock options and vesting of restricted stock units, net 3,781,023 ( 2 ) 593 — 591

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

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

Issuance of common stock for acquisition 5,500,000 1 16,114 — 16,115

Exercise of common stock options and vesting of restricted stock units, net 857,330 — ( 78 ) — ( 78 )

Share-based compensation — — 6,979 — 6,979

Net loss — — — ( 153,357 ) ( 153,357 )

Balance at December 31, 2022 179,826,309 $ 18 $ 397,810 $ 25,746 $ 423,574

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

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Share-based compensation 6,979 4,922 294

Provision for doubtful accounts 114 — —

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

Change in fair value of contingent consideration liability — — ( 27 )

Change in fair value of warrant liability — — ( 363,299 )

Acquired in-process research and development (Note 3)

Change in operating assets and liabilities, net of effects of business acquisition:

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Cash Flows from Investing Activities

Purchase of property and equipment ( 2,380 ) ( 311 ) ( 349 )

Purchase of property and equipment and other ( 2,885 ) ( 2,380 ) ( 311 )

Proceeds from sale of property and equipment 152 45 22

Purchase of in-process research and development ( 14,428 ) — —

Payments for security deposit, net — ( 29 ) —

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Proceeds from exercise of common stock options 79 591 121

Net cash provided by financing activities 15,898 644,504 16,609

Taxes paid related to net share settlement of equity awards ( 157 ) — —

Net cash (used in) provided by financing activities ( 78 ) 15,898 644,504

Net (decrease) increase in cash and cash equivalents and restricted cash ( 138,977 ) ( 130,595 ) 383,420

Cash and cash equivalents, beginning of period 389,705 6,285 1,097

Cash and cash equivalents and restricted cash, beginning of period 259,110 389,705 6,285

Cash and cash equivalents and restricted cash, end of period $ 120,133 $ 259,110 $ 389,705

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Hyliion Holdings Corp.

and its wholly-owned subsidiary design and develop 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 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 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.

is a Delaware corporation headquartered in Cedar Park, Texas.

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

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

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

The Company’s hybrid system 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 (“Hybrid”).

The Hypertruck ERX TM system utilizes 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 when fueled by renewable natural gas, and operate fully electric when needed.

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

The Company recently acquired new fuel agnostic capable generator technology with which it plans to develop and commercialize as the Hypertruck KARNO.

Basis of Presentation and Principles of Consolidation

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The consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the rules and regulations of the Unites States Securities and Exchange Commission (“SEC”).

Any reference in these footnotes to the applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Financial Accounting Standards Board (“FASB”).

Certain prior period balances have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes.

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At December 31, 2020, all outstanding warrants were either exercised or redeemed, with gross proceeds of $ 140.8 million raised, of which $ 16.3 million was collected during the first quarter of 2021 (see Note 9).

At December 31, 2021, the Company had a cash and cash equivalents balance of $ 258.4 million and total investments of $ 299.0 million.

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

At December 31, 2022, the Company had total equity of $ 423.6 million, inclusive of cash and cash equivalents of $ 119.5 million and total investments of $ 302.3 million.

Based on this, the Company has sufficient funds to continue to execute its business strategy for the next twelve months from the issuance date of the financial statements included in this Annual Report on Form 10-K.

Summary of Significant Accounting Policies

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 elected not to opt out of such extended transition period.

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 became a large accelerated filer and no longer qualified as an emerging growth company on December 31, 2021, the end of our current fiscal year.

Accordingly, we 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 previously elected to defer adoption of any new or revised accounting standards under the provisions of the JOBS Act.

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 revenue recognition, inventory, warranties, income taxes valuation of share-based compensation, including the fair value of common stock prior to the Business Combination.

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

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.

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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.

In mid-March 2020, U.S.

State Governors, local officials and leaders outside of the U.S.

In mid-March 2020, United States (“U.S.”) State Governors, local officials and leaders outside of the U.S.

began ordering various “shelter-in-place” orders, which have had various impacts on the U.S.

and global economies.

This has required greater use of estimates and assumptions in the preparation of the 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 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.

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

The lingering impacts of the coronavirus pandemic primarily include ongoing shortages in the transportation industry supply chain.

Segment Information

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The Company operates as a single operating segment.

The Company’s CODM is the chief executive officer, who has ultimate responsibility for the operating performance of the Company and the allocation of

The Company’s CODM is the chief executive officer, who has ultimate responsibility for the operating performance of the Company and the allocation of resources.

The CODM uses cash flows as the primary measure to manage the business and does not segment the business for internal reporting or decision making.

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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.

Cash equivalents are carried at cost, which approximates fair value.

The Company maintains cash in excess of federally insured limits at financial institutions.

The Company makes such deposits with entities it believes are of high credit quality and has not incurred any losses related to these balances to date.

