What changed in this filing

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Item 1. Business

2024-02-13 compared with 2023-02-28 · 422 added, 592 removed, 183 unchanged (85% of the section changed)

Hyliion is a Delaware corporation headquartered in Cedar Park, Texas, and became a NYSE listed company as a result of the merger consummated pursuant to the terms of the Business Combination Agreement, dated June 18, 2020, between Tortoise Acquisition Corp.

and each of the shareholders of Hyliion Inc., a Delaware corporation (the “Business Combination”).

Our mission is to be the leading provider of electrified solutions for the commercial vehicle industry as well as other industries.

Our goal is to reduce the carbon intensity and greenhouse gas (“GHG”) emissions in the transportation sector by providing electrified solutions for Class 8 vehicles that both aim to reduce the cost of operation and promote the usage of existing fueling infrastructure.

Our current products and products under development utilize control software, data analytics, battery systems, fully integrated electric motors, and power electronics to produce our electrified powertrain systems.

We currently offer the Hyliion Hybrid (“Hybrid”) system, which is an electrified powertrain system that augments existing Class 8 semi-trucks and aims to improve vehicle performance or reduce fuel usage, depending on application.

The Hybrid system can either be installed on a new vehicle prior to entering service or retrofit onto an existing in-service vehicle.

This feature gives our customers the flexibility to continue using their preferred vehicle brands and maintain their existing fleet maintenance and operations strategies.

We began selling the Hybrid system in late 2021 and it has been installed on a variety of our customers’ commercial vehicles, utilizing multiple original equipment manufacturer (“OEM”) platforms.

Our Hybrid system deployments are with innovative fleets in the transportation and logistics sector and include a variety of duty cycles, use cases and geographical regions.

A common application is to install the Hybrid system on a compressed natural gas (“CNG”)-powered truck with a conventional drivetrain.

The Hybrid system aims to improve performance by giving a power boost to the CNG drivetrain when needed, along with regenerative braking and an optional fully electric auxiliary power system.

Across these customer installations, and over the entire Hyliion fleet, we have accumulated millions of real-world road miles on Class 8 semi-trucks.

We also plan to offer the Hypertruck ERX powertrain platform (“Hypertruck ERX system”), which is a complete electrified powertrain system leveraging an onboard CNG-fueled generator to supplement battery range to transform an OEM platform into a range-extended electric vehicle (“REEV”).

Both solutions aim to support our customers’ pursuit of sustainability and financial goals by reducing GHG emissions and operating costs while utilizing existing fueling infrastructure.

We plan to begin commercialization of the Hypertruck ERX system in late 2023 and our first application will be deployed on a Class 8 Peterbilt 579 sleeper semi-truck.

The Hypertruck ERX system leverages the experience and operating data from our Hybrid system to offer a solution to replace the traditional diesel or CNG powertrain installed in new vehicles.

Its onboard CNG generator functions as an electric range-extender, addressing the market need of having a fully electric drive truck that can travel long distance between refuels without relying on a broadly-distributed and reliable electric recharging network, as battery electric vehicles (“BEVs”) do.

The systems batteries are recharged by the onboard CNG generator, which when fueled by renewable natural gas (“RNG”), can offer commercial vehicle owners a net-carbon-negative-capable electrified powertrain option.

We believe CNG/RNG is the appropriate fuel source today, as it is cleaner and less expensive than diesel and broadly available.

Over time, other fuels are expected to become available in the future to reduce emissions, including hydrogen.

Therefore, we have showcased a multistage roadmap that starts with utilizing a CNG/RNG generator and evolves into offering hydrogen-based solutions as well.

The control software driving the Hypertruck system is designed to be easily adaptable to different fuel and generator types in accordance with customer and regulatory requirements, thereby reducing future capital investment and time to market.

For long-haul trucking, an electric powertrain with a CNG-fueled range extender generator is preferable today to a pure BEV due to both the comparable cost of fuels and existing availability of CNG fueling infrastructure compared to electric battery charging infrastructure.

Class 8 semi-trucks can currently be refueled with CNG through an existing, geographically diverse, public and truck-accessible network of natural gas refueling stations established across North America.

Globally, RNG, CNG and liquified natural gas (“LNG”) are also used widely used for land-based transport and trucking.

We therefore believe there is a greater opportunity for more rapid adoption of our electrified powertrain solutions across the U.S., Europe, and other countries compared to pure electric solutions, because of the extended range available between refueling events and due to the greater availability of refueling infrastructure compared to other electrified solutions.

In September 2022 we acquired assets including new hydrogen and fuel-agnostic-capable generator technology from General Electric Company's GE Additive business.

The KARNO generator emerged out of GE’s long-running R&D investments in metal additive manufacturing across multiple industries and in areas such as generator thermal and performance design.

Initial testing indicates the KARNO generator is expected to comply with emissions standards of the California Air Resources Board

(“CARB”) and the U.S.

Environment Protection Agency (“EPA”), even when utilizing conventional fuels.

The technology is also expected to achieve a meaningful efficiency improvement over today’s conventional internal combustion engine (“ICE”) generators and could be more efficient than most available fuel cells.

We expect these efficiency improvements to in turn enable fuel cost reductions and improved vehicle range while reducing operating costs.

The technology should also provide for significant reductions in noise, vibration, moving parts and maintenance compared to conventional ICE generators.

The KARNO generator is expected to be capable of operating with over 20 different fuel types including hydrogen, natural gas, propane, ammonia and conventional fossil fuels.

The technology uses heat to drive a sealed linear generator to produce electricity.

The heat is produced by reacting fuels through flameless oxidation or by other heat sources including renewables.

We plan to initially release the Hypertruck ERX system, followed by a variant utilizing the fuel-agnostic Hyliion KARNO (“KARNO”) generator technology (“Hypertruck KARNO”), and a variant equipped with a hydrogen fuel cell generator (“Hypertruck Fuel Cell”).

Hyliion Holdings Corp.

is a Delaware corporation headquartered in Cedar Park, Texas, with research and development facilities in Cincinnati, Ohio, and listed on the NYSE, that designs and develops power generators for stationary and mobile applications.

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 was incorporated on November 7, 2018.

Hyliion is committed to creating innovative solutions that enable clean, flexible and modular electricity production while contributing positively to the environment in the energy economy.

In September 2022, we acquired assets including new hydrogen and fuel-agnostic-capable generator technology from General Electric Company’s GE Additive business (“KARNO generator”).

The KARNO generator is a fuel-agnostic power generation solution, enabled by additive manufacturing, that leverages a linear heat engine to generate electricity with significant improvements in efficiency, emissions and cost compared to conventional generators.

The Company’s primary focus is to provide distributed power generators that operate on various fuel sources to future-proof for an ever-changing energy economy.

Hyliion is addressing the commercial space first with a locally deployable generator that can offer prime power, backup power, peak demand reduction, renewables matching and power generation from waste fuels such as landfill and flare gas.

In the future, the Company plans to scale up its generator solution to address larger utility-scale power needs and to develop variants for household use and mobile applications such as vehicles and marine.

Additionally, the generator technology is well-suited to provide combined heat and power (“CHP”) in various stationary applications.

Strategic Business Developments

During the third quarter of fiscal year 2023 and prior, Hyliion offered the Hyliion Hybrid system (“Hybrid”), an electrified powertrain system that augments existing Class 8 semi-trucks to improve vehicle performance or reduce fuel usage, depending on application.

The Hybrid system could be installed on new vehicles prior to entering service, or retrofit onto existing in-service vehicles, allowing customers to use their preferred vehicle brands and maintain their existing fleet maintenance and operations strategies.

The Company began selling the Hybrid system in late 2021, with deployments to fleets in the transportation and logistics sector in a variety of duty cycles, use cases, and geographical regions.

The Company also continued development of its Hypertruck ERX powertrain platform (“Hypertruck ERX”), a complete electrified powertrain system leveraging an onboard compact natural-gas-fueled generator to supplement battery range to transform an OEM platform into a range extended electric vehicle.

Companies in the truck electrification space (including Hyliion) continue to face a number of challenges and headwinds as they develop and scale the production of new clean vehicles, and as customers deploy these vehicles in their fleets.

For Hyliion, these challenges have included, a slower-than-anticipated market transition to electric truck fleets, escalating component and production costs, new and evolving California Air Resources Board (“CARB”) mandates for fleet adoption of electric trucks, the need to reduce the cost and weight of the Hypertruck ERX platform, continued work by OEMs to de-content components that Tier 1 suppliers are providing, and the expectation that the Company will need to raise additional capital to address and overcome these challenges.

In light of these challenges to the business and other considerations, the Company’s board of directors (the “Board”), with the support of its expert advisors, explored a range of strategic alternatives for its electrified powertrain systems business.

At the conclusion of that strategic review in the fourth quarter of fiscal year 2023, the Board determined that discontinuing operating the electrified powertrain systems business and focusing on the development and commercialization of the Company’s fuel-agnostic KARNO generator technology would be the most effective use of the Company’s capital and in the best interests of the Company’s shareholders.

Hyliion intends to retain the powertrain technology, enabling the Company to explore a future use or sale of the technology.

Tangible assets include the first 30 Hypertruck ERX production trucks which Hyliion no longer plans to recognize revenue on, the Hypertruck Fuel Cell prototype truck that Hyliion successfully completed in the third quarter of fiscal 2023 in collaboration with Hyzon Motors, and other development trucks and equipment.

We expect to sell certain of these tangible assets.

Market Opportunity

Our solutions currently address Class 8 vehicles, with an intent to begin deployments in North America, and then potentially expanding to global markets outside of North America.

Based on ACT Research’s estimates, the North American Class 8 truck market is expected to average almost 300,000 new units per year between 2023 and 2027.

During that time, we expect the regulatory environment to further disincentivize the production and purchase of diesel-powered Class 8 vehicles.

Increased costs for diesel-powered Class 8 vehicles along with the fuel to operate them is expected to make electrified alternatives like the Hypertruck ERX system more favorable on a relative total cost of ownership (“TCO”) basis.

Similarly, we expect fleets to continue to be influenced by customer and other stakeholder demands to reduce emissions from their transportation operations, thus providing an additional catalyst to transition to low-emission vehicles in the Class 8 space.

We view existing plug-in commercial BEVs and commercial fuel cell electric vehicles (“FCEVs”) as unlikely to fulfill the fleet demand created by these factors in the near term, due to their range limitations and dependence on costly and scarce fueling infrastructure.

Current and anticipated regulations at the state and federal level are also expected to create greater demand for cleaner commercial vehicles, including zero emission vehicles (“ZEVs”) like BEVs and FCEVs and near-zero emission vehicles (“NZEVs”) like the Hypertruck ERX system.

For example, CARB has adopted an Advanced Clean Trucks (“ACT”) rule that requires heavy-duty vehicle manufacturers to produce and sell in California a certain number of zero-emission vehicles.

In addition to California, a growing number of other states follow CARB's regulatory framework and are also adopting ACT.

If heavy-duty vehicle manufacturers do not meet the applicable requirements, they will be deemed unable to sell the rest of their portfolio in that state, creating a significant incentive to deploy ZEV and NZEV vehicles that meet the needs of fleet customers.

CARB is also considering a fleet-facing zero-emission vehicle mandate called Advanced Clean Fleet (“ACF”), which acts in a similar manner to ACT by requiring truck operators to add an increasing percentage of ZEV and NZEV vehicles to their fleets over time.

The Hypertruck ERX system provides OEMs 75% credit towards satisfaction of the ACT rule compared to a pure BEV or FCEV.

It is also expected under a draft of the CARB ACF regulation that the Hypertruck ERX system will receive 100% credit to fleets towards meeting the fleet purchase obligation.

While the Hypertruck ERX system will initially be deployed on the Class 8 Peterbilt 579 sleeper cab, there is an opportunity to develop and deploy additional applications of the Hypertruck ERX system, including on additional Peterbilt variants, with other OEMs that sell comparable models, and in different Class 8 vehicle types, like refuse vehicles.

Additional opportunities for the Hypertruck ERX system also exist in applications that require a high-voltage electric power take-off capability, such as electric reefer trailers and special vocational vehicles that are transitioning from hydraulic to high-voltage accessories.

We expect to launch the Hypertruck KARNO powertrain system approximately a few years after the Hypertruck ERX system due to the extensive testing and certification work expected to be required to commercialize a new vehicle generator.

The KARNO generator technology is expected to improve the efficiency of the generator system, while further reducing emissions, noise and vibration as well as improve engine maintenance by virtue of having significantly fewer moving parts versus a traditional CNG or diesel ICE as a power source.

As hydrogen fuel becomes more widely available and adopted for Class 8 vehicles, the Hypertruck KARNO powertrain, by virtue of its fuel-agnostic KARNO generator design, will be capable of utilizing hydrogen as its fuel source, as well as over twenty other fuel types.

The KARNO generator technology is also expected to be adaptable for stationary power generation applications, such as for electricity generation for onsite electric vehicle (“EV”) charging, select commercial and industrial generation applications, and other market opportunities currently served by the electric grid or other standalone power sources.

Our Technology and Solutions

Our electrified powertrain systems utilize Hyliion-designed control software and data analytics technology to control physically integrated battery systems, electric motors and power electronics.

These electrified powertrain platforms can be used to either augment, as in the case of our Hybrid system, or fully replace, as in the case of our Hypertruck platform, conventional powertrains in Class 8 semi-trucks and improve their operational performance.

Our solutions are designed to be compatible

with most major Class 8 semi-truck manufacturers and are highly flexible in their digital and physical design, allowing them to be installed on, or adapted to, a variety of vehicles and fuel sources as market and regulatory opportunities allow.

This platform-focused strategy reduces capital investment over time and aims to allow for faster time to market for Hyliion powertrain products.

Hybrid Powertrain System

Our Hybrid system can be installed on most major Class 8 semi-trucks to reduce fuel usage in the case of diesel applications and improve performance in the case of CNG applications.

Our Hybrid system is comprised of a Hyliion battery system and an associated software management solution, a control module running our software and data analytics, high and low voltage power distribution and a thermal management system.

The battery system and controllers can be attached to the frame rail of most major Class 8 semi-trucks, providing potential cost savings in the case of diesel and simplifying installation, and incorporating a custom e-axle solution with associated cooling box to reduce weight and improve system efficiencies.

The system is charged by regenerative braking and downhill deceleration and discharged to provide additional horsepower and torque when called upon by our control software, thereby reducing engine load to reduce fuel usage and related GHG emissions or applying additional power to improve vehicle performance.

Our Hybrid system’s battery power can also be utilized as an auxiliary power unit (“APU”) to supply electricity for in-cab devices and air conditioning to reduce or eliminate idling when the driver is “hoteling” in the truck.

Based on internal and third-party testing and customer-reported experiences, we believe the benefits of utilizing our Hybrid system compared to conventional diesel or CNG commercial vehicles will reduce fuel usage, emissions, idling and improve performance.

We believe that reduced operating costs, improved driver satisfaction and increased marketability are key decision factors for many fleets in adopting our Hybrid system.

Our Hybrid system can also help fleets transition from diesel to natural gas engines as a result of the increased performance the system provides, and because of the cost savings opportunity natural gas provides over diesel.

The Hybrid system draws upon the real-world feedback we have received from customers and millions of miles logged by trucks equipped with the Hybrid system.

Hypertruck ERX System

Our Hypertruck ERX system is an electric CNG range extender powertrain that is being designed for integration on most major Class 8 semi-trucks to create a net-carbon-negative-capable REEV, when fueled by RNG.

Our Hypertruck ERX system builds upon technical knowledge gained from our Hybrid system.

It consists of a battery system, an associated software management and data analytics solution, a range extending electric generator powered by natural gas, an electric-traction drive system, and our Hyliion CoPilot in-cab driver display.

The system works by pairing the fully electric powertrain with a battery system that is recharged by the onboard generator and regenerative braking that produces electricity.

This system fully replaces the traditional powertrain in Class 8 semi-trucks.

The first iteration of Hypertruck ERX system utilizes a battery system capable of operating up to 75 miles on battery-only power depending on factors including driver behavior, which qualifies it for ¾ of a ZEV credit under CARB’s ACT regulation.

Our Hypertruck ERX system combines the performance of fully electric powertrains with the refueling efficiency of conventionally-fueled vehicles.

We estimate that it may be less expensive to run our onboard generator to produce electricity than recharging a BEV from the grid, depending on the cost of natural gas and electricity in different markets.

