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Item 8. Financial Statements and Supplementary Data

2024-02-13 compared with 2023-02-28 · 160 added, 500 removed, 485 unchanged (58% of the section changed)

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

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

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 28, 2023 expressed an unqualified opinion.

a Delaware corporation and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Critical audit matter

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

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

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

Valuation of IPR&D

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

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

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

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

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

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

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

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

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

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

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

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

We determined there were no critical audit matters.

/s/ GRANT THORNTON LLP

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Additional paid-in capital 404,045 397,810

Retained earnings 25,746 179,103

Treasury stock, at cost;

37,062 and no shares as of December 31, 2023 and 2022, respectively

(Accumulated deficit) retained earnings ( 97,764 ) 25,746

Total stockholders’ equity 306,266 423,574

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Year Ended December 31,

2022 2021 2020

Product sales and other $ 672 $ 2,106

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Research and development 82,240 110,370

Selling, general and administrative expenses 41,988 35,299 9,585

Selling, general and administrative 42,611 41,988

Exit and termination costs 11,474 —

Total operating expenses 136,325 152,358

Loss from operations ( 137,369 ) ( 159,030 )

Interest expense — — ( 5,465 )

Interest income 13,808 5,724

Loss on impairment and disposal of assets ( 19 ) ( 730 ) —

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

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

Other expense, net ( 32 ) — ( 12 )

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

Net (loss) income $ ( 153,357 ) $ ( 96,048 ) $ 324,117

Net (loss) income per share, basic $ ( 0.87 ) $ ( 0.56 ) $ 3.11

Net loss per share, diluted $ ( 0.87 ) $ ( 0.56 ) $ ( 0.35 )

Weighted-average shares outstanding, basic 175,400,486 172,216,477 104,324,059

Weighted-average shares outstanding, diluted 175,400,486 172,216,477 112,570,960

Gain (loss) on impairment and disposal of assets 1 ( 19 )

Other income (expense), net 50 ( 32 )

Net loss $ ( 123,510 ) $ ( 153,357 )

Net loss per share, basic and diluted $ ( 0.68 ) $ ( 0.87 )

Weighted-average shares outstanding, basic and diluted 181,411,069 175,400,486

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

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(Dollar amounts in thousands, except share data)

Common Stock Additional

Capital Retained Earnings (Deficit) Total Stockholders’

Equity (Deficit)

Shares Par Value

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

Exercise of common stock options 1,112,160 — 121 — 121

Conversion of convertible notes payable to common stock 4,404,367 — 44,039 — 44,039

Business Combination and PIPE financing 61,622,839 6 153,147 — 153,153

Common stock issued for warrants exercised, net of issuance cost 15,414,592 4 136,512 — 136,516

Redemption of unexercised warrants — — ( 3 ) — ( 3 )

Share-based compensation — — 294 — 294

Net income — — — 324,117 324,117

Common Stock Treasury Stock Additional

Capital (Accumulated Deficit) Retained Earnings Total Stockholders’

Shares Amount Shares Amount

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

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

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

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

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

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

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

Exercise of common stock options and vesting of restricted stock units, net 3,245,008 — — — 18 — 18

Share-based compensation — — — — 6,217 — 6,217

Repurchase of treasury stock — — ( 37,062 ) ( 33 ) — — ( 33 )

Net loss — — — — — ( 123,510 ) ( 123,510 )

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Year Ended December 31,

2022 2021 2020

Cash flows from operating activities

Net (loss) income $ ( 153,357 ) $ ( 96,048 ) $ 324,117

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Net loss $ ( 123,510 ) $ ( 153,357 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 3,511 1,227

Amortization of investment premiums and discounts 1,250 1,816 —

Loss on extinguishment of debt — — 10,170

Amortization and accretion of investments, net ( 2,868 ) 1,250

Noncash lease expense 1,496 1,244

Inventory write-down 1,139 5,641

Loss on impairment and disposal of assets 19 730 —

Paid-in-kind interest on convertible notes payable — — 1,085

Amortization of debt discount — — 4,237

(Gain) loss on impairment and disposal of assets ( 1 ) 19

Share-based compensation 6,217 6,979

Provision for doubtful accounts — 114

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

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

Acquired in-process research and development (Note 2)