Management believes its credit risk, with respect to the financial institutions to be minimal.

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 consolidated statements of cash flows are summarized as follows:

The Company has provided its corporate headquarters lessor with a letter of credit for $ 0.7 million to secure the performance of the Company's 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 as presented in the consolidated statements of cash flows is summarized as follows:

December 31, 2022 December 31, 2021 December 31, 2020 December 31, 2019

Cash and cash equivalents $ 119,468 $ 258,445 $ 389,705 $ 6,285

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

Total presented in the consolidated statements of cash flows $ 259,110 $ 389,705 $ 6,285 $ 1,097

Restricted cash included in other assets 665 665 — —

$ 120,133 $ 259,110 $ 389,705 $ 6,285

Accounts Receivable

Accounts receivable are stated at a 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 management’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 December 31, 2021 and 2020, accounts receivable included amounts receivable from customers of $ 45.0 thousand and nil , respectively.

At December 31, 2021 and 2020, there was no allowance for doubtful accounts required based on management’s evaluation.

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 and other pertinent factors.

At December 31, 2022 and 2021, accounts receivable included amounts receivable from customers of $ 1.1 million and $ 45.0 thousand, respectively.

At December 31, 2022 and 2021, allowance for doubtful accounts on customer receivables were $ 0.1 million and nil , respectively.

The portion of our net accounts receivable from significant customers is summarized as follows:

2022 2021 2020

Customer A 82 % 100 % — %

Customer B — — —

Customer C 12 — —

94 % 100 % — %

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses of Financial Instruments , which, together with subsequent amendments, amends the requirement on the measurement and recognition of expected credit losses for financial assets held to replace the incurred loss model for financial assets measured at amortized cost and require entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts.

We adopted ASU 2016-13 during the year ended December 31, 2021 and there was no material impact on the consolidated financial statements.

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.

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

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 is included in interest income.

Interest on securities classified as held-to-maturity is included in interest income.

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 an investment 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.

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 (expense) and a new cost basis in the investment is established.

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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 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:

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

Inventory is comprised of raw materials, work in process and finished goods, using the moving-average cost method.

Inventory is comprised of raw materials, work in process and finished goods and includes the cost of raw materials, freight, direct and indirect labor and allocations of other conversion costs and overhead.

Semi-truck inventory is valued using the specific identification cost method and all other inventory is valued using the moving-average cost method.

Inventory is stated at the lower of cost or net realizable value.

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This requires us to determine the estimated selling price of inventory less the estimated cost to convert the inventory on-hand into a finished product and other costs, which we determined includes the cost of installation and validation, to align with the transfer of control to customers in our revenue policy.

Inventory write-downs are first allocated to all other inventory with any residual allocated to semi-truck inventory.

Once inventory is written-down based on a lower of cost or net realizable value analysis, that amount establishes the new carrying value of inventory if written-down at year end, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

Interim impairments are reversed and reassessed at each reporting period.

During the fourth quarter of 2021, we changed from a research and development phase to a production phase for one of our products.

During the fourth quarter of 2021, we changed from a research and development phase to a production phase for our Hybrid system product.

Certain costs incurred for components acquired prior to our determination of reaching a commercial stage were previously expensed as research and development costs, resulting in zero cost basis for those components, which affected the moving-average price.

However, after inventory impairments recognized on December 31, 2021, inventory values and future inventory moving average prices will not be significantly affected by those zero cost items.

At December 31, 2021, our current projected costs of production for inventory items exceeds our sales prices.

We expect to reduce costs based on increased production volumes, negotiated volume discounts, economies of scale and learning curve effects.

Further, as we market these and other products, we may adjust our sales prices.

It is possible that our efforts to achieve these cost reductions may take longer than anticipated and result in negative margin in future periods.

Our current projected costs of production for inventory items exceeds our sales prices, and as a result of impairments, costs recognized on sales in subsequent periods will be lower until the impaired inventory has been sold or otherwise disposed.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets include prepaid insurance, rent, supplies and amounts owed to the Company from the Company’s transfer agent (see Note 8) which are expected to be recognized, received or realized within the next 12 months.

Prepaid expenses and other current assets include prepaid insurance, rent and supplies, which are expected to be recognized, received or realized within the next 12 months.

Property and Equipment, Net

Property and equipment, net is stated at cost less accumulated depreciation, or if acquired in a business combination, at fair value at the date of acquisition.

Property and equipment, net is stated at cost less accumulated depreciation, or if acquired in a business combination, at allocated fair value at the date of acquisition.

Depreciation is calculated using the straight-line method, based upon the following estimated useful lives:

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When property and equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss on the disposition is recorded in the consolidated statement of operations as a component of other income (expense).

All long-lived assets are located in the United States.