Today’s market price for CNG and RNG is more stable than diesel, and natural gas often costs much less than diesel on an equivalent-gallon basis.

By using onboard electricity generation rather than a large battery pack, our Hypertruck ERX system provides an extended range of operation compared to commercial BEVs.

We believe the benefits of our Hypertruck ERX system compared to competing technologies may include:

• a powertrain system as opposed to a complete vehicle redesign;

• a lower TCO due to favorable CNG/RNG pricing;

• government credits and incentives;

• the potential for net carbon negative operation when fueled with RNG;

• the ability to utilize existing natural gas fueling infrastructure;

• zero tailpipe emissions drive-capability;

• improved operating experience for the driver;

• vehicle range exceeding current competing electrified technologies;

• refueling times similar to diesel trucks;

• data generation and connectivity for next-generation fleet management.

By providing up to 75 miles of all-electric range, the Hypertruck ERX system provides the capability of reducing GHG, pollutants, and noise emissions in communities surrounding trucking infrastructure, like warehouses, ports, rail yards, maintenance facilities and fueling infrastructure.

Depending on the source of natural gas used in its CNG generator, the Hypertruck ERX system can deliver significantly lower emissions than a conventional diesel-powered Class 8 semi-truck.

Its electric traction drive provides up to 670 horsepower, in a smooth and seamless delivery, while simultaneously reducing overall noise and vibration levels.

The electric motors in the Hypertruck ERX system provide instantaneous torque, with fewer gears and smoother operation than a conventional transmission.

These factors combine to dramatically improve the driving experience for the operator, which should help with driver satisfaction and retention.

Hypertruck ERX System Rollout Timeline

In November 2021, we began our Hypertruck ERX system pre-production roadshow, which offered fleet owners and shippers firsthand demonstration of the features and benefits of our electric powertrain system.

The roadshow continued throughout 2022 and included “Ride and Drive” events, which provide in-depth product education sessions on how our system operates and enables fleets to decarbonize while reducing total cost of ownership.

Throughout 2022 we made significant progress furthering development and testing of the Hypertruck ERX system and hit several important development milestones on a roadmap that we first laid out in late 2021.

We completed assembly of the first verification vehicles early in the year.

These vehicles are considerably more advanced than earlier prototypes and were used to begin on-road testing of the latest design along with Ride and Drive events and controlled fleet trials with customers.

By the end of 2022, we had completed assembly of verification vehicles and released the design for the 3 rd generation Hypertruck ERX system.

Another milestone achieved was the successful completion of summer testing.

We took four vehicles to Davis Dam in Arizona where they were subjected to rigorous operation, hauling heavy loads up steep grades in temperatures of up to 110 degrees Fahrenheit.

We also deployed verification vehicles into controlled fleet trial operations with customers where the trucks were used in standard freight hauling operations.

Fleet trials provide the opportunity for Hyliion engineers and technicians to closely monitor vehicle operations and to obtain feedback from drivers on how well the powertrain functions.

Late in 2022, we began subjecting verification vehicles to winter testing where we observe system operation in extremely cold conditions to validate component operability, including battery function.

Additional winter testing sessions will continue through the early part of 2023.

Fleet trials will also continue with additional customers and eventually be advanced to a level where the customer takes over daily operation of the trucks without Hyliion engineering technician support, reflecting real-world fleet usage expectations.

Through all our testing and trial activities we expect to accumulate up to one million miles of operation prior to reaching the production stage.

Commercialization of the Hypertruck ERX system in 2023 is dependent upon receiving certain vehicle certifications by federal and state regulators.

Specifically, CARB requires demonstration that our powertrain and vehicle comply with emissions standards for pollutants and particulate matter and that our on-board diagnostics technology operates reliably and in a manner to detect and diagnose malfunctions with the engine and emissions control systems and to alert the driver to the underlying condition so it can be remedied.

Similarly, EPA certification is also required as is approval from the National Highway Traffic Safety Administration for the overall safe operation of the truck and powertrain.

See Government Regulations section for additional details.

There have been ongoing parts shortages in the transportation industry supply chain including semiconductors and other key components.

These supply chain challenges have been especially prominent in the trucking industry, and one of the impacts has been significantly extended lead times for ordering new trucks.

Fleets are experiencing lead times on new truck purchases that extend delivery out into 2023.

We are securing build slots with Peterbilt for all chassis needed for the 2023 calendar year to mitigate future potential supply chain impacts to our Hypertruck ERX system development schedule.

We continue to work closely with our current supply base to improve delivery of components for the quarters ahead and are diligently seeking alternative sources of supply for components that meet our technical specifications with shorter lead times.

CNG and RNG as a Fuel

Our Hypertruck ERX system will leverage an existing cross-country CNG fueling network.

In the continental United States, there are approximately 700 public and 400 private CNG fueling stations in operation for Class 8 semi-trucks.

These stations are geographically dispersed enabling nation-wide fleet operations without a significant infrastructure buildout.

Furthermore, our Hypertruck ERX system can be refueled using a “fast-fill” method which is comparable to diesel truck refueling time.

Internationally, CNG infrastructure is even more prevalent due to government mandates requiring reduced carbon emissions from transportation.

Additionally, we believe that the necessary heavy-duty infrastructure exists that would support near-term adoption of our Hypertruck ERX system.

The ability to utilize existing CNG fueling infrastructure eliminates an important

barrier to Hypertruck ERX system adoption, in contrast to Class 8 BEVs and FCEVs, which currently lack the electric charging and hydrogen fueling infrastructure needed for widespread adoption of those technologies.

Use of RNG is much cleaner for the environment than most other fuel sources.

It is generated by capturing methane from landfills, livestock operations such as dairies, wastewater treatment and other sources or through anaerobic digestion and processing of food and animal waste streams.

Depending on the source, RNG can have a significantly negative carbon intensity score as these methane sources would otherwise be emitted as pollution into the atmosphere.

RNG is injected into existing natural gas pipelines and the delivery to fleets is enabled through credits.

Use of RNG to fuel the Hypertruck ERX system can enable our customers to achieve a net carbon negative emissions profile for their transportation operations, depending on the region of operation.

RNG is widely available today through all 700 existing natural gas stations and new sources are in development.

Approximately 64% of natural gas sold at fueling stations in 2021 was credited towards RNG projects with usage growing 134% over the five years ending 2021, according to the Coalition for Renewable Natural Gas.

Also in 2021, 250 RNG production facilities were in operation, 112 were under construction and another 125 were in project development.

Generator and Fuel Agnostic

Although our initial Hypertruck platform application, the Hypertruck ERX system, will be powered by a CNG fueled generator, it is designed to flexibly accommodate different generator and fuel system types in future applications.

In addition to a natural gas ICE, other potential generator options include the Hyliion KARNO generator and hydrogen fuel cells.

Any available electricity source can be used to recharge the battery of the electric powertrain system, although control systems and software may need to be modified to adapt to different generators, fuels, and electrical power sources.

Our objective is to enable Hypertruck customers to choose their preferred charging system and fuel source based on different priorities, including fuel cost and availability and emissions objectives.

By designing our system in this manner, we expect to be able to quickly adapt to changing technologies, emissions goals, fuel sources, regulatory requirements, and customer preferences without needing to redesign the underlying Hypertruck powertrain platform.

Software, Data Analytics and Computing

Hyliion's proprietary software and control systems are the foundation of the Hypertruck platform, linking the generator source, battery and battery systems, electric drive motors and driver interface into a seamless electric powertrain that is customizable, adaptable, and configurable.

Beginning with the Hybrid system, Hyliion gained critical knowledge and experience in developing control software, powertrain algorithms, systems management capabilities, and cloud integration, which fed into the design of the Hypertruck platform.

Our software and algorithms seek to optimize the fuel economy and performance of our powertrain system by controlling efficient generator operation points and the charging and discharging of the battery system to power the electric motor and electronics.

Our software and control algorithms can be remotely updated over the air to enable our customers to benefit from the latest features and functionalities, minimizing unnecessary downtime.

This cloud-connected capability also provides the data sources for future features, without fundamentally changing the hardware of the system, which could otherwise require large amounts of capital and resources.

As demonstrated with the Hybrid system, Hyliion has developed different applications that solve different customer problems.

Beyond adjusting for different applications on the same vehicle platform type, we expect this software design philosophy to also ease the Hypertruck platform’s transition to entirely different vehicle platform types.

We have the potential to develop value-added software services based on the insights gathered on our vehicles.

This includes cloud-accessed insights into powertrain performance, maintenance, and other logistics and fleet management services.

It also allows for fleet-level customization of powertrain features and performance, without physically touching the vehicle or changing its hardware.

A critical component of our system is the Hyliion CoPilot, which runs on our in-cab display and provides real-time vehicle performance, status metrics, and driving feedback to the vehicle operator.

We have also developed proprietary in-vehicle computing capabilities, in the form of the Hyliion Control Unit (“HCU”) and Hyliion Drive Processor (“HDP”).

These two units form the core of the Hypertruck computing platform, and are easily adapted to future product iterations and platforms.

Challenges with Other Solutions

With a global focus on reducing the environmental impact of commercial transportation, several companies have begun developing solutions to lower GHG emissions from commercial vehicles, including plug-in commercial BEVs and commercial FCEVs.

However, neither of these solutions have been delivered in volume for the high mileage regional and long-haul Class 8 semi-truck markets.

While we do see market opportunities for these solutions, we believe they will face unique challenges achieving widespread adoption in the near term, which may include:

• limited availability of such commercial vehicles or solutions;

• a higher TCO relative to currently-available diesel or CNG commercial vehicles;

• limited availability and capacity of electric charging and hydrogen fueling infrastructure;

• higher lifecycle GHG emissions from the fuel sources used to generate electricity needed to recharge batteries or produce hydrogen and the emissions associated with the production of the battery cells;

• the need or choice to completely redesign the commercial vehicle to implement the solution;

• limited range on a single charge or fueling;

• longer recharging or refueling times compared to diesel and natural gas-fueled vehicles;

• the need to change customers’ existing fleet operations to accommodate new truck technologies, including procurement, dispatch, maintenance, repair, and driver training;

• performance challenges in cold weather.

Our mission is to be the leading provider of electrified solutions for the commercial vehicle industry.

Our value proposition to our customers includes reducing GHG emissions, operating cost savings, improved truck performance, and the ability to utilize existing infrastructure for fueling.

We anticipate that our capital resources and efforts in the near future will continue to focus on the development and commercialization of our drivetrain solutions.

Maintaining Technology Leadership and First-Mover Advantage

Our Hybrid system is currently being sold, and we are one of the first to the market with an electric powertrain solution for long-haul Class 8 semi-trucks.

The software and the algorithms driving our Hybrid system have been utilized in millions of real-world road miles and experience with the Hybrid product is being used to drive continuous improvements in the system management software and our overall knowledge of electric drivetrain operations.

We expect to capture market share for low and zero-emission commercial vehicles by being one of the first to market with a carbon-negative-capability powertrain and by offering a range-extending power generator to help bridge the industry from fossil-fuel-powered trucks to full electric vehicles over time.

We believe that decarbonizing long-distance Class 8 trucking through electrification will be a process that occurs over time as reliable sources of clean, renewable electricity are developed along with the transmission and distribution networks that support a widely available and fast electric vehicle charging network.

In the same manner, the use of hydrogen as a transportation fuel will depend upon the development of new sources of supply that don’t themselves contribute to GHG emissions and a fueling and distribution network that does not exist today.

Therefore, we believe that an electric range-extender powertrain system, such as the Hypertruck ERX system, will be needed as a transition technology to reduce GHG, nitrogen oxides and particulate matter emissions, while offering all-electric range, improved operating performance and TCO savings.

By launching the Hypertruck ERX system, followed by the Hypertruck KARNO system, and a Hypertruck fuel cell truck, we will help drive an industry transition to clean transportation in a manner that is most likely to be successful.

Focusing on Powertrains

Our electrified powertrain solutions are designed to be installed on most Class 8 semi-trucks.

By focusing on the powertrain and its associated components, rather than the full vehicle, we obtain advantages as a new entrant in the Class 8 truck market.

First, our innovative efforts focus on the vehicle components that drive the greatest improvement in economic and environmental benefits towards decarbonizing transportation.

Second, our approach allows us to remain capital-light and use our resources more efficiently to develop software and engineered solutions to powertrain development, while leaving most component production and major vehicle design and assembly work with existing suppliers and truck OEMs.

Leveraging Existing Infrastructure

Our customers will be able to utilize an existing network of approximately 700 CNG fueling stations across the United States, which will help accelerate adoption of our Hypertruck ERX system.

Utilizing CNG allows for electrified Class 8 semi-truck solutions like the Hypertruck ERX system to grow without substantial new infrastructure.

This is in contrast with BEV trucks, where broader availability of electric charging stations will require significant investment and long lead times, driven in part by the uncertain availability and cost of electric power as charging demand for passenger vehicles and electric trucks grows.

By utilizing existing commercial natural gas fueling infrastructure, we believe our customers can achieve low GHG emissions, when utilizing CNG, or carbon-negative status, when utilizing RNG.

While hydrogen sources and refueling stations are also in development, there are few options available today for local, regional or long-haul truck transportation.

Therefore, it is likely that significant additional investment and time will be required before hydrogen is a feasible fuel source for Class 8 trucks.

Continuing to Build and Leverage Strategic Relationships

We have and intend to continue developing partnerships with suppliers, truck OEMs, fuel and maintenance service providers, truck upfitting operators, engineering firms, consultants and others to accelerate the development and production of our solutions.

These partners augment our internal resources and we intend to leverage their capabilities and infrastructure to bring our solutions to market more quickly and to meet industry standards without requiring us to invest additional capital to internalize functions or services that are more easily outsourced.

We are planning to develop agreements with one or more maintenance service providers and fueling partners to ensure that our powertrain systems are fully supported in the field once commercial production begins and so our customers have access to CNG/RNG and attractive prices in the marketplace.

Customer Demand

We began selling the Hybrid system in the fourth quarter of 2021.

Throughout 2022, we delivered Hybrid systems to fleets across the country, utilizing vehicle platforms from multiple OEMs.

Despite these successes, we were unable to fulfill all Hybrid system orders that we obtained from customers due to ongoing supply chain disruptions and the limited ability of our customers to incur the downtime with their existing truck fleets to complete the Hybrid system installation.

Delivery of Hybrid systems in 2023 is expected to continue on a pace consistent with the rate of deliveries in 2022.

Commercialization of the Hypertruck ERX system late in 2023 is expected to divert customer interest from our Hybrid product to the Hypertruck ERX system.

In addition, we continually assess the potential demand impact for the Hybrid system offering in light of recent changes within the competitive landscape.

In 2021, we announced our Hypertruck Innovation Council, which consists of some of the largest fleets in the industry, who have assisted us with the development of the Hypertruck ERX system and will have been among the first to experience the performance of the system through our “Ride and Drive” events.

These events and fleet trials delivered positive feedback from customers’ drivers, and generated further interest in the Hypertruck ERX system.

In 2022 we secured deposit-backed orders from eleven fleet customers for our first 210 production slots for the Hypertruck ERX system.

These trucks are all expected to be delivered to customers by the end of the first quarter of 2024 and will be deployed in what we are calling our Founders Program.

The Founders Program will feature white-glove service and support from a launch facility in the Dallas area.

Recognizing that the Hypertruck ERX system is a new product, we plan to ensure that it is well supported through drivetrain warranty protection and the ability to quickly resolve hardware and software problems or address operator questions and issues as they arise.

We will use the launch facility as a location to centralize our maintenance and service operations and to train electric drive train technicians, both our own and those of our service partners.

We also expect to offer fueling support to make it convenient for fleets to fill up on renewable natural gas.

The fleet support capabilities being offered by the Founders Program will be beneficial as we look to grow our order book with new customers and support a larger number of our systems on the road.

We expect that the steps we are taking to complete development, testing and certification of the Hypertruck ERX system, along with additional customer fleet trials and a successful commercialization and launch of the Founders Program, will be an inflection point for additional orders.

As these milestones are achieved, we will continue to grow our order backlog for delivery of trucks with Hypertruck ERX system in 2024 and beyond.

Production, Assembly and Installation

Our long-term strategy is to be a powertrain company, and we expect to sell our solutions directly to truck OEMs for them to integrate into their production lines.