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Proceeds from sale and maturity of investments 215,422 263,723

Net cash used in investing activities ( 22,022 ) ( 65,991 ) ( 238,140 )

Net cash provided by (used in) investing activities 18,308 ( 22,022 )

Cash flows from financing activities

Business Combination and PIPE financing, net of issuance costs paid — — 516,454

Proceeds from exercise of stock warrants, net of issuance costs — 16,257 124,536

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

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

Payments for deferred financing costs — — ( 468 )

Repayments on finance lease obligations — ( 42 ) ( 247 )

Proceeds from exercise of common stock options 257 79

Taxes paid related to net share settlement of equity awards ( 239 ) ( 157 )

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

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

Repurchase of treasury stock ( 33 ) —

Net cash used in financing activities ( 15 ) ( 78 )

Net decrease in cash and cash equivalents and restricted cash ( 98,669 ) ( 138,977 )

Cash and cash equivalents and restricted cash, beginning of period 120,133 259,110

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Hyliion Holdings Corp.

is a Delaware corporation headquartered in Cedar Park, Texas.

is a Delaware corporation headquartered in Cedar Park, Texas, that designs and develops stationary power applications and electric powertrain systems.

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

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

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

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

The Hypertruck ERX TM system utilizes an intelligent electric powertrain with advanced algorithms to optimize emissions performance and efficiency with no new infrastructure required.

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

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

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

The Company plans to develop and commercialize a fuel-agnostic generator (the “KARNO generator”) to be used in stationary power applications.

The Company believes the KARNO generator is well positioned to address the rising strain on electrical infrastructure, notably from electric vehicles.

The Company announced a strategic review of alternatives for its electric powertrain business on October 10, 2023 citing lower than expected industry adoption of electric trucks, significant increases in component costs, changing regulatory requirements, and uncertainty about its ability to raise additional capital needed for ongoing investment in the business as reason for undertaking this strat egic review.

On November 7, 2023, the board of directors (the “Board”) determined that the Company would wind down operating the powertrain business.

Hyliion intends to retain the technology of the powertrain business technology and will continue to explore potential sales or future use of both the technology and tangible assets from the powertrain business.

Basis of Presentation and Principles of Consolidation

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

(“Legacy Hyliion”).

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

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

changed its name to Hyliion Holdings Corp.

For more information on this transaction see Note 4.

On the Closing Date, and in connection with the closing of the Business Combination, TortoiseCorp changed its name to Hyliion Holdings Corp.

(the “Company” or “Hyliion”) and the Company’s common stock began trading on the New York Stock Exchange under the ticker symbol HYLN.

Legacy Hyliion was deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification (“ASC”) 805.

The determination was primarily based on Legacy Hyliion’s shareholders prior to the Business Combination having a majority of the voting interests in the combined company, Legacy Hyliion’s board of directors comprising a majority of the board of directors of the combined company, Legacy Hyliion’s existing shareholders’ control over decisions regarding the election and removal of directors and officers of the combined company’s board of directors, and Legacy Hyliion’s senior management comprising the senior management of the combined company.

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

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

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

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

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

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

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

In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s common stock, $ 0.0001 par value per share, issued to Legacy Hyliion shareholders and Legacy Hyliion convertible noteholders in connection with the recapitalization transaction.

As such, the shares and corresponding capital amounts and earnings per share related to Legacy Hyliion redeemable convertible preferred stock and Legacy Hyliion common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination.

The accompanying consolidated financial statements include the accounts of Hyliion Holdings Corp.

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Intercompany transactions and balances have been eliminated upon consolidation.

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

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

Financial Accounting Standards Board (“FASB”).

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

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

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

On October 1, 2020, the Company consummated the Business Combination and raised net proceeds of $ 516.5 million net of transaction costs and expenses.

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

At December 31, 2023, the Company had total equity of $ 306.3 million, inclusive of cash and cash equivalents of $ 12.9 million and total investments of $ 278.5 million.

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

Acquisitions and Disposals

On November 7, 2023, the Board of the Company approved a strategic plan to wind down its powertrain business and preserve technology relating to the powertrain business, to better align its workforce with the Company’s future needs, and to reduce the Company’s operating costs (the “Plan”).