Intangible Assets, Net

Intangible assets consist of developed technology and a non-compete agreement and are amortized over their estimated useful life which range from three to six years .

Intangible assets consist of developed technology and a non-compete agreement and are amortized over their estimated useful lives which range from three to six years .

Impairment of Long-Lived Assets

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If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value.

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

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;

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

Revenue is comprised of sales of Hybrid eX Powertrains for long haul “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 eX Powertrain onto the customers’ vehicle.

Revenue is comprised of sales of Hybrid systems for Class 8 semi-trucks, Class 8 semi-trucks outfitted with Hybrid systems 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 year.

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

We recognize revenue on Hybrid system sales and Class 8 semi-trucks outfitted with Hybrid systems upon delivery to, and acceptance of the vehicle by, the customer, which is when control transfers.

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

We do not generally recognize credit losses due to the timing of customer payment shortly after delivery.

The sale of a Hybrid eX Powertrain 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 eX Powertrain with the customer’s vehicle.

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

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 a customer from the transaction price of contracts.

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.

Such deposits were immaterial at December 31, 2022 and 2021.

When a Class 8 semi-truck outfitted with a Hybrid system is resold to a customer, judgment is required to determine if we are the principal or agent in the arrangement.

We consider factors such as, but not limited to, which entity has the primary responsibility for fulfilling the promise to provide the specified good or service, which entity has inventory risk before the specified good or service has been transferred to a customer and which entity has discretion in establishing the price for the specified good or service.

We have determined that we are the principal in transactions involving the resale of Class 8 semi-trucks outfitted with the Hybrid system.

The disaggregation of our revenue sources is summarized as follows and is attributable to the U.S.:

Year Ended December 31,

2022 2021 2020

Hybrid systems and other $ 1,082 $ 60 $ —

Class 8 semi-truck prepared for Hybrid system upfit 1,024 140 —

Total product sales and other $ 2,106 $ 200 $ —

The portion of our revenues from significant customers is summarized as follows:

Year Ended December 31,

2022 2021 2020

Customer A 60 % 100 % — %

Customer B 10 — —

70 % 100 % — %

We determine if an arrangement is a lease at inception of the contract.

Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and operating lease liabilities, net of current portion in the accompanying consolidated balance sheets.

Finance leases are included in property and equipment, net, current portion of

long-term debt, and long-term debt, net of current portion in the accompanying consolidated balance sheets.

We have lease agreements with lease and non-lease components, and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component.

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The Company uses the implicit rate when readily determinable.

The Company has entered into operating leases for corporate offices having initial lease terms of one to eight years .

The Company has entered into finance leases primarily for vehicles and equipment, having initial terms of three years .

The Company’s real estate leases may include one or more options to renew, with the renewal extending the lease term for an additional one to five years .

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These agreements also contain non-lease components related to certain stand-ready services where control transfers over time over the same period and based on the same pattern as the lease component.

Because the Company has determined the lease component is the most predominant component of the arrangement and the timing and pattern of transfer for the lease and non-lease components associated with the lease component are the same, the Company has decided to elect the practical expedient not to separate the lease and non-lease component and accounts for the entire arrangement under ASC 842.

Because the Company has determined the lease component is the most predominant component of the arrangement and the timing and

pattern of transfer for the lease and non-lease components associated with the lease component are the same, the Company has decided to elect the practical expedient not to separate the lease and non-lease component and accounts for the entire arrangement under ASC 842.

The trial and evaluation agreements contain only variable payments not based on an index or rate as a result of refund provisions within those contracts.

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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.

The warranty period typically extends for the lesser of two years or 200,000 miles following transfer of control and solely relates 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.

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Marketing, promotional and advertising costs are expensed as incurred and are included as an element of selling, general and administrative expense in the consolidated statement of operations.

Marketing, promotional and advertising costs were $ 1.6 million, $ 0.3 million and nominal for the years ended December 31, 2021, 2020 and 2019, respectively.

Marketing, promotional and advertising costs were $ 1.1 million, $ 1.6 million and $ 0.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Research and Development Expense

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If factors change, and we utilize different assumptions including the probability of achieving performance conditions, share-based compensation cost on future award grants may differ significantly from share-based compensation cost recognized on past award grants.

Future share-based compensation cost will increase to the extent that we grant additional share-based awards to employees and non-employees.

Future share-based compensation cost will increase to the extent that we grant additional share-based awards to employees and nonemployees.

If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate any remaining unearned share-based compensation cost or incur incremental cost.

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Recent Accounting Pronouncements Issued

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

We adopted ASU 2016-13 during the year ended December 31, 2021 and there was no material impact on the consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance , to increase transparency of government assistance which requires annual disclosures about transactions with a government entity that are accounted for by applying a grant or contribution accounting model by analogy.