However, as we launch production we plan to source incomplete chassis from the OEM and then utilize our facility in Austin, Texas and/or modification and upfitting centers that are close to OEM factories to install our Hypertruck ERX system.

Initial incomplete chassis will include the natural gas engine but not certain components like the transmission, driveshaft and diesel fuel tanks.

We intend to primarily outsource the production, assembly and installation of our electrified powertrain systems to assembly partners as we reach a greater level of production volume, while maintaining in-house research, development and prototyping capabilities, including low-volume assembly and installation.

The initial production version of the Hypertruck ERX system will utilize a Peterbilt 579 truck in sleeper configuration.

Over time, we expect to utilize additional OEM platforms in different configurations.

Sales and Marketing

We currently market and sell our electrified powertrain solutions domestically through a direct sales organization and with certain partners to Class 8 semi-truck fleet owners and operators.

We also expect to market and sell our electrified powertrain solutions internationally at some point in the future.

We use digital marketing strategies to build awareness for the Hyliion brand, the in-market Hybrid offering and the development journey of the Hypertruck ERX system.

Events and in-person activations, particularly those that allow prospective customers to physically interact with our products, often lead to positive results in an industry that is relationship-based and focused on “trying before they buy.”

The Inflation Reduction Act of 2022 was signed into law in August 2022, under which the Hypertruck ERX system will qualify fleets to receive a 30% tax credit up to $40,000 per vehicle adopted.

We expect this to drive further interest in and demand for the Hypertruck ERX system and other products.

electrical grid is facing a multitude of challenges as it strives to manage the escalating demand for electricity while adapting to evolving generating resources.

The electrification of transportation, particularly the growing adoption of electric vehicles, is adding substantial load to the grid.

Additionally, the integration of renewable energy sources such as solar and wind

power introduces variability and necessitates grid modernization and storage solutions for stability.

Hyliion believes that localized grid generation will become an increasing part of the solution to these challenges.

Hyliion also believes that the KARNO generator is suitable for a wide range of electrical power generating applications and can address many concerns with conventional generators that inhibit consumers from adopting onsite generating systems today, including cost versus grid power, reliability, maintenance needs, noise, inflexibility and emissions.

Additionally, the KARNO generator is expected to be able to operate using a wide range of fuel sources including carbon-free fuels such as hydrogen and ammonia.

The planned initial KARNO generator variant is both power dense and easy to deploy.

It is expected to consist of a single four-shaft 200kW generating unit along with essential balance-of-plant components, all arranged within a space-efficient, rectangular configuration occupying approximately three cubic meters.

Later planned developments are expected to include a greater-than 2MW system with multiple KARNO generators inside the footprint of a 20 foot shipping container.

Over time, we expect larger and smaller capacity versions of the KARNO generator will be offered with power levels varying based on the number of generator shafts included or the size of component parts.

We expect the KARNO generator to initially compete effectively in the market for power applications between 200kW to 5MW and later extending to larger and smaller power configurations.

We are currently working with potential customers for initial generator deployments.

The primary purpose of these deployments is to further test and validate KARNO generator product attributes including efficiency, emissions, maintenance requirements, durability, control systems and other parameters.

We expect to receive compensation for these initial deployments as we believe the generator will provide tangible benefits to customers.

We also expect that early deployments will demonstrate the effectiveness of the KARNO generator in a wide range of electrical generating applications.

Target markets include:

• Prime Power:

Most consumers prefer the grid versus generating power locally due to the grid’s inherent advantages of simplicity, convenience, scalability and cost effectiveness.

For critical applications such as hospitals, data centers and refrigerated warehouses, local generators are indispensable in case of a grid power failure.

The KARNO generator introduces the opportunity for certain power consumers to rethink their primary and secondary power sources.

Due to its unique attributes in comparison to conventional generators, including consistently high efficiency across power levels, minimal maintenance requirements, and reduced level of noise and emissions, the KARNO generator stands as a potentially more cost-effective base load power source for consumers, who could then utilize the electric grid as a backup source of power.

This arrangement holds particular appeal for consumers facing high grid electrical costs and low fuel costs, such as for natural gas.

• Vehicle Charging:

The rapid growth of consumer electric vehicles is increasingly straining grid capacity and reliability, both domestically and internationally.

The introduction of commercial EVs, such as buses, delivery vans and large trucks is expected to intensify this challenge in the future given their substantial power requirements during charging.

Many commercial operators cite the lack of electrical capacity access as the primary obstacle to expanding their electric vehicle fleets.

Here, we believe the KARNO generator offers a unique solution for vehicle charging.

Its flexibility in fuel sources, including the ability to use hydrogen, along with its superior environmental performance and low emissions and noise levels offer advantages over internal combustion generators.

A KARNO generator can also modulate power without efficiency loss by activating or deactivating individual generators and by regulating the heat input to each generator.

Finally, KARNO’s high power density allows it to be deployed as a localized power source for vehicle charging without consuming parking space.

• Waste Gas Power Generation:

Natural gas sourced from waste sites like landfills, water treatment plants and dairy farms is a growing market as producers seek to capture sources of methane emissions that would otherwise be released into the atmosphere or flared.

Also known as renewable natural gas (“RNG”), most sources are typically treated to remove impurities such as carbon dioxide, hydrogen sulfide and moisture before the gas can be utilized or injected into natural gas pipelines.

We believe the KARNO generator will compete effectively as a power generator using waste gas sources.

Its modularity, coupled with its capability to oxidize a variety of fuel sources and mixtures with no or limited prior gas processing, positions it as an efficient and adaptable power generator for waste gas sources.

Similarly, natural gas extracted from gas or oil wells frequently requires processing to remove natural gas liquids and impurities.

At remote well sites, gas may be flared, or burned, due to insufficient pipeline capacity for transmission to consuming markets.

The KARNO generator creates a new opportunity – to transform flare gas into valuable electricity, destined either for integration into the electric grid or for localized consumption.

As with RNG, the KARNO generator is anticipated to use flare gas with limited need for pre-treatment at a gas processing facility.

• Peak Shaving:

“Peaking charges” also referred to as “demand charges” are fees imposed by utilities on customers based on their highest recorded electricity usage during a billing cycle, often measured over a short interval, such as 15 minutes.

These charges serve to recuperate the expenses associated with maintaining grid capacity during periods of

For customers with substantial peak demand, such as large industrial facilities and data centers, peaking charges can significantly inflate their electric bills.

Additionally, time-based electricity rates are now common to reduce demand on the grid during peak times.

Peak rates can be two to three times higher than base rates, increasing electricity charges even further for consumers.

In this context, distributed generation sources like the KARNO generator can play a pivotal role in mitigating the financial impact of peaking charges and rates by supplementing grid power during peak consumption periods.

• Backup Power:

The market for local backup power generators is well established but also poised for growth due to reduced reliability of the power grid, a greater share of intermittent renewable sources of electricity, the frequency and severity of extreme weather events and the need for continuous power supply in critical applications.

Generator emissions are a growing concern in the backup power market due to increased focus on the health impacts of harmful compounds such as nitrogen oxides (“NOx”), carbon monoxide and volatile organic compounds (“VOCs”).

To address these concerns, emissions control technologies are often incorporated for conventional generators and alternative sources of fuel like natural gas are replacing diesel, which is also a source of particulate matter (“PM”) emissions if exhaust gases are untreated.

The backup power market is another opportunity for the KARNO generator which is particularly attractive for its low level of emissions and low noise level while in operation.

The KARNO generator is expected to reduce CO and NOx emissions by over 95% compared to diesel generators, and potentially without the need for exhaust aftertreatment.

We therefore believe that KARNO presents an opportunity to provide solutions for end users that desire a lower emissions profile and in the event emissions regulations are further tightened.

Following initial deployments, we expect to ramp up commercialization of the KARNO generator including expansion of production capacity and establishment of sales and distribution channels, potentially including market collaborations and extending our reach outside of the U.S.

In the future we intend to develop KARNO generators of different sizes and configurations to capitalize on KARNO’s unique advantages and extend these advantages across a broader range of market opportunities.

Products and Services

KARNO Generator System

The KARNO generator emerged out of GE’s long-running research and development investments in aerospace engines and metal additive manufacturing across multiple industries and in areas such as generator thermal and performance design.

We initially envisioned utilizing the KARNO generator as new range-extending power source for the Hypertruck powertrain system, given its ability to operate on a wide range of fuel sources, including natural gas and hydrogen.

We believe that the unique capabilities of the KARNO generator will also make it competitive in the stationary power market, competing favorably against conventional electrical generating systems and opening up potential new markets to enhance grid power availability and reliability.

The KARNO generator technology, including the technology that was acquired from GE and the technology developed by Hyliion subsequent to the acquisition, is protected by numerous patents and trademarks which we believe provide Hyliion extensive and lasting protection for its intellectual property.

KARNO Generator Development

Our ongoing efforts with the KARNO generator encompass activities such as its design, development and rigorous testing, along with the development of essential balance-of-plant systems including cooling and controls systems.

Notably, we have reached a significant milestone by constructing the 125kW ALPHA generator which we are currently testing in our development facility.

Simultaneously, we are in the final stages of designing a 200kW BETA generator, which is expected to serve as our design for initial commercial deployments.

We have also showcased KARNO integrated as an on-board generator for our Hypertruck ERX powertrain system and with potential stationary power customers.

Moreover, we successfully demonstrated the generator’s capability to feed power back to the electric grid from our Cincinnati, Ohio facility and confirmed through testing the capability of the generator’s oxidation system to be fueled using untreated natural gas from a Permian Basin well site.

As we progress toward our anticipated initial stationary generator deployments, scheduled for late 2024, pivotal development activities are underway, including enhancements to the linear generator system and its controls, rigorous validation of essential operating parameters, including efficiency, emissions and reliability, and build-out of balance-of-plant systems and controls.

These initial generator deployments, coupled with our ongoing testing and development endeavors, will play a vital role in the validation of other critical design specifications, including the generator’s projected operating life, maintenance requirements and durability.

We expect to achieve efficiencies over time, leading to a reduction in the manufacturing and assembly costs associated with the KARNO generator.

These efficiencies will predominantly stem from advancements in the speed and capacity of additive manufacturing machines offered by GE and other vendors.

The pace of advancements in additive technology are expected to improve over time, with the output of machines we intend to acquire over the next three to four years projected to increase

compared to machines available today.

Additionally, we are actively pursuing design modifications that will enable specific components to be produced through conventional manufacturing processes.

Moreover, for less critical components, we are exploring utilization of lower-cost and lightweight materials like aluminum.

Lastly, we anticipate that economies of scale will play a pivotal role in reducing system component costs as manufacturing output scales up progressively.

The Science of the KARNO Generator

The KARNO generator is distinguished from conventional generating systems that rely on reciprocating internal combustion engines or gas turbines to drive a rotating shaft.

In contrast, the KARNO generator harnesses the power of a heat engine to propel a linear generating system.

This innovative generator derives its linear motion from temperature differences inside the engine.

The generation of heat within the system occurs through flameless oxidation of fuels, like natural gas, hydrogen, or propane.

This thermal energy causes helium gas enclosed within a sealed cylinder to expand, thereby propelling linear motion in a connected piston-shaft system which includes a sequence of permanent magnets situated on the shaft passing through electrical coils.

Subsequently, the counter-motion generated by a piston at the opposite end of the shaft flows the helium gas to the cold side of a piston in an adjacent shaft, where excess heat is efficiently dissipated.

This cyclical process continues, resulting in a continuous source of electrical power for so long as heat is supplied to the generator.

Linear generators present several advantages over conventional generators, with key benefits including reduced maintenance, attributable to their simplified design with few moving parts.

Additionally, they can exhibit higher efficiency by circumventing the mechanical losses linked to rotating components such as bearings and gears while producing less noise and vibration.

In the case of the KARNO generator, each shaft of the generator relies on a single moving part and utilizes a pressurized helium bearing system in place of oil-based lubricants.

The KARNO generator also stands out for its ability to achieve exceptional efficiency and power density by maximizing heat transfer between components and working fluids.

Enabled by advances in additive manufacturing systems, parts are designed with a large number of intricate flow channels for the movement of heat, cooling water, helium and exhaust gases such that contact surface areas for heat transfer are maximized.

The KARNO generator is expected to surpass the efficiency of conventional reciprocating generating systems of a similar size when employing various fuel sources and even outperform fuel cells at high power levels when using hydrogen.

Notably, its high efficiency remains consistent across a broad range of output power levels.

In contrast, fuel cells reach peak efficiency at low power levels but experience diminishing efficiency as output increases towards full power.

Internal combustion engines typically achieve peak efficiency within a limited operational output range and may suffer increased wear at low power levels.

The KARNO generator offers a distinct advantage in power adjustment by modulating operating parameters and the rate of heat introduction, enabling seamless power adjustments without compromising the generator’s efficiency.

We anticipate that the KARNO generator will achieve an electrical generating efficiency of nearly 50%, calculated by considering the usable output power in relation to the energy from the fuel source.

High efficiency is expected to remain consistent across a wide range of output power levels, spanning from tens of kilowatts to multiple megawatts.

In contrast, internal combustion diesel generators typically operate within an efficiency range of 25% to 40% over a similar power spectrum, while the U.S.

electrical power grid is estimated to operate at an efficiency between 33% and 40%.

Notably, best-in-class grid-level gas turbine powerplants can obtain efficiencies ranging between 45% to 55%.

However, these powerplants have a much larger minimum power level (typically 10MW+) and incur transmission and distribution losses between 5% and 10% which the KARNO generator can circumvent by being strategically located near the point of power consumption.

Conventional generators emit pollutants as a result of incomplete combustion of fuel-air mixtures, with the formation of nitrous-oxide compounds being particularly prominent.

Unlike conventional generators, which often employ internal combustion engines operating at high temperatures with rapid and incomplete fuel combustion, the KARNO generator is designed for continuous fuel oxidation at lower temperatures than internal combustion engines and extended burn times.

This is achieved partly through the recirculation of exhaust gases, which serves to prolong combustion duration and by pre-heating incoming air.

As a result, the KARNO generator is anticipated to achieve low levels of emissions, with CO 2 and NOx emissions expected to be reduced by over 95% compared to best-in-class diesel engines and targeting CARB 2027 standards without the need for aftertreatment.

One of the notable advantages of the KARNO generator, in comparison to traditional generating units, is the expected significant reduction in maintenance requirements and cost.

Conventional generators typically incur periodic and usage-based maintenance expense that can range between 5% to 20% of their total operating cost throughout their lifespan, influenced by factors such as utilization and operating parameters.

The KARNO generator’s primary advantage arises from having only a single moving linear actuator per shaft (4 shafts per 200kW generator), which glides linearly on low friction helium bearings.

This innovative design significantly mitigates efficiency losses attributed to friction, enhances the system’s operational longevity and eliminates the need for oil-based lubricants commonly found in conventional generators.

Furthermore, internal combustion engines require extensive overhauls after specific operating periods which are costly, require specialized expertise,

and result in prolonged downtime.

Conversely, the KARNO generator is projected to require less costly and simplified maintenance service than internal combustion engines, translating into both cost savings and reduced downtime.

The KARNO generator, functioning as a heat engine, derives advantages from its expected capability to operate across a diverse spectrum of over 20 available fuel sources and fuel mixtures.

These include natural gas, propane, gasoline, jet fuel, and alternative fuels like bio-diesel, hydrogen and ammonia.

Moreover, the generator will be able to seamlessly transition between these fuels or fuel blends, requiring no physical modifications to its flameless oxidation system.

This versatility will enable a single generator to adapt to different use cases.

For example, the generator may operate on natural gas for prime power generation when a pipeline connection is available and on waste gas near a landfill or dairy farm with some modifications.

Furthermore, as hydrogen becomes more widely available, the KARNO generator will be able to seamlessly adapt to this cleaner fuel.

As the energy landscape evolves, the KARNO generator’s fuel-agnostic nature positions it as a future-proof solution to a range of electricity generation needs.

Benefits of the KARNO Generator Versus Conventional Competitors

We believe the versatility and operating characteristics of the KARNO generator make it an ideal system for a variety of conventional and emerging electrical generating applications.

Key attributes of the KARNO generator distinguish it from its conventional generator counterparts, which may open new market opportunities:

• Generator Efficiency :

The anticipated operating efficiency of the KARNO generator results in lower cost of electricity versus conventional generating systems and, in many markets, grid power.