As part of the Plan, the Company will continue to focus on commercialization of its KARNO generator technology.

Following completion of the Plan, we no longer expect to recognize revenue on products not related to KARNO technology, including the Company’s Hypertruck ERX system (“Hypertruck ERX”) and Hyliion Hybrid system (“Hybr id”).

The Company continues to evaluate opportunities to monetize certain of the tangible assets relating to the Business, but no assurances can be provided that any such opportunities will be realized.

The Company expects the wind-down to be primarily completed by the end of the Company’s first quarter of fiscal year 2024.

We have not accounted for the impacts of the Plan as a discontinued operation through December 31, 2023, and substantial ongoing wind-down activities remain.

The Plan included a reduction of the Company’s workforce by approximately 175 people, or 67 %, with some severance agreements that provide for continued services through various dates of the Company’s fiscal year 2024.

The Plan is expected to result in total charges and expenses of approximately $ 20.4 million including:

(i) $ 1.2 million in employee severance and retention payments, (ii) $ 0.7 million in accelerated non-cash stock-based compensation expense, (iii) $ 14.5 million in contract termination and other cancellation costs, excluding amounts recoverable from resale of tangible assets, and (iv) $ 4.0 million in non-cash charges, including accelerated depreciation and amortization.

Charges and expenses related to the Plan of $ 11.5 million were incurred in the Company’s fourth quarter of fiscal year 2023 included in exit and termination costs in the consolidated statements of operations.

The remaining $ 8.9 million in charges and expenses are expected to be incurred in the first quarter of fiscal 2024, excluding amounts recoverable from resale of tangible assets.

The change in total liabilities associated with the Plan, excluding warranty balances in Note 12, is summarized as follows (in millions).

These balances are included within accrued expenses and other current liabilities, as presented in Note 11, with the remainder included within accounts payable.

December 31, 2022 Charged to Expense Costs Paid or Settled December 31, 2023

Employee severance and retention $ — $ 1.2 $ ( 0.1 ) $ 1.1

Contract terminations — 8.2 ( 1.7 ) 6.5

$ — $ 9.4 $ ( 1.8 ) $ 7.6

The above estimates of the cash expenditures and charges that the Company expects to incur in connection with the Plan, and the timing thereof, are subject to a number of assumptions and actual amounts may differ materially from estimates.

In addition, the Company may incur other cash expenditures or charges not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the Plan or otherwise.

In September 2022, we acquired certain assets (the “Acquired Asset”) of General Electric Company's GE Additive business (the “Acquisition”) including new hydrogen and fuel agnostic capable generator technology.

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

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

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

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

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

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

Summary of Significant Accounting Policies

Use of Estimates and Uncertainty of the Coronavirus Pandemic

Use of Estimates

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

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

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

The Company’s most significant estimates and judgments involve inventory, acquisitions, disposals, income taxes, valuation of share-based compensation, and probability-weighted future cash flows associated with long-lived asset impairment reviews .

Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making

judgments about the carrying values of assets and liabilities.

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

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

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

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

and global economies.

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

Segment Information

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Restricted Cash

The Company provided a supplier with a letter of credit for $ 7.9 million in the fourth quarter of 2023 to secure the performance of the Company’s obligations to purchase semi-trucks related to the Founders Program, backed by a restricted cash deposit to pay any draws on the letter of credit by the supplier.

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

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

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

December 31, 2023 December 31, 2022 December 31, 2021

Cash and cash equivalents $ 12,881 $ 119,468 $ 258,445

Restricted cash included in prepaid expenses and other current assets 7,918 — —

Restricted cash included in other assets 665 665 665

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

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

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

At December 31, 2023 and 2022, accounts receivable included amounts receivable from customers of $ 0.0 million and $ 1.1 million, respectively.

At December 31, 2023 and 2022, allowance for doubtful accounts on customer receivables were $ 0.0 million and $ 0.1 million, respectively.