The pronouncement is effective for fiscal years beginning after December 15, 2021.

The Company adopted ASU 2021-10 for the year ended December 31, 2022 with no material impact and updated its related disclosures.

In September 2022, we acquired certain assets (the “Acquired Asset”) of General Electric Company's GE Additive business (the “Acquisition”).

The Acquired Assets include new hydrogen and fuel agnostic capable generator technology (“KARNO”).

The Acquisition did not meet the definition of a business combination and was accounted for as an asset acquisition.

No goodwill was recognized and payments allocated to in-process research and development (“IPR&D”) were recorded in research and development expense as there was no alternative future use.

Total consideration for the Acquisition was $ 32.3 million comprised of $ 15.0 million in cash, 5,500,000 shares of common stock valued at $ 16.1 million on the closing date and $ 1.2 million in direct transaction costs.

$ 3.6 million was recorded as property and equipment with expected useful lives of primarily five years and $ 28.8 million was recorded as research and development expense.

All assets were valued using level 3 inputs, with property and equipment valued using a market approach and IPR&D valued using an income approach based on Company management’s projections.

The cash component of the consideration was recorded in the statement of cash flows and allocated between purchase of property and equipment and purchase of IPR&D under investing activities.

Reverse Recapitalization

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• issued and outstanding share of Legacy Hyliion’s redeemable, convertible preferred stock, was converted into shares of Legacy Hyliion common stock based on a one -to-one ratio (see Note 9).

The Business Combination was accounted for with a retrospective application of the Business Combination that results in 34,799,813 shares of redeemable, convertible preferred stock converting into the same number of shares of Legacy Hyliion common stock.

The Business Combination was accounted

for with a retrospective application of the Business Combination that results in 34,799,813 shares of redeemable, convertible preferred stock converting into the same number of shares of Legacy Hyliion common stock.

• convertible note payable, plus accrued paid-in-kind interest, was converted into an aggregate 2,336,235 shares of Legacy Hyliion common stock at the predetermined discount (see Note 5).

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Transaction costs incurred in connection with the Business Combination totaled approximately $ 45.0 million, which were charged to additional paid-in capital for the year ended December 31, 2020.

The carrying value of debt at December 31, 2021 and 2020, is summarized as follows:

Paycheck Protection Program loan $ — $ 908

Finance lease obligations — 49

Less current portion — ( 49 )

Debt, net of current portion $ — $ 908

During the year ended December 31, 2018, the Company issued a convertible note payable in exchange for cash totaling $ 5.0 million (the “2018 Note”).

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In addition to the above embedded features, the Company agreed that the holder of the 2018 Note would be the Company’s preferred supplier for certain components or products that the holder sells.

See Note 16 for further details on this agreement.

The Company assessed the embedded features within the 2018 Note and determined that the automatic conversion feature upon next equity financing and optional conversion feature upon change in control (share-settled redemption features) and the additional interest feature met the definition of a derivative and were not clearly and closely related to the host contract and required separate accounting.

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(a) Automatic or optional (for one of the Initial 2019 Notes) conversion upon the next equity financing of at least $ 15.0 million in proceeds (the “Next Equity Financing”).

The conversion price was dependent upon the pre-money valuation of the Company in connection with the next equity financing, with the conversion price set at a 25 % discount on the next equity

financing price if the pre-money valuation was $ 100.0 million or less, or 25 % multiplied by the quotient of $ 100.0 million divided by the pre-money valuation if it was greater than $ 100.0 million.

The conversion price was dependent upon the pre-money valuation of the Company in connection with the next equity financing, with the conversion price set at a 25 % discount on the next equity financing price if the pre-money valuation was $ 100.0 million or less, or 25 % multiplied by the quotient of $ 100.0 million divided by the pre-money valuation if it was greater than $ 100.0 million.

(b) Optional conversion (for one of the Initial 2019 Notes) upon a subsequent equity financing if the holder did not elect to convert upon the Next Equity Financing, at the price that was set by the subsequent equity financing (no discount).

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The December 2019 Note was only prepayable with the consent of the holder.

The December 2019 Note was secured by substantially all of the assets of the Company, subordinate to the security interest held by one of the Initial 2019 Note holders.

The December 2019 Note was

secured by substantially all of the assets of the Company, subordinate to the security interest held by one of the Initial 2019 Note holders.

The December 2019 Note included the following embedded features:

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(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 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.

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The convertible notes would convert into shares of common stock at a conversion price equal to (i) the valuation of the Company established in connection with such next financing, divided by (ii) the total number of shares of capital stock of the Company (on a fully diluted and as-converted basis), as established in the original respective convertible notes.

This conversion price would then be discounted based on the negotiated conversion discounts that were established in the

noteholders’ original convertible notes.