• Low Maintenance :

With only a single moving part per shaft, the simplicity of the KARNO generator is expected to reduce both periodic maintenance expenses and expected overhaul costs.

• Fuel Agnostic :

While many traditional generators operate on a single fuel source or require system modification to achieve fuel flexibility, the KARNO generator is truly fuel-agnostic, and can switch between fuel choices during operation with some modifications.

• Low Noise and Vibration :

Unlike conventional generators, the KARNO generator operates without internal combustion, resulting in a significantly lower noise level of approximately 67 decibels at six feet, which is approximately equivalent to a typical conversation.

• Higher Power Density :

The unique architecture and features of the KARNO generator that are enabled by advances in additive manufacturing, enable the generator to achieve a high level of power density.

For example, a 200kW generator occupies less than a cubic meter of volume, excluding the balance-of-plant.

• Modularity :

The power output of a KARNO generator can be modulated by changing the level of heat applied to the system.

For larger power applications above 200kW, systems with six or more shafts can be utilized or, multiple KARNO generators can be assembled to operate as a single unit.

For megawatt applications, individual generators can be turned on or off to adjust the total power output of the system.

• Fast Startup Time :

It is anticipated that the KARNO generator will be able to begin generating electricity from a cold start in approximately 30 to 60 seconds.

Additionally, full power can be achieved in a matter of minutes.

Conversely, some generating systems, such as solid oxide fuel cells, require a warm-up period of up to 30 minutes.

Production, Assembly, Installation, Suppliers and Distribution

Hyliion plans to begin deploying initial KARNO generator BETA units with customers in late 2024 after design and initial testing of the generator and balance-of-plant system components are complete.

Key generator components will initially be sourced internally using additive manufacturing processes and technologies that were both developed by Hyliion and purchased from GE in 2022.

Other components will be manufactured internally or purchased from suppliers based on proprietary Hyliion designs.

Hyliion is developing a base of suppliers for other generator systems, including linear motor components, support systems and generator enclosure materials.

Suppliers are assessed for quality based on rigorous standards and processes that were established for Hyliion’s former powertrain systems.

Assembly, installation and maintenance of KARNO generator systems is expected to be performed by Hyliion for initial customer deployments.

Additive manufacturing is a key enabler of KARNO generator technology and performance characteristics and is considered a core competency of the Company and a source of competitive advantage versus other linear power generating systems.

Rapid innovation is another core Hyliion capability extending beyond generator design to include print processes and materials, including high-speed parameter development to increase equipment availability, print yield, and design effectiveness.

We are also investing engineering resources to enable the use of alternative metal materials in certain components to optimize performance while reducing print time and cost.

Hyliion has purchased state-of-the-art laser sintering machines (3-D additive printers) from GE and has secured additional machine capacity which we expect to be delivered in 2024 and early 2025 to support early generator production and deliveries.

Hyliion currently plans to print all key generator components in-house for early system deployments in order to optimize production parameters, component quality, printing innovation and system throughput.

The standalone generator set, or genset system, includes the KARNO generator along with an enclosure that houses key balance-of-plant elements such as the cooling system, generator controls, a battery system and high voltage electrical components.

Prior to shipment, the entire stationary genset system will undergo rigorous testing to validate performance.

Initial deployments of BETA units will further help validate genset system quality, performance and reliability before commercial ramp-up of production and sales.

Hyliion technicians will be available to support installation and monitoring of system performance, aided by the ability to remotely monitor critical system parameters.

We have begun printing the first BETA units of the KARNO generator at our facility in Cincinnati, Ohio and expect to complete assembly and testing of deployments units in 2024 at that facility.

We also plan to begin acquiring additive printing capacity for our Cedar Park, Texas facility later in 2024.

Future print capacity additions as well as generator assembly functions are expected to begin shifting to Cedar Park beginning in 2025.

As production volumes rise, we may consider outsourcing certain production and assembly functions including the printing, manufacturing and assembly of specific components or the entire generator to third parties.

In our initial deployment phase, we intend to collaborate closely with customers, identifying a broad range of use cases and improvement opportunities for the KARNO generator.

Over time, we will consider options for integrating our products into existing sales and distribution channels and forging partnerships with established manufacturers, vendors, developers and distributors.

Research and Development

Our research and development activities primarily take place at our headquarters in Cedar Park, Texas, our facility in West Chester, Ohio, on our testing and demonstration vehicles on roads and highways, and at our partners’ facilities.

Our research and development activities primarily take place at our headquarters in Cedar Park, Texas and our facility in Cincinnati, Ohio.

Our research and development is primarily focused on:

• electrified powertrain development and system integration;

• control software and algorithms for our powertrain systems;

• next generation packaging and cooling for our battery systems;

• interoperability with third-party powertrain components, such as e-motors, inverters and axles;

• component integration;

• development of the KARNO generator including testing and validation;

• integration of the KARNO generator technology into the Hypertruck system;

• integration of the KARNO generator technology into various applications;

• accelerated lifetime testing processes to improve reliability, maintainability and system-level robustness;

• development of battery systems that can be used as a starter power source for the KARNO generator or as a load buffer solution;

• data analytics;

• alternative products for existing and in-development components and technology.

The majority of our current activities are focused on the research and development of our electrified powertrain systems, third-party component integration and the underlying proprietary battery and software technology platforms.

The majority of our current activities are focused on the research and development of our KARNO generator.

We undertake significant testing and validation of our products and components to ensure that they will meet the demands of our customers.

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As of December 31, 2023, we had 56 issued U.S.

patents and 51 pending U.S.

patent applications.

patents, 64 pending U.S.

patent applications, and 22 foreign patent applications.

Of the foregoing patent and application totals, 40 pertain to our KARNO generator with the remainder, which primarily relate to powertrain technology, retained for potential future use or sale.

We pursue the registration of our domain names, trademarks and service marks in the United States and in some locations abroad.

In an effort to protect our brand, as of December 31, 2022, we had three registered and seven pending trademarks in the United States and 39 registered and 11 pending trademarks internationally.

In an effort to protect our brand, as of December 31, 2023, we had three registered and seven pending trademarks in the United States and 44 registered and four pending trademarks internationally.

We regularly review our development efforts to assess the existence and patentability of new intellectual property.

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Human Capital

As of December 31, 2022, we had approximately 250 full-time employees all located within the United States.

We have not experienced any work stoppages and we consider our relationship with our employees to be good.

None of our employees are subject to a collective bargaining agreement or are represented by a labor union.

As of December 31, 2023, we had approximately 85 full-time employees, excluding employees working on the wind-down of our powertrain operations whose positions are expected to be eliminated by the end of the first quarter of 2024.

All full-time employees are located within the United States.

In connection with the discontinuation of the electrified powertrain systems business, we reduced our workforce by approximately 175 people, or 67%, with some severance agreements that provide for continued services through various dates in 2024.

Our people are integral to our business, and we are highly dependent on our ability to attract, engage, develop and retain key employees while hiring qualified management, technical, and vehicle engineering personnel.

We seek to provide our employees with competitive compensation and benefits, including grants of equity under our equity incentive plans, access to 401(k) plans and medical, life and disability insurance.

In addition, we provide several supplemental health plans of our employees ’ choosing.

We welcome the diversity of all team members and encourage the integration of their unique skills, thoughts, experiences and identities.

By fostering an inclusive culture, we enable every member of the workforce to leverage their unique talents and deliver high-performance standards to drive innovation and success.

Our production, research and development employees mainly work in our Austin headquarters and other facilities, which have implemented practices including company-wide policies to ensure the safety of each employee and compliance with Occupational Safety and Health Administration standards.

We have developed a flexible work policy that

allows certain employees to work from home.

While we are currently still a small company in terms of headcount, we have plans to grow, and expect that our practices and programs with respect to human capital management will grow as we do.

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• air emissions;

• use of recycled materials;

• energy sources;

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• the protection of the environment;

• natural resources and endangered species;

• the remediation of environmental contamination.

• natural resources.

We may be required to obtain and comply with the terms and conditions of multiple environmental permits, many of which are difficult and costly to obtain and could be subject to legal challenges.

Compliance with such laws and regulations at an international, regional, national, provincial and local level is an important aspect of our ability to continue operations.

Compliance with such laws and regulations at an international, regional, national, provincial and local level is an important aspect of our ability to continue operations and grow the business.

Environmental standards applicable to us are established by the laws and regulations of the countries in which we operate, and our product are sold, and standards adopted by regulatory agencies and the permits and licenses that we hold.

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In some instances, violations may also result in the suspension or revocation of permits and licenses.

EPA and CARB Emissions Compliance and Certification

Under the U.S.

Clean Air Act, some of our electrified powertrain solutions may be required to obtain a Certificate of Conformity issued by the EPA and a series of California Executive Orders issued by CARB, demonstrating that our powertrains and vehicles comply with requirements including as applicable, emission standards for both criteria pollutants, such as nitrogen oxides (“NOx”) and particulate matter (“PM”), and GHGs, such as carbon dioxide (“CO2”) and nitrous oxide (“N2O”).

A Certificate of Conformity is required for vehicles sold in all states and Executive Orders are required for vehicles sold in California and states that have adopted the California standards.

There are currently six states that have adopted the California standard for heavy-duty vehicles, five states are pursuing adoption of some or all of the CARB standards through a formal rulemaking process and an additional six states are considering adoption of some or all of the CARB standards.

CARB has adopted an ACT rule that requires heavy-duty vehicle manufacturers to produce and sell in California a certain number of zero-emission vehicles.

In addition to California, a growing number of other states follow the CARB regulatory framework and are also adopting ACT.

If the heavy-duty vehicle manufacturers do not meet the applicable requirements, they will be deemed unable to sell the rest of their portfolio in that state, creating a significant incentive to deploy ZEV and NZEV vehicles that meet the need of fleet customers.

CARB is also considering a fleet-facing zero-emission vehicle mandate (ACF), which acts in a similar manner to ACT by requiring truck operators to add an increasing percentage of ZEV and NZEV vehicles to their fleets over time.

All vehicles and engines manufactured for sale in the United States must be covered by an EPA Certificate of Conformity (and respective CARB Executive Orders if sold in California), including engines and vehicles using zero-emission or low-carbon technology.

As is necessary, an EPA Certificate of Conformity and/or CARB Executive Order, covering both criteria pollutants and GHG, must be obtained each model year for each engine family and heavy-duty vehicle.

Manufacturers of heavy-duty engines and vehicles also must ensure that their products comply with On Board Diagnostics (“OBD”) requirements.

The OBD system is intended to identify and diagnose malfunctions within the engine, aftertreatment and emission control systems and alert the driver to the underlying issue so the vehicle can be brought in for service.

CARB issues approval of the OBD system as part of its issuance of an Executive Order;

the EPA typically deems CARB OBD approval to be compliant with the EPA’s requirements.

As with emissions compliance, manufacturers are required to ensure that the OBD system functions as designed and is able to identify component malfunctions throughout the full useful life of the vehicle or engine.

We are currently in the process of obtaining the certifications required from both CARB and the EPA to confirm conformity with applicable regulations.

This effort includes demonstrating that our system complies with emissions standards for criteria

pollutants and that our OBD systems are capable of detecting deviations from these standards throughout their operating life.

We expect to obtain needed certifications prior to the start of Hypertruck ERX commercialization in the second half of 2023 .

Inflation Reduction Act

The Inflation Reduction Act in the U.S.

became law in August 2022.

Trucks with the Hypertruck ERX system are eligible under the Inflation Reduction Act for a 30% tax credit of up to $40,000 per vehicle.

On December 29, 2022 the United States Treasury Department and the Internal Revenue Service (“IRS”) released guidance relating to the electric vehicle tax credit provisions of the Inflation Reduction Act of 2022 including guidance on the commercial clean vehicle tax credit (section “45W”) for businesses.

Businesses and tax-exempt organizations that buy a qualified commercial clean vehicle may qualify for a clean vehicle tax credit of up to $40,000 under Internal Revenue Code 45W.

The credit equals the lesser of:

• 15% of the basis in the vehicle (30% if the vehicle is not powered by gas or diesel);

• The incremental cost of the vehicle;

• The maximum credit is $7,500 for qualified vehicles with gross vehicle weight ratings (“GVWR”s) of under 14,000 pounds and $40,000 for all other vehicles.

There is no limit on the number of credits businesses can claim.

ZEV Credits and Other

In California, the Advanced Clean Truck Rule was passed in June of 2020 and placed a requirement on heavy duty truck manufactures to produce and sell zero emission vehicles as a percentage of their total sales, beginning in 2024.

The sales requirements gradually increase every year until 2035.

The basic structure is that manufacturers will accumulate deficits when they sell conventionally fuel vehicles.

These deficits can be offset by the accumulation of credits which are earned as ZEVs and NZEVs are sold.

NZEVs generate credits based on their minimum all-electric range (“AER”).

The credits are calculated by multiplying the AER by 0.01.

As an example, if a customer is to purchase an electric vehicle with an AER of 35 miles, the sale would produce 35% of a credit.

NZEV credits cannot exceed 75%.

The California Air Resource Board is currently reviewing a draft rulemaking called the Advanced Clean Fleet Rule that is expected to be released in 2023.

The Advanced Clean Fleet Rule is a medium and heavy-duty zero-emission fleet regulation with the goal of achieving a zero-emission truck and bus California fleet by 2045.

The primary goal of the ACF regulation is to accelerate the market for zero-emission trucks, vans, and buses by requiring fleets that are well suited for electrification, to transition to ZEVs where feasible.

GHG Credits — U.S.

The EPA’s GHG Regulation requires all manufacturers of heavy-duty engines and vehicles to comply with fleet average GHG standards.

Manufacturers may comply with the standards by producing engines or vehicles, all of which comply with the standards, or by averaging, banking and trading GHG credits within vehicle or engine categories.

Manufacturers may also comply with GHG standards by purchasing credits from manufacturers with a surplus of credits.

The failure to comply with GHG standards can lead to civil penalties or the voiding of a manufacturer’s EPA Certificate of Conformity.

In connection with the delivery and placement into service of zero-emission and low-emission vehicles, we may earn tradable GHG credits that under current laws and regulations can be sold to other manufacturers.

Under the EPA’s GHG Regulation, plug-in hybrid, all-electric and fuel cell vehicles can earn a credit multiplier of 3.5, 4.5, and 5.5, respectively, for use in the calculation of GHG emission credits.

Commercial engine and vehicle manufacturers are required to meet the NOx emission standard for each type of engine or vehicle produced.

Typical diesel engine emission control technology limits the fuel economy and GHG improvements that can be made while maintaining compliance with the NOx standard.

As the fleet-average GHG standards continue to decrease over time, compliance with the NOx standard will increase the difficulty for conventional diesel vehicles to meet the applicable GHG standard.

Until technology catches up for commercial vehicles, manufacturers of diesel trucks will likely need to purchase GHG credits to cover their emission deficit.

The EPA’s GHG Regulation provides the opportunity for the sale of excess credits to other manufacturers who apply such credits to comply with these regulatory requirements.

Furthermore, the regulation does not limit the number of GHG credits that can be sold within the same commercial vehicle categories.

GHG Credits — California Air Resources Board

California also has a separate GHG emissions regulatory program, which is very similar to the EPA requirements.

Like the EPA’s GHG Rule, the CARB rule allows for averaging, banking and trading of credits to comply with the fleet-average GHG standard and the failure to comply with the California GHG standard may lead to the imposition of civil penalties.

The delivery and placement into service of our zero-emission and low-emission vehicles in California may earn us tradable credits that can be sold.

Under CARB GHG regulations, advanced technology vehicles can also earn a credit multiplier of for use in the calculation of emission credits in the same amounts as under the EPA’s GHG Rule.

Heavy-Duty Vehicle Safety Requirements

Manufacturers of vehicles that operate on US highways are subject to, and must comply with, various regulations established by the National Highway Traffic Safety Administration (“NHTSA”).

These federal motor vehicle safety standards (“FMVSS”) cover a wide variety of vehicle equipment and components.

Manufacturers of vehicles, including heavy-duty vehicles, must confirm that their vehicles and vehicle equipment comply with applicable standards or, as appropriate, are exempt from those standards.

Currently, there are several FMVSS that apply to vehicle manufacturers and may be applicable to Hyliion’s Hybrid and Hypertruck platforms.