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

2022 2021 2020

Customer A — % 82 %

Customer B — — —

Customer C — 12

94 % 100 % — %

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

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

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

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

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

Significant other observable inputs other than level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data;

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

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

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The Company’s financial instruments consist of cash and cash equivalents and restricted cash, accounts receivable, investments, accounts payable and accrued expenses.

The carrying value of cash and cash equivalents and restricted cash, accounts receivable, accounts payable and accrued expenses approximates fair value because of the short-term nature of those instruments.

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

The carrying value of cash and cash equivalents and restricted cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short-term nature of those instruments.

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

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

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We review our inventory to determine whether its carrying value exceeds the net amount realizable we expect to receive upon the ultimate sale of the inventory.

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

This requires us to determine the estimated

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

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

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

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

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

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

Through December 31, 2023, we have not yet commercialized the KARNO generator.

Costs incurred for components acquired prior to our determination of reaching a commercial stage are expensed as research and development costs, resulting in zero cost basis for those components.

As a result, moving-average prices for inventory that is capitalized in future periods may be significantly affected by those zero cost items.

Prepaid Expenses and Other Current Assets

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

Intangible Assets, Net

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

Impairment of Long-Lived Assets

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

As a result of factors including the events surrounding the Plan discussed in Note 2, the Company performe d a test of recoverability of its long-lived assets and determined that all long-lived assets were recoverable as of September 30, 2023.

As of September 30, 2023, long-lived assets associated with the powertrain busine ss had a recorded amount of $ 4.2 million and associated probability-weighted estimated future cash flows of $ 4.4 million.

If the Company is unable to sell long-lived assets associated with the powertrain business at a sufficient price, it will record associated impairment charges in future periods.

Estimated future cash flows for all other long-lived assets substantially exceeded recorded amounts.

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

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

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

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

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

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

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

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

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

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

We do not offer any sales returns.

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

Our policy is to

exclude taxes collected from customers from the transaction price of contracts.

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

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

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

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

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

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

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

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

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

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

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

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

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

We did not offer any sales returns.

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

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

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

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

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

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

Year Ended December 31,

2022 2021 2020

Hybrid systems and other $ 416 $ 1,082

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Year Ended December 31,

2022 2021 2020

Customer A 65 % 60 %

Customer B — 10

70 % 100 % — %

Customer G 25 —

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

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

Variable lease costs consist primarily of common area maintenance.

ROU assets represent the Company’s right to use underlying assets for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the leases.

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The Company does not record operating leases with an initial term of twelve months or less (“short-term leases”) in the consolidated balance sheets.

The Company’s vehicle and equipment leases may include transfer rights or options to purchase at the end of the lease that the Company is reasonably certain to exercise.

Interest expense is recognized using the effective interest rate method, and the ROU asset is amortized over the useful life of the underlying asset.

The Company also enters into arrangements whereby space within the real estate is subleased.

At the lease commencement date these subleases are recognized as operating leases.

Operating leases are recognized on a straight-line basis over the lease term.

The Company has entered into various trial and evaluation agreements that contain an operating lease component that is within the scope of ASC 842, Leases (“ASC 842”).

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

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

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

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

The Company records accounts receivable when the Company meets the criteria within the trial and evaluation agreements to invoice the lessee.

In accordance with ASC 842, the Company recognizes variable lease payments as profit or loss in the period in which the changes in facts and circumstances on which the variable lease payments are based occur, which will generally be the end of the trial period when the customer refund rights lapse.

During the years ended December 31, 2022, 2021 and 2020, the Company did not recognize any lease income related to these trial and evaluation agreements either because the Company has not received any consideration from the lease contracts, or the uncertainty related to the consideration received has not been resolved.

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

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

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

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

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

Marketing, promotional and advertising costs were $ 1.3 million and $ 1.1 million for the years ended December 31, 2023 and 2022, respectively.

Research and Development Expense

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The Company accounts for share-based compensation in accordance with ASC 718, Compensation – Stock Compensation , under which shared based payments that involve the issuance of common stock to employees and nonemployees and meet the criteria for equity-classified awards are recognized in the financial statements as share-based compensation expense based on the fair value on the date of grant.

The Company issues stock option awards and restricted stock awards to employees and nonemployees, utilizing new shares.

The Company issues restricted stock awards to employees and nonemployees, utilizing new shares.