This conversion price would then be discounted based on the negotiated conversion discounts that were established in the noteholders’ original convertible notes.

The amended terms of the Note Amendments were determined to be clarifications of the existing terms and did not result in substantially different terms.

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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.

Finance Lease Obligations

The Company’s debt arising from finance lease obligations primarily relates to vehicles and equipment.

See Note 10 for future maturities of finance lease obligations.

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

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Corporate bonds and notes 213,088 76 ( 3,344 ) 209,820

Total held-to-maturity investments $ 299,004 $ 5 $ ( 1,106 ) $ 297,903

$ 302,308 $ 112 $ ( 4,461 ) $ 297,959

Fair Value Measurements as of

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Losses Fair Value

treasury bills $ 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

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

December 31, 2022 December 31, 2021

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Due after one year through five years 108,568 106,865 180,217 179,189

Total held-to-maturity securities $ 299,004 $ 297,903 $ 237,851 $ 237,772

$ 302,308 $ 297,959 $ 299,004 $ 297,903

Fair Value Measurements

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

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

Fair Value Measurements as of December 31, 2022

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Corporate bonds and notes — 209,820 — 209,820

Total assets $ 259,110 $ 297,903 $ — $ 557,013

$ 120,133 $ 297,959 $ — $ 418,092

Fair Value Measurements as of December 31, 2021

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

Restricted cash 665 — — 665

Held-to-maturity investments:

treasury bills — 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 rollforward of the Company’s Level 3 instruments at December 31, 2020 is summarized as follows*:

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Balance at December 31, 2020 $ —

* There were no Level 3 instruments outstanding during the year ended December 31, 2021.

* There were no Level 3 instruments outstanding during the years ended December 31, 2022 or 2021.

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

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Finished goods 74 110

Total $ 114 $ 132

We write-down inventory for any excess or obsolete inventories or when we believe that the net realizable value of inventories is less than the carrying value.

During the year ended December 31, 2021, we recorded write-downs of $ 2.3 million, included in cost of revenues.

During the years ended December 31, 2020 and 2019, we were in a research and development phase, and did not record substantial inventory amounts or cost of sales and related adjustments.

During the years ended December 31, 2022 and 2021, we recorded write-downs of $ 5.6 million and $ 2.3 million, respectively, included in cost of revenues.

During the year ended December 31, 2020, we were in a research and development phase for all of our products, and did not capitalize substantial inventory amounts or record cost of sales and related adjustments.

Capital Structure

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Forward Purchase Warrants:

Simultaneous with the consummation of the Business Combination in October 2020, 875,000 Forward Purchase Warrants to purchase shares of common stock were issued in connection with the forward purchase

agreement (See Note 3).

The Forward Purchase Warrants had terms and provisions identical to those of the Public Warrants, including as to exercise price, exercisability and exercise period, except that the Forward Purchase Warrants are subject to transfer restrictions and certain registration rights.

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Only stock options have been awarded to employees, consultants and advisors under the 2016 Plan.

Legacy Options converted into an option to purchase a number of shares of common stock equal to the product of the number of shares of Legacy Hyliion common stock and the Exchange Ratio at an exercise price per share equal to the exercise price of the Legacy Option divided by the Exchange Ratio.

the Legacy Option divided by the Exchange Ratio.

Each exchanged option is governed by the same terms and conditions applicable to the Legacy Option prior to the Business Combination.

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This model incorporates certain assumptions for inputs including an expected volatility in the market value of the underlying common stock, expected term, a risk-free interest rate, and the expected dividend yield of the underlying common stock.

The following assumptions were used for options issued in the following periods*:

Year Ended December 31,

The following assumptions were used for options issued during the year ended December 31, 2020*:

Expected volatility 70.0 %

Expected term 6.1 years 6.1 - 10 years

Expected term 6.1 years

Risk-free interest rate 1.7 %

Expected dividend yield 0.0 %

* There were no options issued during the year ended December 31, 2021.

* There were no options issued during the years ended December 31, 2022 and 2021.

• Expected volatility :

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Outstanding at December 31, 2020 6,982,497 0.16 7.8 years

Granted 2,797,828 $ 0.23

Exercised ( 3,558,201 ) 0.17

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No awards were granted under the 2020 Plan prior to the year ended December 31, 2021, and no stock options have been granted under the 2020 Plan.

Employee and nonemployee RSUs for which a grant date has been established generally vest over three to four years from the date of grant.

These awards become available to the recipient upon the satisfaction of a vesting condition based on a period of service, and performance conditions for certain awards.

Employee and director RSUs for which a grant date has been established generally vest over three to four years from the date of grant.

These awards become available to the recipient upon the satisfaction of a vesting condition based on a period of service, and performance conditions (for certain awards to employees).