As may be required, Hyliion is evaluating FMVSS requirements for applicability to Hyliion products.

Manufacturers of vehicles that operate on US highways must also comply with NHTSA safety reporting requirements concerning safety involving Hyliion systems concerning various issues including, but not limited to, accidents, warranty claims, field actions and reports and recalls.

As situations may arise, Hyliion will take appropriate actions to comply with these reporting requirements.

We have experienced, and expect to continue to experience, intense competition from a number of companies, particularly as the commercial transportation sector increasingly shifts towards low-emission, zero-emission, or carbon-neutral solutions.

We face competition from many different sources, including major commercial vehicle OEMs and companies that are developing alternative fuel and electric commercial vehicles.

Existing commercial vehicle OEMs such as PACCAR, Navistar, Volvo, Mack Trucks and Daimler maintain the largest market shares in the sector.

Given we primarily develop and sell powertrains that are designed to be installed into an OEM’s commercial vehicle to augment or replace conventionally fueled powertrains, as opposed to a complete commercial vehicle, we believe we will primarily compete with other powertrain providers offering new low-emissions solutions as opposed to commercial vehicle manufacturers.

While there are many competitors addressing electrification of commercial vehicles, many of them are focused on shorter range and lighter-duty vehicles.

We are providing electrified solutions that are addressing both the long-haul and regional transportation sectors.

We believe the primary competitive factors in the long-haul Class 8 semi-truck market include, but are not limited to:

Specific standards, certifications, and rules for which we seek to be in compliance include the following:

• Military Standard (“MIL-STD”) 1399 requirements over power quality;

• MIL-STD-810, MIL-STD-901, and MIL-STD-167 requirements over shock and vibrations;

• MIL-STD-810G requirements over environmental exposure;

• UL Solutions (“UL”) 2200 and 1741 requirements over generator set and inverter safety, respectively;

• Institute of Electrical and Electronics Engineers (“IEEE”) 1547 and 519 requirements over grid interconnection and harmonic control, respectively;

• South Coast Air Quality Management District (“SCAQMD”) in California Rule 1110.3, the first of its kind regulation focused on linear generators, “Emissions for Linear Generators.” This rule governs, among other things, the steady state emissions from technologies such as KARNO.

We worked jointly with SCAQMD to establish the various criteria and as a result, believe that KARNO will comply with this regulation.

We have experienced, and expect to continue to experience, intense competition from a number of companies.

We face competition from many different sources, including utility-scale grid power and manufacturers of fixed and portable generator equipment.

Key generator manufacturing competitors include Cummins, Bloom Energy, Generac, Kohler, Caterpillar, Mainspring and Jenbacher, several of which maintain the largest market shares in the sector.

We believe the primary competitive factors in the stationary generator market include, but are not limited to:

• total cost of ownership;

• emissions profile;

• availability of charging or fueling network;

• availability of fueling sources;

• ease of integration into existing operations;

• product performance and uptime;

• vehicle quality, reliability and safety;

• vehicle support, parts and on-road service network;

• technological innovation specifically around battery, software and data analytics;

• fleet management.

• generator quality, reliability, safety and noise.

We believe that we compete favorably with our competitors on the basis of these factors;

however, most of our current and potential competitors have greater financial, technical, manufacturing, marketing and other resources than us.

Our competitors may be able to deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their alternative fuel and electric truck programs.

Our competitors may be able to deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their generator products.

Additionally, our competitors also have greater name recognition, longer operating histories, larger sales forces, broader customer and industry relationships and other tangible and intangible resources than us.

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Additional mergers and acquisitions may result in even more resources being concentrated in our competitors.

We cannot provide assurances that our electrified systems will be the first to market.

Even if our electrified systems are first to market, or among the first to market, we cannot be sure that customers will choose vehicles with our electrified systems over those of our competitors, or over conventional natural gas or diesel-powered vehicles.

Numerous companies, including Cummins, Daimler, Dana, Navistar, PACCAR, Volvo, Tesla, Nikola, Lion Electric, Hyzon and other commercial vehicle manufacturers have announced their plans to bring Class 8 semi-truck BEVs or FCEVs to the market.

However, we do not believe any of them have showcased a roadmap similar to Hyliion’s, which is based on offering a range-extender electric vehicle that utilizes various generators with different fuel sources as a product that helps trucking transition from fossil fuel-powered vehicles to fully electric vehicles over time as technology advances and fueling and recharging infrastructure becomes more readily available and reliable.

Furthermore, we will also face competition from

manufacturers of more powerful internal combustion engines powered by natural gas and diesel fuel.

We expect additional competitors may enter the market as well, particularly if we are successful with the Hypertruck platform.

We cannot provide assurances that our stationary generators will be broadly adopted or will provide benefits that overcome their capital costs.

Legal Proceedings

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Regardless of outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors and there can be no assurances that favorable outcomes will be obtained.

Information About Our Executive Officers

The following table and notes set forth information about our executive officers:

Name of Individual Age Position

Thomas Healy (1)

31 Chief Executive Officer

Jon Panzer (2)

57 Chief Financial Officer

Dennis Gallagher (3)

58 Chief Operating Officer

Cheri Lantz (4)

48 Chief Strategy Officer

Jose Oxholm (5)

57 Chief Legal & Compliance Officer

Healy has served as our Chief Executive Officer since October 2020 and prior to this, served as Chief Executive Officer of Hyliion Inc., (“Legacy Hyliion”) since January 26, 2016.

While leading the Company, Mr.

Healy has been awarded numerous patents in the space of electrifying commercial vehicles.

Healy founded Legacy Hyliion while studying to obtain a Master’s in mechanical engineering and had previously founded multiple start-ups during his undergraduate studies.

He took a leave of absence during his Master’s program in 2015 to found Legacy Hyliion.

Healy holds a B.S.

in mechanical engineering with a double-major in engineering and public policy from Carnegie Mellon University.

Panzer has served as Chief Financial Officer since September 2022.

Prior to joining Hyliion, Mr.

Panzer spent 26 years at Union Pacific, one of the nation’s largest railroads.

His most recent position at Union Pacific was Senior Vice President of Intermodal Operations and he also served as Senior Vice President of Technology and Strategic Planning, Vice President and Treasurer, Vice President, Financial Planning and Analysis, and Assistance Vice President, Marketing and Sales.

As head of Union Pacific’s information technology organization, Mr.

Panzer was responsible for managing application development, technology infrastructure and cybersecurity.

Prior to joining Union Pacific, Mr.

Panzer served in the United States Navy as a nuclear engineer.

Panzer holds a B.S.

in electrical engineering from the University of Nebraska, Lincoln and an MBA from Carnegie Mellon.

Gallagher has served as Chief Operating Officer since August 2021.

Gallagher has extensive background in strategic planning, growth initiatives, and process implementation in the commercial vehicle and automation industries.

From October 2017 to August 2021, Mr.

Gallagher worked at Jacobs Vehicle Systems, where he served as President of the industry-leading supplier to the heavy-duty commercial truck market.

Prior to that, he served as Vice President and General Manager for EMEA & India of Kollmorgen, a Danaher company, from August 2014 to December 2017.

Previously in his career, he has held executive roles within Danaher and Fortive where he successfully led a number of global business units.

Gallagher graduated from the University of Lowell with a B.S.

in electrical engineering.

Lantz has served as Chief Strategy Officer since 2022.

Lantz is a seasoned strategy leader who has spent 25 years developing and leading operations and growth strategies for manufacturers in the mobility sector.

Prior to joining the Company, Ms.

Lantz served as the Vice President of Strategy for the Transportations Solution Segment at TE Connectivity, an electronics

manufacturer.

Prior to that role, Ms.

Lantz served as the Chief Strategy Officer and executive leader responsible for advanced and shared engineering and global test labs at Meritor, Inc., a leading manufacturer of axles and brakes to the commercial vehicle industry.

Additionally, Ms.

Lantz has advised companies on growth and operational topics as a strategist for Boston Consulting Group and Booz and Company.

Lantz holds three degrees from the University of Michigan, an MBA from the Ross School of Business with a focus on corporate strategy and economics, a master’s in manufacturing engineering and a B.S.

in chemical engineering.

Oxholm has served as Chief Legal & Compliance Officer since February 2024 and prior to this, served as Vice President, General Counsel, and Chief Compliance Officer since 2020.

Oxholm has extensive experience with complex business transactions, litigation, and new market entries for companies in the automotive and transportation sectors.

From January 2017 to February 2020, Mr.

Oxholm served as Vice President, Deputy General Counsel and Chief Compliance Officer for Meritor, Inc.

Prior to that, Mr.

Oxholm was Senior Vice President, General Counsel and Secretary for LoJack Corporation from 2012 to 2016.

He has a J.D.

from the University of Pennsylvania and a bachelor’s degree from the University of Michigan.

Available Information

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Risks Related to our Business

We may experience significant delays in the design, production and launch of the KARNO generator which could harm our business, prospects, financial condition and operating results.

The KARNO generator is still in the development and testing phase, and commercial deliveries are not expected to begin until late 2024 or later, and may not occur at all.

Initial deployments may not be recognized as revenue, or there may be a need to deploy units at a decreased price or for free to obtain initial customers.

Some of our target customers may be expecting to receive government incentives for deployments and may not purchase our KARNO generators in the event those incentives are delayed or not received.

Any delay in the financing, design, production and launch of the KARNO generator would materially damage our brand, business, prospects, financial condition and operating results.

We are an early-stage company with a history of losses, and expect to incur significant expenses and continuing losses for the foreseeable future.

We incurred a net loss of $153.4 million for the year ended December 31, 2022 and have incurred cumulative net operating losses of $277.3 million during the previous three years ended December 31, 2022.

We believe that we will continue to incur significant operating and net losses each quarter until we are generating positive gross margins from selling our powertrain systems that exceeds our operating expenses.

We do not expect to reach this level of financial performance in 2023, and may not ever.

Even if we are able to successfully develop and sell our electrified powertrain solutions, there can be no assurance that they will be commercially successful.

Our potential profitability is dependent upon the successful development and successful commercial introduction and acceptance of our electrified powertrain solutions, which may not occur.

We will require significant capital to develop and grow our business, including developing, producing and servicing our electrified powertrain solutions, our KARNO generator product, and our brand.

We expect to incur significant expenses, which will impact our profitability and available capital, including costs for research and development efforts, component and service procurement, sales, general and administrative costs, and production, distribution and support of our electrified powertrain solutions.

We also expect to utilize more of our cash to grow working capital as we procure component parts for commercialization of our Hypertruck ERX powertrain system.

Our ability to become profitable in the future will require us to complete the design and development of electrified powertrain solutions that meet projected performance criteria.

We must also successfully market our electrified powertrain solutions and services to customers, sell our systems at prices needed to achieve positive gross margins and control operating and production costs.

We may need to sell our products at a loss or discounted prices in the near term in order to win initial customer orders and gain the confidence of fleet customers.

If we are unable to efficiently design, produce, market, sell, distribute and service our electrified powertrain solutions or generator, our margins, profitability, and long-term prospects will be materially and adversely affected.

We are in the early stages of developing key commercial relationships with suppliers and customers, and our ability to predict the outcome of those relationships is limited.

The Company is undertaking a significant shift in its business strategy by winding down operations related to the electrified powertrain systems business and focusing on the development and commercialization of the Company's fuel-agnostic KARNO generator technology.

We have historically incurred net losses ($123.5 million and $153.4 million for the years ended December 31, 2023 and 2022, respectively).

We believe that we will continue to incur significant operating and net losses each quarter until we are generating sufficient positive gross margins from sales of KARNO generator products.

We do not expect to achieve this level of financial performance through 2024, and we may never achieve such performance.

Additionally, in connection with our new business strategy, we expect to adop t initiatives in an effort to improve operating efficiencies and lower our cost structure.

There may be unanticipated difficulties in implementing one or more of these initiatives, and we may not ultimately realize the full benefits of, or be able to sustain the benefits anticipated by, these initiatives.

We will require significant capital to develop and grow our business, including developing, producing and servicing KARNO generators and our brand.

We expect to incur significant expenses, which will impact our profitability and available capital,

including costs for research and development efforts, component and service procurement, sales, general and administrative costs, and production, distribution and support.

Our ability to become profitable in the future will require us to complete the design, development and testing of our KARNO generator while achieving projected performance criteria.

We must also successfully market our KARNO generator and related services to customers, sell our systems at prices needed to achieve positive gross margins, and control operating and production costs.

We may need to sell our products at a loss or discounted prices in the short term in order to win initial customer orders and gain the confidence of potential customers.

If we are unable to efficiently design, produce, market, sell, distribute and service our KARNO generator, our margins, profitability, and long-term prospects will be materially and adversely affected.

We have no experience manufacturing the KARNO generator on a large-scale basis and if we do not develop adequate manufacturing processes and capabilities to do so, or if we fail to identify qualified outsourced manufacturing partners, in a timely manner, we will be unable to achieve our growth and profitability objectives.

We have not yet manufactured the KARNO generator on a large scale but in order to produce the generator at affordable prices, we will have to manufacture at scale which may require future printer throughput increases, reduction of printer or material costs, and volume-driven cost reductions on other generator components.

We do not know whether we will timely receive the printers we need to manufacture KARNO at scale or whether the printers we intend to use will be able to adequately accommodate capacity needs.

We do not know whether our plans to scale the product will be implemented such that they will satisfy the requirements of our customers and the anticipated markets for the KARNO generator.

If the Company is unable to develop these manufacturing capabilities internally, we may be unable to identify outsourced manufacturing partners who have the technical capability to produce KARNO generators or who can do so on commercially acceptable terms.

Our failure to develop manufacturing processes and capabilities in a timely manner could prevent us from achieving our growth and profitability objectives.

Significant markets for our KARNO generator may develop more slowly than we anticipate or may never develop at all.

This would significantly harm our revenues and may cause us to be unable to recover the losses we have incurred and expect to incur in the development of our products.

The distributed power generation industry is still an emerging market in an otherwise mature and heavily regulated energy utility industry, and we cannot be sure that potential customers will accept distributed generation broadly, or stationary power generators including our KARNO generators, specifically.

Significant markets for distributed power generation may never develop or they may develop more slowly than we anticipate.

Enterprises may be unwilling to adopt our KARNO generator technology over traditional or competing power sources like electricity from the grid, for any number of reasons, including the perception that our technology or our Company is unproven, lack of confidence in our business model, the unavailability of third-party service providers to operate and maintain KARNO generators, and lack of awareness of our product or their perception of regulatory or political headwinds.

Market opportunity estimates and growth forecasts, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate.

In particular, estimates and forecasts relating to the size and expected growth of electricity demand in our target markets, our capacity to address this demand, the adoption of our KARNO generator technology, and our pricing may prove to be inaccurate.

Any inaccuracies or errors in our estimates or third-party estimates of market opportunity may cause us to misallocate capital and other business resources, which could harm our business.

The addressable market we estimate may not materialize for many years, if ever, and even if the markets in which we compete meet size estimates and growth forecasts, our business could fail to grow at similar rates, if at all.

Any such delay or failure in the development of potential markets would significantly harm our revenues and we may be unable to recover the losses we have incurred and expect to continue to incur in the acquisition and development of KARNO generator technology.

If this were to occur, we may never achieve profitability and our business could fail.

Whether or not end-users will want to implement and use stationary power generators and other distributed generation technologies may be affected by many factors, some of which are beyond our control, including:

the emergence of more competitive technologies and products;

alternative technologies and products that could render our products obsolete;

the future cost of fuels used by our products;

the regulatory requirements of agencies with respect to energy products;

government support by way of legislation, tax incentives, policies or otherwise, relating to our technology;

the manufacturing and supply costs for components and systems for the KARNO generator;

the perceptions of consumers regarding the safety of our products;

the willingness of consumers to try new technologies;

and the continued development and improvement of existing power technologies.

We may not be able to successfully engage target customers or convert early-stage products into meaningful orders in the future.

Our success, and our ability to increase revenue and operate profitably, depends in part on our ability to identify target customers and to convert early-stage products into meaningful orders in the future.

If we are unable to meet our customers’ performance requirements or industry specifications, identify target customers or convert early-stage products into meaningful orders, our business, prospects, financial condition and operating results would be materially adversely affected.

we or our customers find that our KARNO generator does not perform as expected or if our orders for KARNO generators do not materialize in large numbers, we may cease to distribute our KARNO generators, or recall some or all of our product, and future distributions may be delayed or cease for some period of time or indefinitely.