The Company has elected to recognize the adjustment to share-based compensation expense in the period in which forfeitures occur.

1 unchanged sentence

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

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

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

Share-based compensation cost affects our research and development and selling, general and administrative expenses.

The Company utilized the Black-Scholes model to determine the fair value of the stock option awards issued prior to the year ended December 31, 2021, which required the input of subjective assumptions.

These assumptions include estimating (a) the length of time grantees will retain their vested stock options before exercising them for employees and the contractual term of the option for nonemployees (“expected term”), (b) the volatility of the Company’s common stock price over the expected term, (c) expected dividends, and (d) the fair value of a share of common stock prior to the Business Combination.

After the closing of the Business Combination, the Company’s board of directors determined the fair value of each share of common stock underlying stock-based awards based on the closing price of the Company’s common stock as reported by the NYSE on the date of grant.

The assumptions used in the Black-Scholes model are management’s best estimates, but the estimates involve inherent uncertainties and the application of management judgment (see Note 10).

As a result, if other assumptions had been used, the recorded share-based compensation expense could have been materially different from that depicted in the financial statements.

The Company accounts for income taxes in accordance with ASC 740, Income Taxes , under which deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards.

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For the years ended December 31, 2023 and 2022, there were no uncertain tax positions taken or expected to be taken in the Company’s tax returns.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

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

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

The Company adopted ASU 2019-12 on January 1, 2021 and there was no impact to the Company as a result of the adoption.

Net (Loss) Income Per Share

Basic (loss) income per share (“EPS”) is computed by dividing net loss (the numerator) by the weighted average number of common shares outstanding for the period (the denominator).

Diluted EPS attributable to common shareholders is computed by adjusting net loss by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period.

Net Loss Per Share

Basic loss per share (“EPS”) is computed by dividing net loss (the numerator) by the weighted average number of common shares outstanding for the period (the denominator).

Diluted EPS attributable to common shareholders is computed by adjusting net loss by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each

Potential common shares include shares issuable upon exercise of stock options and vesting of restricted stock awards (see Note 8).

The number of potential common shares outstanding are calculated using the treasury stock or if-converted method.

Recent Accounting Pronouncements Issued

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) , to enhance transparency and decision usefulness of income tax disclosures.

The pronouncement is effective for fiscal years beginning after December 15, 2024 and we expect a material impact to our disclosures as a result of adoption.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , to improve the disclosures about a public entity’s reportable segments.

The pronouncement is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 and we expect a material impact to our disclosures as a result of adoption.

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

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

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

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

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

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

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

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

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

Reverse Recapitalization

On October 1, 2020, Legacy Hyliion and TortoiseCorp consummated the merger contemplated by the Business Combination, with Legacy Hyliion surviving the merger as a wholly-owned subsidiary of TortoiseCorp.

Upon the closing of the Business Combination, TortoiseCorp’s certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of capital stock to 260,000,000 shares, of which 250,000,000 shares were designated common stock, $ .0001 par value per share, and of which 10,000,000 shares were designated preferred stock, $ 0.0001 par value per share.

Immediately prior to the closing of the Business Combination, each

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

The Business Combination was accounted

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

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

Upon the consummation of the Business Combination, each share of Legacy Hyliion common stock issued and outstanding was cancelled and converted into the right to receive 1.45720232 shares (the “Exchange Ratio”) of the Company’s common stock (the “Per Share Merger Consideration”).

Additionally, Legacy Hyliion issued 1,000,000 shares of Legacy Hyliion common stock with an estimated grant date fair value of $ 10.00 per share to one of the convertible noteholders in connection with the commercial matters agreement (“Commercial Matters Agreement”) that was entered into in June 2020, that was not subject to the Exchange Ratio (see Note 5).

Outstanding stock options, whether vested or unvested, to purchase shares of Legacy Hyliion common stock granted under the 2016 Plan (“Legacy Options”) (see Note 10) converted into stock options for shares of the Company’s common stock upon the same terms and conditions that were in effect with respect to such stock options immediately prior to the Business Combination, after giving effect to the Exchange Ratio.

Outstanding warrants to purchase shares of TortoiseCorp Class A common stock remained outstanding at the Closing Date.