Activity in the 2020 Plan for the years ended December 31, 2022, 2021 and 2020 is summarized as follows:

Number of Units Weighted Average Grant Date Fair Value (in Dollars)

Nonvested at December 31, 2020 — $ —

Unvested at December 31, 2020 — $ —

1,858,236 11.24

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( 124,993 ) 12.09

Nonvested at December 31, 2021 3

Unvested at December 31, 2021 3

1,556,794 11.01

1 Excludes 1,985,914 shares issued where no accounting grant date has been established.

2 Excludes 75,000 shares issued and forfeited where no accounting grant date has been established.

3 Excludes 1,910,914 shares issued and nonvested where no accounting grant date has been established.

Share-based compensation expense under the 2020 Plan for the years ended December 31, 2021, 2020 and 2019 was $ 4.8 million, nil and nil , respectively.

The fair value of RSUs that vested during the years ended December 31, 2021, 2020 and 2019 was $ 1.6 million, nil , and nil , respectively.

2,504,939 4.10

Vested ( 470,426 ) 11.07

( 822,207 ) 8.44

Unvested at December 31, 2022 6

2,769,100 $ 5.51

1 Excludes 1,985,914 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established.

2 Excludes 75,000 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established.

3 Excludes 1,910,914 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established.

4 Excludes 204,167 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established.

5 Excludes 130,000 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established.

6 Excludes 1,336,667 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established.

Share-based compensation expense under the 2020 Plan for the years ended December 31, 2022, 2021 and 2020 was $ 6.9 million, $ 4.8 million and nil , respectively.

The fair value of RSUs that vested during the years ended December 31, 2022, 2021 and 2020 was $ 1.7 million, $ 1.6 million, and nil , respectively.

There was $ 10.2 million of unrecognized compensation expense related to the 2020 Plan at December 31, 2022, which is expected to be recognized over the remaining vesting periods, subject to forfeitures, with a weighted-average period of 1.9 years.

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

In addition, the Company enters into arrangements whereby portions of the leased premises are subleased to third parties and are classified as operating leases.

The Company enters into operating leases for its corporate office, temporary offices, vehicles and equipment.

In addition, the Company may enter into arrangements whereby portions of the leased premises are subleased to third parties and are classified as operating leases.

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

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The Company accounted for this extension as a lease modification and recorded a decrease to the operating lease ROU asset and lease liability.

The lease amendment includes the option to extend the term for up to two consecutive terms of five years , which is not reasonably certain to be exercised at the modification date.

The lease amendment includes the option to extend the term for up to two consecutive terms of five years , which was not reasonably certain to be exercised at the modification date.

The following table provides a summary of the components of lease income, costs and rent, which are included within research and development and selling, general and administrative expense:

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Total finance lease costs $ — $ 75 $ 133

Finance lease ROU assets were nil and $ 0.3 million at December 31, 2021 and 2020 and accumulated amortization was nil and $ 0.1 million as of December 31, 2021 and 2020, respectively.

The following table provides the weighted-average lease terms and discount rates used for the Company’s operating and finance leases:

The following table provides the weighted-average lease terms and discount rates used for the Company’s operating leases:

Weighted-average remaining lease term:

Operating leases 4.3 years 5.3 years

Finance leases 0.0 years 0.3 years

Weighted-average discount rate:

Operating leases 7.1 % 7.1 %

Finance leases — % 14.2 %

The following table provides a summary of lease liability maturities for the next five years and thereafter at December 31, 2021:

Leases Finance

2022 $ 657 $ —

Thereafter 822 —

The following table provides a summary of operating lease liability maturities for the next five years and thereafter at December 31, 2022:

Total minimum lease payments 8,696

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Leasehold improvements 1,002 1,077

Demo fleet systems — 263

Office furniture and fixtures 162 155

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Developed technology 6 years 1.4 years $ 583 $ ( 445 ) $ 138

Non-compete 3 years 0.0 years 5 ( 5 ) —

Internal-use software 3 years 3.0 years 66 ( 4 ) 62

$ 649 $ ( 449 ) $ 200

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Developed technology 6 years 2.4 years $ 578 $ ( 343 ) $ 235

Non-compete 3 years 0.4 years 5 ( 4 ) 1

$ 578 $ ( 343 ) $ 235

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Accrued compensation and related benefits 4,773 3,460

Accrued liability for warrants exercised but not settled — 4,282

Other accrued liabilities 928 618

$ 11,535 $ 7,759

The change in warranty liability for the years ended December 31, 2021 and 2020 is summarized as follows:

The change in warranty liability for the years ended December 31, 2022 and 2021 is summarized as follows and included within accrued expenses and other current liabilities and other liabilities in the consolidated balance sheets:

Year ended December 31,

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Accrual for warranties issued 644 44

Net changes in accrual related to pre-existing warranties ( 7 ) —

Warranty charges ( 154 ) —

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Operating lease obligation 1,537 1,815

Section 174 expenditures 14,840 —

R&D tax credit 4,714 693

Other 3,148 1,908

Intangible assets, net 6,001 —

Property and equipment, net — 13

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Intangible assets, net — 49

Property and equipment, net 83 —

Total deferred tax liabilities 1,442 1,673

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The Company had federal net operating loss carryforwards of $ 229.5 million and $ 187.6 million at December 31, 2022 and 2021, respectively.