Demand for our products will ultimately depend on end user customers, some of whom operate in highly cyclical industries, which may subject us to the performance of their industries and can result in uncertainty and significantly impact the demand for our products, which could have a material adverse effect on our business, prospects, financial condition and operating results.

Demand for our products will ultimately depend on our end-user customers, some of whom operate in highly cyclical industries.

Demand in these industries is impacted by numerous factors, including commodity prices, infrastructure spending, housing starts, real estate equity values, interest rates, consumer spending, fuel costs, energy demands, municipal spending and commercial construction, among others.

Increases or decreases in these variables may significantly impact the demand for our products.

If we are unable to accurately predict demand, we may be unable to meet our customers’ needs, resulting in the loss of potential sales, or we may produce excess products, resulting in increased inventories and overcapacity in our production facilities, increasing our unit production cost and decreasing our operating margins.

Additionally, our end user customers may be required to obtain certifications for use of the KARNO generator on their premises or other intended locations and the delay or failure of these customers to obtain such certifications could have a material impact on our business and operating results.

If we fail to manage our growth effectively, including failing to attract qualified personnel, we may not be able to develop, produce, market and sell our distributed generation products successfully.

Any failure to manage our growth effectively could materially and adversely affect our business, prospects, operating results and financial condition.

We intend to expand our operations in future years.

We intend to continue to hire additional personnel, including engineers, design and production personnel and service technicians for our KARNO generator design, development, distribution and service support.

Competition for individuals with experience designing, producing and servicing distributed generators and their software is intense, and we may not be able to attract, integrate, train, motivate, or retain additional highly qualified personnel in the Austin, Texas and Cincinnati, Ohio areas where we are located.

Due to the specific skills required and the strong job market nationally, we may experience increased compensation, recruiting and relocation expenses to achieve our hiring goals.

The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm our business, prospects, financial condition and operating results.

We are dependent on our suppliers, some of which are single or limited-source suppliers, and the inability of these suppliers to deliver necessary components for our generator at prices, volumes, and performance specifications acceptable to us could have a material adverse effect on our business, prospects, financial condition and operating results.

We rely on third-party suppliers, some of whom are single-source suppliers, for the provision and development of many of the key components and materials used in our KARNO generator system, such as linear electric machine component suppliers.

Any failure of these suppliers or outsourcing partners to perform could require us to seek alternative suppliers or to expand our production capabilities, which could incur additional costs and have a negative impact on our cost or supply of components or finished goods.

While we plan to obtain components from multiple sources whenever possible, some of the components used in our generator may be purchased by us from a single source.

Our third-party suppliers may not be able to meet their product specifications and performance characteristics or our desired specifications and pricing, which would impact our ability to achieve our product specifications and performance characteristics.

Additionally, our third-party suppliers may be unable to obtain required certifications for their products for which we plan to use or provide warranties that are necessary for our solutions.

If we are unable to obtain components and materials used in our generator solution from our suppliers or if our suppliers decide to create or supply a competing product, our business could be adversely affected.

While we believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable to do so in the short term (or at all) at prices or quality levels that are favorable to us, which could have a material adverse effect on our business, prospects, financial condition and operating results.

We are in the early stages of developing key commercial relationships with suppliers, and our ability to predict the outcome of those relationships is limited.

We are in the process of developing relationships to accelerate the development, production and sale of our solutions.

We have deployed Hybrid and Hypertruck ERX system units to certain companies we expect to be customers in the future;

However, all of our commercial relationships are in the early stages of development and we do not have the ability to predict with certainty the outcome of those relationships.

Our suppliers may face delays or be unable to meet our business requirements and standards at the quantity, quality, timeliness and price levels needed for our business.

The entities that we expect to be customers in the future may decide not to do business with us.

Because we are still getting to know our suppliers and customers, these relationships could result in controversies or even litigation, which could have a material adverse effect on our ability to continue our plans for strategic growth and ultimately our business results.

We are highly dependent on the services of Thomas Healy, our Chief Executive Officer, and if we are unable to retain Mr.

Healy, attract and retain key employees and hire qualified management, technical and vehicle engineering personnel, our ability to compete could be harmed.

Our success depends, in part, on our ability to retain our key personnel.

We are highly dependent on the services of Thomas Healy, our Chief Executive Officer and largest stockholder.

Healy is the source of many of the ideas and execution driving us.

Healy were to discontinue his service with us due to death, disability or any other reason, we would be significantly disadvantaged.

The unexpected loss of or failure to retain one or more of our key employees could adversely affect our business.

If we fail to manage our growth effectively, including failing to attract qualified personnel, we may not be able to develop, produce, market and sell our electrified powertrain solutions successfully.

Any failure to manage our growth effectively could materially and adversely affect our business, prospects, operating results and financial condition.

We intend to expand our operations significantly.

We intend to continue to hire additional personnel, including software engineers, design and production personnel and service technicians for our electrified powertrain solutions.

Because our electrified powertrain solutions are based on a different technology platform than traditional internal combustion engines, individuals with sufficient training in alternative fuel and electric vehicles may not be available to hire, and as a result, we may need to expend significant time and expense training any newly hired employees.

Competition for individuals with experience designing, producing and servicing electrified vehicles and their software is intense, and we may not be able to attract, integrate, train, motivate, or retain additional highly qualified personnel, particularly with respect to software engineers in the Austin, Texas area where we are headquartered.

Due to the specific skills required, the strong job market nationally and the high cost of living and competition in the Austin, Texas area, we may experience increased compensation, recruiting and relocation expenses to achieve our hiring goals.

The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm our business, prospects, financial condition and operating results.

Because we are still getting to know our suppliers, these relationships could result in controversies or even litigation, which could have a material adverse effect on our ability to continue our plans for strategic growth and ultimately our business results.

Increases in costs, disruption of supply or shortage of our components could harm our business.

Once we begin commercial production of our KARNO generator, we may experience increases in the cost or a sustained interruption in the supply or shortage of our components.

Any such increase or supply interruption could materially negatively impact our business, prospects, financial condition and operating results.

The prices for our components fluctuate depending on

market conditions and global demand and could adversely affect our business, prospects, financial condition and operating results.

Risks Related to our Products

If our electrified powertrain solutions fail to perform as expected, our ability to develop, market and sell our electrified powertrain solutions could be harmed.

Our electrified powertrain solutions may contain defects in design and production that may cause them not to perform as expected or they may require repair.

There can be no assurance that we will be able to detect and fix any defects in our electrified powertrain solutions.

Our electrified powertrain solutions may not meet customers’ expectations or perform competitively with other vehicles that may become available.

Any product defects or any other failure of our electrified powertrain solutions and software to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, negative publicity, product liability claims and significant warranty and other expenses and could have a material adverse impact on our business, prospects, financial condition and operating results.

The performance characteristics of our electrified powertrain solutions, including fuel economy, range between refueling, and emissions levels, may vary, including due to factors outside of our control.

Our electrified powertrain solutions are still being designed and developed, and there are no assurances that they will be able to meet their projected performance characteristics, including fuel economy, range between refueling, and emissions levels.

External factors (such as driver behavior, weather conditions, hardware efficiency, payload and terrain) may also impact the performance characteristics of our electrified powertrain solutions related to estimated fuel savings, GHG emissions and fuel economy of vehicles installed with our electrified powertrain solutions.

These external factors as well as any operation of our electrified powertrain solutions other than as intended, may result in emissions levels that are greater than we expect.

The ability of our electrified powertrain solutions to have a net-carbon-negative profile, will depend on the availability of renewable natural gas as well as the infrastructure necessary to purchase RNG through fuel providers.

Any limitation on the ability to purchase RNG, such as a decrease or a limitation on the number of natural gas fueling stations or limitation on the production of natural gas and RNG in particular, will negatively impact the anticipated carbon intensity profile of our electrified powertrain solutions.

In addition, the carbon intensity profiles could vary based on the source of RNG, which could reduce a fleet’s ability

to have favorable carbon intensity scores.

Due to these factors, there can be no guarantee that the operators of vehicles using our electrified powertrain solutions will realize the expected fuel savings, range and fuel economy and GHG emission reductions.

Our beliefs regarding the ability of our electrified powertrain solutions to limit carbon intensity and reduce GHG emissions and contribute to global decarbonization may be based on materially inaccurate assumptions.

Our beliefs regarding our ability to reduce carbon intensity and GHG emissions are based on certain assumptions, including, but not limited to, our projections of the use of natural gas and renewable natural gas in the future, fuel types used, the ability to obtain carbon credits, driver behavior and our electrified powertrain solutions’ efficiencies and performance.

To the extent our assumptions are materially incorrect or incomplete, it could adversely impact our business, prospects, financial condition and operating results.

In addition, if our assumptions regarding the ability of our solutions to limit carbon intensity and reduce GHG emissions from trucking operations are materially incorrect or incomplete, or if our beliefs regarding the availability of our products are materially incorrect or incomplete, it is possible that our competitors’ technology may be better at limiting carbon intensity and reducing GHG emissions in certain circumstances and in certain markets.

We have limited experience servicing our electrified powertrain solutions and our integrated software.

If our KARNO generators fail to perform as expected, our ability to develop, market and sell our products could be harmed.

Our KARNO generators may contain defects in design and production that may cause them not to perform as expected or they may require repair or not achieve the expected low maintenance characteristics.

There can be no assurance that we will be able to detect and fix any defects in our KARNO generators.

Our products may not meet customers’ expectations or perform competitively with other distributed generators that may become available.

Any product defects or any other failure of our KARNO generator and software to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, negative publicity, product liability claims and significant warranty and other expenses and could have a material adverse impact on our business, prospects, financial condition and operating results.

We have limited experience servicing our KARNO generators and our integrated software.

If we are unable to address the service requirements of our customers, our business, prospects, financial condition and operating results may be materially and adversely affected.

We have limited experience in servicing our electrified powertrain solutions and expect to increase our servicing capabilities as we begin commercial production of our electrified powertrain solutions.

Servicing hybrid and electric vehicles is different than servicing vehicles with internal combustion engines and traditional mechanical powertrains and requires specialized skills, including high voltage training and servicing techniques.

We plan to partner with one or more third party service providers to perform some or all of the servicing on our electrified powertrain solutions, and there can be no assurance that we will be able to enter into an acceptable arrangement with any such third-party provider.

We have limited experience in servicing our KARNO generators and expect to increase our servicing capabilities as we begin commercial production.

Servicing distributed generators requires specialized skills, including high voltage training and servicing techniques.

We may partner with one or more third party service providers to perform some or all of the servicing on our electrified powertrain solutions, and there can be no assurance that we will be able to enter into an acceptable arrangement with any such third-party provider.

Our ability to provide effective customer support is largely dependent on our ability to attract, train and retain qualified personnel with experience in supporting customers on platforms such as ours.

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If we are unable to successfully address the service requirements of our customers or establish a market perception that we do not maintain high-quality support, we may be subject to claims from our customers, including loss of revenue or damages, and our business, prospects, financial condition, and operating results may be materially and adversely affected.

Our electrified powertrain solutions rely on software and hardware that is highly technical, and if these systems contain errors, bugs or vulnerabilities, or if we are unsuccessful in addressing or mitigating technical limitations in our systems, our business could be adversely affected.

Our electrified powertrain solutions rely on software and hardware to store, retrieve, process and manage immense amounts of data.

Such software and hardware, that is developed or maintained internally or by third parties, is highly technical and complex and will require modification and updates over the life of the vehicle.

Our software and hardware may contain, errors, bugs or vulnerabilities, and our systems are subject to certain technical limitations that may compromise our ability to meet our objectives.

Some errors, bugs or vulnerabilities inherently may be difficult to detect and may only be discovered after the code has been released for external or internal use.

If we are unable to prevent or effectively remedy errors, bugs, vulnerabilities or defects in our software and hardware, we may suffer damage to our reputation, loss of customers, loss of revenue or liability for damages, any of which could adversely affect our business and financial results.

We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

Product liability claims, even those without merit or those that do not involve our products, could harm our business, prospects, financial condition and operating results.

The automobile industry in particular experiences significant product liability claims, and we face inherent risk of exposure to claims in the event our electric powertrain solutions do not perform or are claimed to not have performed as expected.

As is true for other commercial vehicle suppliers, we expect in the future that our electrified powertrain solutions will be installed on vehicles that will be involved in crashes resulting in death or personal injury.

Additionally, product liability claims that affect our competitors may cause indirect adverse publicity for us and our products.

Our risks in this area are particularly pronounced given the relatively limited number of electrified powertrain solutions delivered to date and limited field experience of our products.

A successful product liability claim against us could require us to pay a substantial monetary award.

In some jurisdictions, we may self-insure against the risk of product liability claims for

vehicle exposure, meaning that any product liability claims will likely have to be paid from company funds, not by insurance.

In some jurisdictions, we may self-insure against the risk of product liability claims for vehicle exposure, meaning that any product liability claims will likely have to be paid from company funds, not by insurance.

Product liability claims could have a material adverse effect on our brand, business and financial condition.

Insufficient warranty reserves to cover future warranty claims could materially adversely affect our business, prospects, financial condition and operating results.

We maintain warranty reserves to cover warranty-related claims of our electrified powertrain solutions.

If our warranty reserves are inadequate to cover future warranty claims on our vehicles, or our parts suppliers fail to provide warranties for, or honor warranty claims against, their parts, our business, prospects, financial condition and operating results could be materially and adversely affected.

We may become subject to significant and unexpected warranty expenses as well as claims from our customers, including loss of revenue or damages.

There can be no assurances that then-existing warranty reserves will be sufficient to cover all claims.

Risks Related to our Financial Results

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• our ability to achieve favorable pricing from suppliers for component purchases;

• our ability to obtain required certifications for our powertrain systems;

• our ability to obtain required certifications for our KARNO generators;

• developments involving our competitors;

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As a result of these factors, we believe that period-to-period comparisons of our financial results, especially in the short term, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance.

Moreover, our financial results may not meet expectations of equity research analysts, ratings agencies or investors, who may be overly focused on quarterly financial results or financial valuation models that do not match our expected growth plan.

Moreover, our financial results may not meet expectations of equity research analysts, ratings agencies or investors, who may be overly

focused on quarterly financial results or financial valuation models that do not match our expected growth plan.

If any of this occurs, the trading price of our common stock could fall substantially, either suddenly or over time.

Risks Related to our Customers

We may not be able to successfully engage target customers or convert early trial deployments with truck fleets into meaningful orders or additional deployments in the future.

Our success, and our ability to increase revenue and operate profitably, depends in part on our ability to identify target customers and to convert early trial deployments with truck fleets into meaningful orders or additional deployments in the future.

If we are unable to meet our customers’ performance requirements or industry specifications, identify target customers or convert early trial deployments into meaningful orders or obtain additional deployments in the future, our business, prospects, financial condition and operating results would be materially adversely affected.

Moreover, if we or our customers find that our Hybrid system does not perform as expected or if our orders for Hybrid systems do not materialize in large numbers, we may cease to distribute our Hybrid system, or recall some or all of our product, and future distributions may be delayed or cease for some period of time or indefinitely.

We plan to accept reservation orders for the sale of our electrified powertrain solutions that are cancellable, and our initial pre-launch sales order and reservations for Hypertruck ERX-equipped trucks are cancellable.

Our Hypertruck ERX electrified powertrain solution is still in the development and testing phase and commercial deliveries are not expected to begin until late 2023 or later, and may not occur at all.

As a result, we plan to accept reservation orders for trucks equipped with our Hypertruck ERX system that are cancellable by customers without penalty.

As a result, no assurance can be made that reservations will not be cancelled or that reservations will result in the purchase of our electrified powertrain solutions, and any such cancellations could harm our business, prospects, financial condition and operating results.

We may also enter into contracts for the sale of our electrified powertrain solutions that include various cancellation rights in favor of the customer.

For example, in May 2020, we entered into a pre-launch sales agreement (the “Agility Pre-Launch Agreement”) with Agility Logistics Cargo Transport Co.

WLL (“Agility Transport”), a company organized under the laws of and based in Kuwait and a subsidiary of Agility Public Warehousing Company K.S.C.P.

for up to 1,000 trucks equipped with our Hypertruck ERX system in one or more future purchase orders, subject to certain testing and performance requirements and

termination rights, including a right to terminate the Agility Pre-Launch Agreement prior to purchasing all or any portion of Agility Transport’s pre-order.