The warrants became exercisable 30 days after the completion of the Business Combination and expired five years after the completion of the Business Combination or earlier upon redemption or liquidation.

On November 30, 2020, the Company issued a notice of redemption to the warrant holders and on December 31, 2020, it redeemed all outstanding public warrants.

See Note 9 for more information.

In connection with the Business Combination,

• certain TortoiseCorp shareholders exercised their right to redeem certain of their outstanding shares for cash, resulting in the redemption of 3,308 shares of TortoiseCorp common stock for gross redemption payments of less than $ 0.1 million.

• a number of investors purchased from the Company an aggregate of 30,750,000 shares of common stock (the “PIPE Shares”), for a purchase price of $ 10.00 per share and an aggregate purchase price of $ 307.5 million pursuant to separate subscription agreements entered into effective June 18, 2020 (the “PIPE”).

The PIPE investment closed simultaneously with the consummation of the Business Combination.

• an investor purchased 1,750,000 TortoiseCorp units (consisting of one share of common stock and one half of one warrant, the “Forward Purchase Units”), consisting of 1,750,000 shares of common stock (“Forward Purchase Shares”) and warrants to purchase 875,000 shares of common stock (“Forward Purchase Warrants”) for an aggregate purchase price of $ 17.5 million pursuant to a forward purchase agreement entered into effective February 6, 2019, as amended by the First Amendment to Amended and Restated Forward Purchase Agreement, dated June 18, 2020.

The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP.

Under this method of accounting, TortoiseCorp was treated as the “acquired” company for financial reporting purposes.

See Note 1 for further details.

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

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

Prior to the Business Combination, Legacy Hyliion and TortoiseCorp filed separate standalone federal, state and local income tax returns.

As a result of the Business Combination Legacy Hyliion will file a consolidated income tax return.

Although, for legal purposes, TortoiseCorp acquired Legacy Hyliion, and the transaction represents a reverse acquisition for federal income tax purposes.

TortoiseCorp will be the parent of the consolidated group with Legacy Hyliion a subsidiary, but in the year of the closing of the Business Combination, Legacy Hyliion will file a full year tax return with TortoiseCorp joining in the return the day after the Closing Date.

The following table reconciles the elements of the Business Combination to the consolidated statements of cash flows and the consolidated statements of changes in stockholders’ equity as of and for the year ended December 31, 2020:

Cash - TortoiseCorp’s trust and cash (net of redemption) $ 236,484

Cash - PIPE 307,500

Cash - forward purchase units 17,500

transaction costs and advisory fees paid ( 45,030 )

Net Business Combination and PIPE financing $ 516,454

The number of shares of common stock issued immediately following the consummation of the Business Combination were:

Common stock, outstanding prior to Business Combination 23,300,917

redemption of TortoiseCorp shares ( 3,308 )

Common stock of TortoiseCorp 23,297,609

TortoiseCorp founder shares 5,825,230

Shares issued in PIPE 30,750,000

Shares issued in connection with forward purchase agreement 1,750,000

Business Combination, PIPE, and forward purchase agreement financing shares 61,622,839

Legacy Hyliion shares (1)

Total shares of common stock immediately after Business Combination 153,901,829

Hyliion Holdings Corp.

exercise of warrants 15,414,592

Total shares of common stock at December 31, 2020 169,316,421

(1) The number of Legacy Hyliion shares was determined as follows:

Legacy Hyliion

shares Legacy Hyliion

Balance at December 31, 2018 24,453,750 35,634,061

Recapitalization applied to Series A outstanding at December 31, 2018 34,799,813 50,710,369

Exercise of common stock options - 2019 286,874 418,033

Exercise of common stock options - 2020 (pre-Closing) 763,216 1,112,160

Conversion of convertible notes payable to common stock (2)

2,336,235 4,404,367

(2) The number of shares issued for the conversion of convertible notes payable to common stock is calculated by applying the Exchange Ratio to the Legacy Hyliion shares issued at the time of conversion and adding 1,000,000 shares issued in connection with the Commercial Matters Agreement.

All fractions were rounded down.