At December 31, 2021, $ 10.5 million of this amount will begin to expire in 2036 and the remaining $ 177.1 million have an indefinite carryforward period.

At December 31, 2022, $ 10.5 million of this amount will begin to expire in 2036 and the remaining $ 219.0

million has an indefinite carryforward period.

The Company had state net operating loss carryforwards of $ 12.5 million and $ 12.5 million at December 31, 2022 and 2021, respectively, that will begin to expire beginning in 2036 and research and development credits of $ 4.1 million that will begin to expire in 2037.

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The tax returns for years 2018 and thereafter remain open for examination.

However, the taxing authorities have the ability to review the propriety of tax losses created in closed tax years to the extent such losses are utilized in an open tax year.

Commitments and Contingencies

Economic Incentive Agreement

During the year ended December 31, 2018, the Company entered into an agreement with the Cedar Park Economic Development Corporation ("EDC"), whereby the Company will receive grants from the EDC contingent upon the Company fulfilling and maintaining certain corporate office lease and employment requirements.

During the year ended December 31, 2018, the Company entered into an agreement with the Cedar Park Economic Development Corporation (“EDC”), whereby the Company will receive cash grants from the EDC contingent upon the Company fulfilling and maintaining certain corporate office lease and employment requirements.

The specified requirements must be met on or before specific measurement dates and maintained throughout the term of the agreement, which expires effective December 31, 2025.

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Under the agreement, the EDC has the right to file a security interest to all assets of the Company.

This security interest is subordinate to the holders of the convertible notes payable with security interests.

Legal Proceedings

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.

On September 28, 2020, the Company, then operating as TortoiseCorp, held a special meeting of the stockholders of the Company (the “Special Meeting”), to approve the proposed Business Combination with Hyliion Inc.

and certain other matters relating thereto.

Among them were several proposals to amend the TortoiseCorp’s certificate of incorporation (the “Old Charter”), including an amendment to increase the number of authorized shares of Class A common stock from 200,000,000 to 250,000,000 shares (the “Class A Increase Amendment”).

At the Special Meeting, all proposals presented, including the Class A Increase Amendment, were approved by a majority of the then-outstanding shares of the Company’s Class A common stock and Class B common stock, voting as a single class.

On October 1, 2020, the Business Combination closed and the Company’s restated certificate of incorporation (the “New Charter”), which gave effect to that amendment and certain other approved amendments and also reclassified the Company’s Class A common stock into “common stock,” became effective.

A recent ruling by the Delaware Court of Chancery (the “Court of Chancery”) has created uncertainty as to whether Section 242(b)(2) of the Delaware General Corporation Law (“DGCL”) would have required the Class A Increase Amendment proposal to be approved by separate votes of the Class A common stock and Class B common stock.

The Company continues to believe that a separate vote of Class A common stock was not required to approve the Class A Increase Amendment.

In light of this recent ruling, however, the Company filed a petition (the “Petition”) in the Court of Chancery pursuant to Section 205 of the DGCL on February 13, 2023 seeking validation of the Class A Increase Amendment and the validation and declaration of effectiveness of the New Charter (including its filing and effectiveness) which gave effect to the Class A Increase Amendment, and for the avoidance of doubt the validation of the reclassification of the Company's Class A common stock into “common stock” pursuant to the New Charter, in each case as of October 1, 2020.

Section 205 of the DGCL permits the Court of Chancery, in its discretion, to ratify and validate potentially defective corporate acts after considering a variety of factors.

On February 14, 2023, the Court of Chancery granted the motion to expedite and set a hearing date on the Petition of March 6, 2023.

From the date of the Business Combination and through the issuance date of the financial statements included in this Annual Report on Form 10-K the total issued and potential dilutive shares of the Company have not exceeded the previously authorized 200,000,000 .

If the Company is not successful in the Section 205 proceeding, the uncertainty with respect to its capitalization resulting from the Delaware Court of Chancery’s ruling referenced above could have a material adverse impact on the Company, including on its ability to issue stock-based compensation to its employees, directors and officers, pursue strategic transactions or complete future equity or debt financing transactions, until the underlying issues are definitively resolved.