The Agility Pre-Launch Agreement does not specify the terms or period upon which these purchase orders may be entered into, such that our sale of Hypertruck ERX system to Agility Transport is subject to the parties reaching further agreement on the terms of the purchase agreements.

Any termination, reduction or dispute related to this agreement or others similar to it could harm our business, prospects, financial condition and operating results.

We intend to sell our electrified powertrain solutions to large commercial vehicle OEM customers and large-volume private-fleet and for-hire trucking customers.

The failure to obtain such customers, loss of sales to such customers, ability to sell full trucks or failure to negotiate acceptable terms in contract negotiations could have an adverse impact on our business.

We intend to sell our electrified powertrain solutions to commercial vehicle OEMs and other large volume customers including private and for-hire trucking fleets.

We may not be able to establish relationships with such OEMs or large volume customers if customer demand is not as high as we expect or if commercial vehicle OEMs face pressure from their existing suppliers not to purchase our electrified powertrain solutions.

We may enter into long-term contracts with certain of these commercial vehicle OEMs and other large volume customers, who have substantial bargaining power with respect to price and other commercial terms, and any long-term contracts would be subject to renegotiation and renewal from time to time.

Failure to obtain new customers, loss of all or a substantial portion of sales to any customers for whatever reason (including, but not limited to, loss of contracts or failure to negotiate acceptable terms in contract renewal negotiations, loss of market share by these customers, insolvency of such customers, reduced or delayed customer requirements, plant shutdowns, strikes or other work stoppages affecting production by such customers), or continued reduction of prices to these customers could have a significant adverse effect on our financial results.

There can be no assurance that we will be able to obtain or retain large volume customers or that we will be able to offset any reduction of prices to these customers with reductions in our costs or by obtaining new customers.

Demand for our products will ultimately depend on our end-user customers, some of whom operate in highly cyclical industries.

Increases or decreases in these variables may significantly impact the demand for our products.

Risks Related to our Production Processes and Supply Chain

We face significant barriers to produce our electrified powertrain solutions, and if we cannot successfully overcome those barriers our business will be negatively impacted.

The commercial trucking industry has traditionally been characterized by significant barriers to entry, including the ability to meet performance requirements or industry specifications, acceptance by OEMs and our end users, large capital requirements, investment costs of design and production, long lead times to bring components to market from the concept and design stage, the need for specialized design and development expertise, regulatory requirements, establishing a brand name and image and the need to establish sales capabilities.

If we are not able to overcome these barriers, our business, prospects, financial condition and operating results will be negatively impacted and our ability to grow our business will be harmed.

Our success will depend on our ability to economically outsource the production, assembly and installation of our electrified powertrain solutions at scale, and our ability to develop and produce electrified powertrain solutions of sufficient quality and appeal to customers on schedule and at scale is unproven.

Our business depends in large part on our ability to execute our plans to develop, produce, install, assemble, market, sell, and service our electrified powertrain solutions.

We currently produce our Hybrid system at our facility in Cedar Park, Texas and expect to begin production of our Hypertruck ERX system in late 2023, at the earliest.

Over time, we anticipate we will shift production to our outsourcing partners’ facilities.

We anticipate that a significant concentration of this production, assembly and installation will be performed by a small number of outsourcing partners.

While these arrangements can lower operating costs,

they also reduce our direct control over production and distribution.

Such diminished control may have an adverse effect on the quality or quantity of products or services, or our flexibility to respond to changing conditions.

Our continued development of our electrified powertrain solutions is and will be subject to risks, including with respect to:

• the equipment we plan to use being able to accurately produce our electrified powertrain solutions within specified design tolerances;

• the compatibility of our electrified powertrain solutions with existing and future commercial vehicle designs;

• long- and short-term durability of the components in our electrified powertrain solutions in the day-to-day wear and tear of the commercial trucking environment;

• compliance with environmental, workplace safety and similar regulations;

• the ability or willingness of our suppliers to deliver key components to our desired specifications, in a timely manner, on acceptable terms, and in the quantities we require;

• delays in delivery of final component designs to our suppliers;

• our ability to attract, recruit, hire and train skilled employees;

• quality controls, particularly as we plan to expand our production capabilities;

• delays or disruptions in our supply chain;

• other delays and cost overruns;

• our ability to secure additional funding if necessary.

We and our future production partners have no experience to date in high-volume production of our electrified powertrain solutions.

We do not know whether we or our future production partners will be able to develop efficient, automated, low-cost production capabilities and processes and reliable sources of component supply, that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes required to successfully mass market our electrified powertrain solutions or whether we or our production partners will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond our control such as problems with suppliers and vendors, or in time to meet our vehicle commercialization schedules or to satisfy the requirements of customers.

Any failure to develop such production processes and capabilities within our projected costs and timelines could have a material adverse effect on our business, prospects, financial condition and operating results.

We may experience significant delays in the design, production and launch of our electrified powertrain solutions, which could harm our business, prospects, financial condition and operating results.

Our electrified powertrain solutions are still in the development and testing phase, and commercial deliveries of the Hypertruck ERX system are not expected to begin until late 2023 or later, and may not occur at all.

Any delay in the financing, design, production and launch of our electrified powertrain solutions, including future production of our Hybrid system and Hypertruck ERX system at our outsourcing partners, could materially damage our brand, business, prospects, financial condition and operating results.

We are dependent on large commercial vehicle OEMs and producers of de-contented chassis to provide vehicles for our electrified powertrain solutions.

Because we do not manufacture complete commercial vehicles, we are dependent on commercial vehicle OEMs to provide de-contended chassis (chassis with conventional powertrain components removed) platforms for installing our electrified powertrain solutions.

The most favorable financial model for deployment of our products is for OEMs to directly install our products in their commercial vehicles when they are being assembled.

If OEMs are unable or unwilling to integrate the installation of our electrified powertrain solutions into their commercial vehicle production lines, we may have to establish other OEM relationships or rely on commercial truck upfitting and modification companies to do this work.

To the extent that there are limitations on the availability of de-contented chassis, either due to the unwillingness or inability of OEMs and producers to produce and provide them to us or our installation partners, or a change in governmental regulations or policies, we would either need to develop our own commercial vehicle on which to install our electrified powertrain solutions or install our products into commercial vehicles that would have to be de-contented.

Either case could have a negative impact on our ability to sell our electrified powertrain solutions at the prices, margins, or in the timeframes that we anticipate.

Additionally, if commercial vehicle OEMs limit or fail to provide a warranty on vehicles with our electrified powertrain solutions, we will incur additional costs by contracting with a third party to provide warranty services.

Any of the foregoing would have a material adverse effect on our business, prospects, financial condition and operating results.

We will rely on third parties, including commercial truck upfitting and modification companies and commercial vehicle OEMs, to install our electrified powertrain solutions in vehicles, which is subject to risks.

We intend to enter into agreements with commercial truck upfitting and modification companies and commercial vehicle OEMs to install our electrified powertrain solutions.

Using third-party contract manufacturers and installers for the production and installation of our electrified powertrain solutions is subject to risks with respect to operations that are outside our control.

could experience delays if our outsourcing partners do not meet agreed upon timelines or experience capacity constraints that make it impossible for us to fulfill purchase orders on time or at all.

The installation of our solutions may also void the warranty of a vehicle or a vehicle’s components, such as the engine or transmission, which may reduce customer demand for our solutions.

Our ability to successfully build a premium brand could also be adversely affected by perceptions about the quality of our outsourcing partners’ products.

In addition, although we are involved in each step of the supply chain, production and installation processes, because we also rely on our outsourcing partners and third parties to meet our quality standards, there can be no assurance that the final product will meet expected quality standards.

We are dependent on our suppliers, some of which are single or limited-source suppliers, and the inability of these suppliers to deliver necessary components of our vehicles at prices, volumes, and performance specifications acceptable to us could have a material adverse effect on our business, prospects, financial condition and operating results.

We rely on third-party suppliers, some of whom are single-source suppliers, for the provision and development of many of the key components and materials used in our electrified powertrain solutions, such as natural gas generators.

While we plan to obtain components from multiple sources whenever possible, some of the components used in our vehicles will be purchased by us from a single source.

Our third-party suppliers may not be able to meet their product specifications and performance characteristics or our desired specifications, performance and pricing, which would impact our ability to achieve our product specifications and performance characteristics as well.

Additionally, our third-party suppliers may be unable to obtain required certifications for their products for which we plan to use or provide warranties that are necessary for our solutions.

If we are unable to obtain components and materials used in our electrified powertrain solutions from our suppliers or if our suppliers decide to create or supply a competing product, our business could be adversely affected.

Increases in costs, disruption of supply or shortage of our components, particularly battery cells, could harm our business.

Once we begin commercial production of our electrified powertrain solutions, we may experience increases in the cost or a sustained interruption in the supply or shortage of our components.

Any such increase or supply interruption could materially negatively impact our business, prospects, financial condition and operating results.

The prices for our components fluctuate depending on market conditions and global demand and could adversely affect our business, prospects, financial condition and operating results.

Any disruption in the supply of battery cells could temporarily disrupt production of our electrified powertrain solutions until a different supplier is fully qualified.

Moreover, battery cell manufacturers may refuse to supply electric vehicle manufacturers if they determine that the vehicles are not sufficiently safe.

Furthermore, fluctuations or shortages in petroleum and other economic conditions may cause us to experience significant increases in freight charges.

Substantial increases in the prices for raw materials may increase the cost of our components and consequently, the costs of products.

There can be no assurance that we will be able to recoup increasing costs of our components by increasing prices, which could reduce our margins.

Risks Related to Our Industry and Competitive Landscape

Our future growth is dependent upon the commercial trucking industry’s willingness to adopt alternative fuel, hybrid and electric vehicles.

Our growth is highly dependent upon the adoption of alternative fuel, hybrid and electric vehicles by the commercial trucking industry.

If the market for alternative fuel, hybrid and electric vehicles and our electrified powertrain solutions does not develop at the rate or in the manner or to the extent that we expect, or if critical assumptions we have made regarding the efficiency, range or performance of our electrified powertrain solutions are incorrect or incomplete, our business, prospects, financial condition and operating results will be harmed.

The market for alternative fuels, hybrid and electric vehicles is new and untested and is characterized by rapidly changing technologies, price competition, numerous competitors, evolving government regulation and industry standards and uncertain customer demands and behaviors.

Although we hope to be among the first to bring electrified powertrain solutions to market, competitors have already begun to sell electrified vehicles and may gain a competitive advantage over us.

We face intense competition in trying to be among the first to bring electrified powertrain solutions to market, and we expect competition to intensify in light of increased demand and regulatory push for alternative fuel and electric vehicles.

Most of our current and potential competitors have greater financial, technical, manufacturing, marketing and other resources than we do.

They may be able to deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their alternative fuel and electric truck programs.

Additionally, our competitors also have greater name recognition, longer operating histories, larger sales forces, broader customer and industry relationships and other resources than we do.

These competitors also compete with us in recruiting and retaining qualified research and development, sales, marketing and management personnel, as well as in acquiring technologies complementary to, or necessary for, our

Additional mergers and acquisitions may result in even more resources being concentrated in our competitors.

We cannot provide assurances that our electrified systems will be the first to market and there are no assurances that customers will choose vehicles with our electrified systems over those of our competitors, or over diesel powered trucks.

Numerous companies including Cummins, Daimler, Dana, Navistar, PACCAR, Volvo, Tesla, Nikola, Lion Electric, Hyzon and other commercial vehicle manufacturers have announced their plans to bring Class 8 semi-truck BEVs or FCEVs to the market.

Furthermore, we will also face competition from manufacturers of internal combustion engines powered by diesel fuel and natural gas.

We expect additional competitors to enter the industry as well.

Developments in alternative technology or improvements in the internal combustion engine may adversely affect the demand for our electrified powertrain solutions.

We expect to face significant competition in the distributed generation market.

Our KARNO generators will compete with a broad range of companies and technologies, including traditional energy suppliers, such as public utilities, and other energy providers utilizing traditional co-generation systems, nuclear, hydro, coal or geothermal power, companies utilizing intermittent solar or wind power paired with storage, and other commercially available stationary power generation technologies, including fuel cells and diesel generators.

Many of our competitors, such as traditional utilities and other companies offering distributed generation products, have longer operating histories, customer incumbency advantages, access to and influence with local and state governments, and access to more capital resources than us.

Significant developments in alternative technologies, such as energy storage, wind, solar or hydro power generation, or improvements in the efficiency or cost of traditional energy sources, including coal, oil, natural gas used in combustion, or nuclear power, may materially and adversely affect our business and prospects in ways we cannot anticipate.

We may also face new competitors who are not currently in the market, including companies with newer or better technologies or products, larger providers or traditional utilities or other existing competitors that may enter our market segments.

If we fail to adapt to changing market conditions and to compete successfully with grid electricity or new competitors, our growth will be limited, which would adversely affect our business results.

Developments in alternative technology or improvements in distributed generation products may adversely affect the demand for our KARNO generators.

Significant developments in alternative technologies, such as battery cells, advanced diesel, improved natural gas engines, new power generation technology or alternate fuel sources or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business, prospects, financial condition and operating results in ways we do not currently anticipate.

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Risks Related to Technology, Data and Privacy-Related Matters

We are subject to cybersecurity risks to operational systems, security systems, infrastructure, integrated software in our electrified powertrain solutions and customer data processed by us or third-party vendors or suppliers and any material failure, weakness, interruption, cyber event, incident or breach of security could prevent us from effectively operating our business.

We collect, store, transmit and otherwise process customer, driver, employee and others’ data as part of our business operations, which may include personal data or confidential or proprietary information.

We are subject to cybersecurity risks to operational systems, security systems, infrastructure, and customer data processed by us or third-party vendors or suppliers and any material failure, weakness, interruption, cyber event, incident or breach of security could prevent us from effectively operating our business.

We collect, store, transmit and otherwise process customer, employee and others’ data as part of our business operations, which may include personal data or confidential or proprietary information.

We also work with partners and third-party service providers or vendors that collect, store and process such data on our behalf in connection with our business.

There can be no assurance that any security measures that we or our third-party service providers or vendors have implemented will be effective against current or future security threats.

We are at risk for interruptions, outages and breaches of:

(a) operational systems;

(b) facility security systems;

in each case owned by us or our third-party vendors or suppliers as well as (a) the integrated software in our electrified powertrain solutions;

or (b) customer or driver data that we process or our third-party vendors or suppliers process on our behalf.

We are at risk for interruptions, outages and breaches of our operational systems, facility security systems, transmission control modules or other in-product technology;

in each case owned by us or our third-party vendors or suppliers as well as the integrated software in our KARNO generators;

or customer data that we process or our third-party vendors or suppliers process on our behalf.

The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time.

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We have designed, implemented and tested security measures intended to prevent unauthorized access to our information technology networks, our electrified powertrain solutions and related systems.

Any unauthorized access to or control of our electrified powertrain solutions, or any loss of customer data, could result in legal claims or proceedings and remediation of such problems could result in significant, unplanned capital expenditures.

Inability to leverage vehicle and customer data could impact our software algorithms and impact research and development operations.

We rely on data collected from the use of fleet vehicles outfitted with our products, including vehicle data and data related to battery usage statistics.

We use this data in connection with our software algorithms and the research, development and analysis

of our products.

Our inability to obtain this data or the necessary rights to use this data could result in delays or otherwise negatively impact our research and development efforts.

Any unauthorized access to or control of our electrified powertrain solutions, or any loss of customer data,

could result in legal claims or proceedings and remediation of such problems could result in significant, unplanned capital expenditures.

We may need to defend ourselves against patent, copyright or trademark infringement claims or trade secret misappropriation claims, which may be time-consuming and cause us to incur substantial costs.

Companies, organizations or individuals, including our competitors, may own or obtain patents, trademarks or other proprietary rights that would prevent or limit our ability to make, use, develop or sell our electrified powertrain solutions, which could make it more difficult for us to operate our business.

Companies, organizations or individuals, including our competitors, may own or obtain patents, trademarks or other proprietary rights that would prevent or limit our ability to make, use, develop or sell our KARNO generator and other products, which could make it more difficult for us to operate our business.

We may receive inquiries from patent, copyright or trademark owners inquiring whether we infringe upon their proprietary rights.