Lock-Up Arrangements

Certain former stockholders of Legacy Hyliion and TortoiseCorp have agreed to lock-up restrictions regarding the future transfer shares of common stock.

Such shares were not able to be transferred or otherwise disposed of for a period of six months through April 1, 2021, subject to certain exceptions.

Transaction costs

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

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

The 2018 Note bore interest at 6 % per annum and matured in September 2020 ( two years subsequent to its issuance date).

The 2018 Note included the following embedded features:

(a) Automatic conversion upon the next equity financing of at least $ 5.0 million in proceeds.

The conversion price was dependent upon the pre-money valuation of the Company in connection with the next equity financing, with the conversion price set at a 35 % discount on the next equity financing price if the pre-money valuation was $ 100.0 million or less, or 35 % multiplied by the quotient of $ 100.0 million divided by the pre-money valuation if it was greater than $ 100.0 million.

(b) Optional conversion upon a change in control.

In the event of a change in control, the holder could elect to convert the 2018 Note into shares of common stock at a conversion price equal to (i) the product of the change in control purchase price multiplied by 65 %, divided by (ii) the total number of outstanding shares of capital stock of the Company (on a fully-diluted basis).

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

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

Upon the occurrence of an event of default, the 2018 Note would either automatically become due and payable or could become due and payable at the holder’s option (based on the nature of the event of default).

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

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

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

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

At issuance, the Company estimated the fair value of the automatic and optional conversion features to be approximately $ 1.8 million.

At issuance, the Company concluded the fair value of the additional interest feature was de minimis.

Between February and July 2019, the Company issued a series of convertible notes payable in exchange for cash totaling $ 13.6 million (the “Initial 2019 Notes”).

The Initial 2019 Notes bored interest at 6 % per annum and matured two to five years after their respective issuance dates.

The Initial 2019 Notes were only prepayable with the consent of the holders.

One of the Initial 2019 Notes (totaling $ 1.8 million) was secured by substantially all of the assets of the Company, subordinate to the first priority, senior secured interest held by a note holder of a convertible note issued in January 2020.

The holder of this note had first priority secured interest in these assets.

The Initial 2019 Notes included the following embedded features:

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

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

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

In the event of a change in control, the holder could elect to convert the Initial 2019 Notes into shares of common stock at a conversion price equal to (i) the product of the change in control purchase price multiplied by 75 %, divided by (ii) the total number of outstanding shares of capital stock of the Company (on a fully-diluted basis).

(d) Optional redemption upon a change in control.

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

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

Upon the occurrence of an event of default, the Initial 2019 Notes would either automatically become due and payable or could become due and payable at the holder’s option (based on the nature of the event of default).

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

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

In addition, the Company had the right to modify one of the Initial 2019 Notes (totaling $ 1.8 million) in the event the holder did not convert upon next equity financing to adjust the interest rate to 4 % per annum.

The Company assessed the embedded features within the Initial 2019 Notes and determined that the automatic or optional conversion feature upon next equity financing and the optional conversion feature upon change in control (share-settled redemption features), the additional interest feature and the interest rate adjustment feature met the definition of a derivative and were not clearly and closely related to the host contract and required separate accounting.

At issuance, the Company estimated the fair value of the automatic and optional conversion features to be approximately $ 6.0 million.

At issuance, the Company concluded the fair value of the additional interest feature and the interest rate adjustment feature was de minimis.

In December 2019, the Company issued a convertible note payable in exchange for cash totaling $ 3.2 million (the “December 2019 Note”).

The December 2019 Note bore interest at 6 % per annum and matured in December 2020 ( one year subsequent to its issuance date).

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

The December 2019 Note was

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

The December 2019 Note included the following embedded features:

(a) Automatic conversion upon the next equity financing of at least $ 35.0 million in proceeds.

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

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

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

(c) Automatic conversion upon a subsequent equity financing of at least $ 35.0 million if the holder did not elect to convert upon any previous equity financing, at the price that was set by the subsequent equity financing (no discount).

(d) Optional conversion upon a change in control.

In the event of a change in control, the holder could elect to convert the December 2019 Note into shares of common stock at a conversion price equal to (i) the product of the change in control purchase price multiplied by 50 %, divided by (ii) the total number of outstanding shares of capital stock of the Company (on a fully-diluted basis).