Net (Loss) Income Per Share

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6,647,112 6,625,597 —

* Potential common shares from unvested restricted stock units include 1,910,914 , nil and nil shares for the years ended December 31, 2021, 2020 and 2019, respectively, where no accounting grant date has been established.

* Potential common shares from unvested restricted stock units for the years ended December 31, 2022, 2021 and 2020 include 1,336,667 , 1,910,914 and nil shares, respectively, where no accounting grant date has been established.

Supplemental Cash Flow Information

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Operating cash flows from operating leases $ ( 1,921 ) $ ( 1,386 ) $ ( 1,446 )

Operating cash flows from finance leases $ ( 1 ) $ ( 29 ) $ ( 50 )

Right-of-use assets obtained in exchange for lease obligations $ — $ 3,410 $ 1,007

1 unchanged sentence

2022 2021 2020

Supplemental disclosures of noncash investing and financing information:

Supplemental disclosure of noncash investing and financing activities:

Warrants exercised where proceeds are included within prepaid expenses and other current assets $ — $ — $ 11,978

Settlement of convertible notes payable and convertible note payable derivative liabilities $ — $ — $ 44,039

Redemption of unexercised warrants included within prepaid expenses and other current assets $ — $ ( 3 ) $ —

Acquisitions of property and equipment included in accounts payable $ 246 $ — $ —

Common stock issued for purchase of assets $ 16,115 $ — $ —

Acquisitions of property and equipment and intangible assets included in accounts payable and other $ 59 $ 246 $ —

Retirement Plan

The Company has adopted a 401(k) plan to provide all eligible employees a means to accumulate retirement savings on a tax-advantaged basis.

The 401(k) plan requires participants to be at least 21 years old.

The 401(k) plan requires participants to be at least 21 years old and have 30 days of service.

Plan participants may make elective contributions up to the maximum percentage of compensation and dollar amount allowed under the Internal Revenue Code and are always 100% vested in their elective contributions.

The Company can make discretionary employer contributions at its election and did not make any contributions during the years ended December 31, 2021, 2020 and 2019.

The Company has also established a Profit Sharing plan in which the employer may make contributions on the employee’s behalf (“discretionary employer contributions”).

The Company did not make any Profit Sharing contributions during the years ended December 31, 2022, 2021 and 2020.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

As previously reported in our Amended Annual Report on Form 10-K for the year ended December 31, 2020, on October 1, 2020, after the recommendation of the Audit Committee of the Board, the Board approved the engagement of Grant Thornton LLP (“Grant Thornton”) as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the year ending December 31, 2020.

Grant Thornton served as the independent registered public accounting firm of Legacy Hyliion prior to the Business Combination.

Accordingly, WithumSmith+Brown, PC (“Withum”), the Company’s independent registered public accounting firm prior to the Business Combination, was informed on October 1, 2020 that it would be replaced by Grant Thornton as the Company’s independent registered public accounting firm following completion of the Company’s review of the quarter ended September 30, 2020, which consists only of the accounts of the pre-Business Combination special purpose acquisition company, TortoiseCorp.

Withum’s report of independent registered public accounting firm, dated March 20, 2020, on the Company’s balance sheets as of December 31, 2019 and 2018, the related statements of operations, stockholders’ equity and cash flows for the year ended December 31, 2019 and for the period from November 7, 2018 (inception) to December 31, 2018, and the related notes to the financial statements (collectively, the “financial statements”) did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles other than the Company’s ability to continue as a going concern due to Company’s obligation to either complete a business combination by the close of business on March 4, 2021, or cease all operations except for the purpose of winding down and liquidating.

During the period from November 7, 2018 (inception) to December 31, 2019 and the subsequent period through October 1, 2020, there were no:

(i) disagreements with Withum on any matter of accounting principles or practices, financial statement disclosures or audited scope or procedures, which disagreements if not resolved to Withum’s satisfaction would have caused Withum to make reference to the subject matter of the disagreement in connection with its report or (ii) reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

During the period from November 7, 2018 (inception) to December 31, 2018, and the interim period through October 1, 2020, the Company did not consult Grant Thornton with respect to either (i) the application of accounting principles to a specified transaction, either completed or proposed;

or the type of audit opinion that might be rendered on the Company’s financial statements, and no written report or oral advice was provided to the Company by Grant Thornton that Grant Thornton concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue;

or (ii) any matter that was either the subject of a disagreement, as that term is described in Item 304(a)(1)(iv) of Regulation S-K under the Exchange Act and the related instructions to Item 304 of Regulation S-K under the Exchange Act, or a reportable event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange Act.

The Company provided Withum with a copy of the disclosures made by the Company in connection with this change and requested that Withum furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made by the Company in response to Item 304(a) of Regulation S-K under the Exchange Act and, if not, stating the respects in which it does not agree.

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-K

Item 8. Financial Statements and Supplementary Data