We may also be the subject of allegations that we have misappropriated their trade secrets or other proprietary rights.

Companies owning patents or other intellectual property rights relating to battery packs, electric motors, fuel cells or electronic power management systems may allege infringement or misappropriation of such rights.

In response to a determination that we have infringed upon or misappropriated a third party’s intellectual property rights, we may be required to (a) cease development, sales or use of our products that incorporate the asserted intellectual property, (b) pay substantial damages, (c) obtain a license from the owner of the asserted intellectual property right, which license may not be available on reasonable terms or at all or (d) redesign one or more aspects or systems of our electrified powertrain solutions.

Companies owning patents or other intellectual property rights relating to distributed generators may allege infringement or misappropriation of such rights.

In response to a determination that we have infringed upon or misappropriated a third party’s intellectual property rights, we may be required to cease development, sales or use of our products that incorporate the asserted intellectual property, pay substantial damages, obtain a license from the owner of the asserted intellectual property right, which license may not be available on reasonable terms or at all, or redesign one or more aspects or systems of our products.

A successful claim of infringement or misappropriation against us could materially adversely affect our business, prospects, financial condition and operating results.

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Risks Related to Environmental and Regulatory Matters

The unavailability, reduction or elimination of government and economic incentives for alternative fuel use due to policy changes or government regulation could have a material adverse effect on our business, prospects, financial condition and operating results.

Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, the reduced need for such subsidies and incentives due to the perceived success of the electric vehicle industry or other reasons may result in the diminished competitiveness of the alternative fuel and electric vehicle industry generally or our electrified powertrain solutions.

While certain tax credits and other incentives for alternative energy production, alternative fuel and electric vehicles have been available in the past, there is no guarantee these programs will be available in the future.

In particular, we are influenced by federal, state and local tax credits, rebates, grants and other government programs and incentives that promote the use of RNG and natural gas as vehicle fuel.

These include various government programs that make grant funds available for the purchase of natural gas vehicles or encourage low carbon “compliant” transportation fuels (including CNG).

If current tax incentives are not available in the future, our financial position could be harmed.

Additionally, other changes to governmental regulations and policies could impact the competitiveness of natural gas as a fuel source.

For instance, a limitation or ban on extraction methods like fracking, could have a negative impact on the availability and price of natural gas and may adversely affect the growth of the alternative fuel automobile markets.

Additionally, an increase in the economic incentives for other fuel sources or BEVs, such as through the subsidization of other fuel sources or higher permitted weight limits for BEVs or FCEVs or the reduction or elimination of the higher permitted weight limits for

natural gas vehicles, could make our products less competitive.

Such changes in regulations and policies could materially and adversely affect our business, prospects, financial condition and operating results.

Our business could be negatively affected by unfavorable changes to federal or state tax laws or the adoption of federal or state laws or regulations mandating new or additional limits on the production of GHG emissions, the cost of natural gas and “tailpipe” emissions.

Federal or state laws or regulations may be adopted that would impose new or additional limits on the emissions of GHG.

The potential effects of GHG emission limits on our business are subject to significant uncertainties based on, among other things, the timing of the implementation of any new requirements, the required levels of emission reductions, the nature of any market-based or tax-based mechanisms adopted to facilitate reductions, the relative availability of GHG emission reduction offsets, the development of cost-effective, commercial-scale carbon capture and storage technology and supporting regulations and liability mitigation measures, the range of available compliance alternatives, and our ability to demonstrate that our products qualify as a compliance alternative under any new statutory or regulatory programs to limit GHG emissions.

If our solutions are not able to meet future GHG emission limits or perform as well as BEV, FCEV or other alternative fuel vehicles, for instance due to unavailability of RNG in a particular area, a decline in RNG production, an increase in RNG cost, a decrease in credits for RNG or an increase in our cost, our solutions could be less competitive.

Additionally, federal, state or road taxes could be added to natural gas fuel, which would increase the operating cost of our products.

Furthermore, additional federal or state taxes could be implemented on “tailpipe” emissions, which would have a negative impact on the cost of our products and a positive impact on the cost of BEVs and FCEVs relative to our solutions.

Such new federal or state laws or regulations could have a material adverse impact on our business, prospects, financial condition and operating results.

We, our outsourcing partners and our suppliers are or may be subject to substantial regulation and unfavorable changes to, or failure by us, our outsourcing partners or our suppliers to comply with, these regulations could substantially harm our business and operating results.

Our electrified powertrain solutions, and the sale of motor vehicles in general, our outsourcing partners and our suppliers are or may be subject to substantial regulation under international, federal, state and local laws.

We continue to evaluate requirements for licenses, approvals, certificates and governmental authorizations necessary to manufacture, sell or service our electrified powertrain solutions in the jurisdictions in which we plan to operate and intend to take such actions necessary to comply.

We may experience difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental authorizations necessary to manufacture, sell or service their electrified powertrain solutions in any of these jurisdictions.

We continue to evaluate requirements for licenses, approvals, certificates and governmental authorizations necessary to manufacture, sell, or service our KARNO generator in the jurisdictions in which we plan to operate and intend to take such actions necessary to comply.

If we, our outsourcing partners or our suppliers are unable to obtain or comply with any of the licenses, approvals, certifications or other governmental authorizations necessary to carry out our operations in the jurisdictions in which we currently operate, or those jurisdictions in which we plan to operate in the future, our business, prospects, financial condition and operating results could be materially adversely affected.

We expect to incur significant costs in complying with these regulations.

For example, if the battery packs installed in our electrified powertrain solutions are deemed to be transported, we will need to comply with the mandatory regulations governing the transport of “dangerous goods,” and any deficiency in compliance may result in us being prohibited from selling our electrified powertrain solutions until compliant batteries are installed.

Additionally, although we do not believe that our current after-market Hybrid system is required to obtain certifications from the EPA in the event that regulators determine that certifications are necessary, we may be prohibited from selling our Hybrid system until such time as we obtain the required certifications.

Any such required changes to our battery packs or Hybrid system will require additional expenditures and may delay the shipment of vehicles.

In addition, regulations related to the electric and alternative energy vehicle industry are evolving and we face risks associated with changes to these regulations.

To the extent the laws change, our electrified powertrain solutions and our suppliers’ products may not comply with applicable international, federal, state or local laws, which would have an adverse effect on our business.

To the extent the laws change, our products may not comply with applicable international, federal, state or local laws, which would have an adverse effect on our business.

Compliance with changing regulations could be burdensome, time consuming and expensive.

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We are subject to evolving laws, regulations, standards and contractual obligations related to data privacy and security, and our actual or perceived failure to comply with such obligations could harm our reputation, subject us to significant fines and liability or adversely affect our business.

We intend to use our in-vehicle services and functionality to log information about each vehicle’s use in order to aid us in vehicle diagnostics and servicing.

Our customers or their drivers may object to the use of this data, which may increase our vehicle maintenance costs and harm our business prospects.

Collection of our customers’, employees’, and others’ information in conducting our business may subject us to various legislative and regulatory burdens related to data privacy and security that could require notification of data breaches, restrict our use of such information and hinder our ability to acquire new customers or market to existing customers.

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As legislation continues to develop, we will likely be required to expend significant additional resources to continue to modify or enhance our protective measures and internal processes to comply with such legislation.

In addition, non-compliance with these laws or a significant breach of our third-party service providers’ or

vendors’ or our own network security and systems could have serious negative consequences for our business and future prospects, including possible fines, penalties and damages, reduced customer demand for our vehicles and harm to our reputation and brand.

In addition, non-compliance with these laws or a significant breach of our third-party service providers’ or vendors’ or our own network security and systems could have serious negative consequences for our business and future prospects, including possible fines, penalties and damages, reduced customer demand for our vehicles and harm to our reputation and brand.

We are subject to various environmental laws and regulations that could impose substantial costs upon us and cause delays in building our production facilities.

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If we cannot raise additional funds when we need them, our business, prospects, financial condition and operating results could be negatively affected.

The design, production, sale and servicing of our electrified powertrain solutions is capital-intensive.

The design, production, sale and servicing of our products is capital-intensive.

On October 1, 2020, the Company raised net proceeds of $516.5 million.

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We may determine that additional funds are necessary earlier than anticipated.

This capital may be necessary to fund our ongoing operations, continue research, development and design efforts, create new products and improve infrastructure.

This capital may be necessary to fund our ongoing operations, purchase additive printing machines, continue research, development and design efforts, create new products and improve infrastructure.

We may raise additional funds through the issuance of equity, equity related or debt securities or through obtaining credit from government or financial institutions.

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If we cannot raise additional funds when we need them, our business, prospects, financial condition and operating results could be materially adversely affected.

We may not be able to raise the capital we need to invest in additive manufacturing capacity, facilities and other equipment needed to manufacture and assemble KARNO generator systems.

If we cannot raise the investment capital we need on favorable terms, our business, prospects, financial condition and operating results could be negatively affected.

The production of key KARNO generator parts at the scale we need to grow our business requires significant investment in modern additive printer technology as well as production facilities and other equipment needed to support printing and assembly operations.

We intend to finance most of these capital investments through leases or utilize other forms of debt financing.

The lease market for additive printer technology is immature and may not support the level of lease capital we need to grow our business.

We cannot be certain that we can obtain lease or debt financing on favorable terms when required, or at all.

If we cannot obtain equipment and other asset financing when we need it, our business prospects, financial condition and operating results could be materially adversely affected.

Our ability to use net operating loss carryforwards and other tax attributes may be limited as a result of ownership changes.

We have incurred losses during our history and do not expect to become profitable in the near future, and may never achieve profitability.

To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire, if at all.

To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable

income, if any, until such unused losses expir e, if at all.

As of December 31, 2023, we had U.S.

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federal net operating loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income.

It is uncertain if and to what extent various states will conform to the Tax Act or the CARES Act.

Under Section 382 of the Code, substantial changes in our ownership may result in an annual limitation on the amount of net operating loss carryforwards that could be utilized in the future to offset our taxable income.

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This will limit the usage of our 2017 and prior year net operating losses, and will cause $2.0 million of such losses to expire unused, regardless of future taxable income.

No other such ownership changes have occurred through December 31, 2022.

Due to this, as well as our overall profitability estimate as

noted above, we have recorded a full valuation allowance related to our net operating loss carryforwards and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.

We may not be able to obtain or agree on acceptable terms and conditions for all or a significant portion of the government grants, loans and other incentives for which we may apply.

We could experience another ownership change that might limit our use of net operating loss and tax credits in the future.

There is also a risk that due to regulatory changes, such as suspensions on the use of net operating loss, or other unforeseen reasons, our existing net operating loss could expire or otherwise be unavailable to offset future income tax liabilities.

Due to this, as well as our overall profitability estimate as noted above, we have recorded a full valuation allowance related to our net operating loss carryforwards and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.

We, or our potential customers, may not be able to obtain or agree on acceptable terms and conditions for all or a significant portion of the government grants, loans and other incentives which are applied for.

As a result, our business, prospects, financial condition and operating results may be adversely affected.

We anticipate applying for federal and state grants, loans and tax incentives under government programs designed to stimulate the economy and support the production of alternative fuel and electric vehicles and related technologies.

We anticipate that in the future there will be new opportunities for us to apply for grants, loans and other incentives from federal, state and foreign governments.

Our ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of our applications to participate in such programs.

We anticipate that we and our potential customers will apply for federal and state grants, loans and tax incentives under government programs designed to stimulate the economy and support the production of alternative fuel and electric vehicles and related technologies.

We anticipate that in the future there will be new opportunities for us and our potential customers to apply for grants, loans and other incentives from federal, state and foreign governments.

Our, and our potential customers’ ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of applications to participate in such programs.

The application process for these funds and other incentives will likely be highly competitive.

We cannot assure you that we will be successful in obtaining any of these additional grants, loans and other incentives.

We cannot assure you that we, or our potential customers, will be successful in obtaining any of these additional grants, loans and other incentives.

Risks Related to Ownership of Our Securities

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Any such issuances of additional shares of common or preferred stock may cause significant dilution, subordinate the rights to holders of common stock to those of preferred stock, cause a change in control, and adversely affect prevailing market prices.

Our failure to maintain compliance with the NYSE’s continued listing requirements could result in the delisting of our common stock.

Our common stock is listed on the New York Stock Exchange (the “NYSE”).

In order to maintain this listing, we must satisfy minimum financial and other requirements.

On November 2, 2023, we received notice (the “Delisting Notice”) from the NYSE that because the average per share closing price of our common stock (the “Common Stock”) over a 30 consecutive trading-day period ended November 1, 2023 was below $1.00 (the “Minimum Price Requirement”), we were not in compliance with Section 802.01C of the NYSE’s Listed Company Manual.

Pursuant to Section 802.01C, we have a period of six months following the receipt of the Delisting Notice to regain compliance with the Minimum Price Requirement.

In accordance with the NYSE’s rules, we notified the NYSE within 10 business days of our intent to cure the deficiency, which may include effecting a reverse stock split, subject to approval by our Board and stockholders.

We may regain compliance with the Minimum Price Requirement at any time during the cure period if, on the last trading day of any calendar month during the cure period, or on the last day of the cure period, our common stock has (i) a closing share price of at least $1.00, and (ii) an average closing share price of at least $1.00 over the 30 trading-day period

ending on the last trading day of that month or on the last day of the cure period, as applicable.

The Delisting Notice has no immediate impact on the listing of our common stock, which will continue to be listed and traded on the NYSE under the symbol “HYLN” during this period, subject to our compliance with the other continued listing requirements of the NYSE.

Failure to satisfy the conditions of the cure period or to maintain other listing requirements could lead to delisting.

The perception among investors that we are at a heightened risk of delisting could negatively affect the market price and trading volume of our common stock.

If our common stock is delisted from the NYSE, the delisting could:

substantially decrease trading in our common stock;

adversely affect the market liquidity of our common stock;

adversely affect our ability to issue additional securities or obtain additional financing in the future on acceptable terms, if at all;

result in the potential loss of confidence by investors, suppliers, partners and employees and fewer business development opportunities;

and result in limited news and analyst coverage.

Additionally, the market price of our common stock may decline further, and stockholders may lose some or all of their investment.

General Risks

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Any product recall in the future, whether it involves us or a competitor’s product, may result in negative publicity, damage our brand and materially adversely affect our business, prospects, financial condition and operating results.

In the future, we may voluntarily or involuntarily, initiate a recall if any of our products (including the batteries we design, develop and manufacture) prove to be defective or noncompliant with applicable federal motor vehicle safety standards or other laws or regulations.

In the future, we may voluntarily or involuntarily, initiate a recall if any of our products prove to be defective or noncompliant with applicable safety standards or other laws or regulations.

Such recalls may involve significant expense and diversion of management attention and other resources, which could adversely affect our brand image, as well as our business, prospects, financial condition and operating results.

We have been, and may in the future be, adversely affected by the global COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, which may significantly harm our business, prospects, financial condition and operating results.

Since early 2020, there have been periods of widespread worldwide impact from the COVID-19 pandemic, and we have been, and may in the future be, adversely affected as a result.

Numerous government regulations and public advisories, as well as shifting social behaviors, temporarily limited or closed non-essential transportation, government functions, business activities and person-to-person interactions.

Reduced operations and production line shutdowns at commercial vehicle OEMs due to COVID-19, limitations on travel by our personnel and personnel of our customers and increased demand for commercial trucks within our customers’ fleets caused a delay to the planned installation of our Hybrid system on their trucks.

A resurgence of COVID-19 and related variants could result in similar restrictions to normal business activity in the future and cause delays or shutdowns of commercial vehicle OEMs or our suppliers that could impact our ability to meet customer orders.

We are or may be subject to risks associated with strategic alliances or acquisitions and may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future.

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Strategic business relationships will be an important factor in the growth and success of our business.

However, there are no assurances that we will be able to continue to identify or secure suitable business

relationship opportunities in the future or our competitors may capitalize on such opportunities before we do.

However, there are no assurances that we will be able to continue to identify or secure suitable business relationship opportunities in the future or our competitors may capitalize on such opportunities before we do.

Moreover, identifying such opportunities could require substantial management time and resources, and negotiating and financing relationships involves significant costs and uncertainties.

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Moreover, the costs of identifying and consummating acquisitions may be significant.

UNRESOLVED STAFF COMMENTS

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 1. Business