(e) Optional redemption upon a change in control.

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

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

Upon the occurrence of an event of default, the December 2019 Note would either automatically become due and payable or could become due and payable at the holder’s option (based on the nature of the event of default).

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

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

In addition, in the event the holder did not convert upon an equity financing, the maturity date of the December 2019 Note would automatically extend by one year .

In such situation, the holder also had the right to extend the maturity date for an additional two years beyond the modified maturity date.

The Company assessed the embedded features within the December 2019 Note and determined that the automatic and optional conversion features upon next equity financing (share-settled redemption features), the additional interest feature and the term extension feature met the definition of a derivative and were not clearly and closely related to the host contract and required separate accounting.

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

At issuance and at December 2019, the Company estimated the fair value of the automatic and optional conversion features to be approximately $ 1.4 million.

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

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

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

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

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

The January 2020 Note included the following embedded features:

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

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

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

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

(d) Optional redemption upon a change in control.

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

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

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

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

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

on the nature of the event of default).

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

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

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

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

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

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

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

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

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

During June 2020, the holders of the convertible notes executed amendments (the “Note Amendments”) to their respective convertible notes clarifying the planned Business Combination would qualify as a next financing, as defined in the respective convertible notes.

The convertible notes would either automatically convert or convert at the holder’s option (the election of which was evidenced by entering into the Note Amendments) in connection with such next financing (in this case the Business Combination).

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

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

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

Accordingly, the Note Amendments were accounted for as modifications.

In connection with the reverse recapitalization discussed in Note 4, immediately prior to the closing of the Business Combination, the convertible notes, plus accrued paid-in-kind interest, totaling $ 26.8 million were converted into an aggregate of 2,336,235 shares of Legacy Hyliion common stock, which were then exchanged for an aggregate of 3,404,367 shares of the Company’s common stock on the Closing Date.

In addition, the Company issued 1,000,000 shares of Legacy Hyliion common stock to a noteholder of the 2018 Note, Initial 2019 Notes, and January 2020 Note, with a grant date fair value of $ 10.00 per share in accordance with the Commercial Matters Agreement.

In connection with this conversion of the convertible notes, the Company recorded a loss on extinguishment of $ 10.2 million included within other income (expense) on the accompanying consolidated statements of operations.

During August 2020, the Company issued a term loan (the “Term Loan”) with a principal balance totaling $ 10.1 million that matured on the earlier of (i) December 15, 2020, (ii) the termination of the Business Combination or, (iii) the consummation of the Business Combination as provided in the Business Combination.

In connection with the Term Loan, the Company paid $ 0.5 million of financing costs.

The Term Loan bore interest at a rate equal to 6.5 % plus the greater of (a) the Federal Funds rate plus 0.5 %, (b) LIBOR Rate for a one-month interest period plus 1.0 %, and (c) Prime Rate in effect on such day.

While outstanding in 2020, the Term Loan bore interest at 8.5 % per annum.

The Term Loan plus accrued interest was repaid in full in October 2020.

Payroll Protection Program Loan

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

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

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

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

The amortized cost, unrealized gains and losses, and fair value, and maturities of our held-to-maturity investments at December 31, 2023 and 2022 are summarized as follows:

Fair Value Measurements as of

December 31, 2022

Fair Value Measurements at December 31, 2023

Amortized Cost Gross Unrealized

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$ 278,483 $ 590 $ ( 499 ) $ 278,574

Fair Value Measurements as of

December 31, 2021

Fair Value Measurements at December 31, 2022

Amortized Cost Gross Unrealized

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The fair value measurements of our financial assets at December 31, 2023 and 2022 are summarized as follows:

Fair Value Measurements as of December 31, 2022

Fair Value Measurements at December 31, 2023

Level I Level II Level III Total

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$ 21,464 $ 278,574 $ — $ 300,038

Fair Value Measurements as of December 31, 2021

Fair Value Measurements at December 31, 2022

Level I Level II Level III Total

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$ 120,133 $ 297,959 $ — $ 418,092

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

Balance at December 31, 2019 $ 8,351

Issuance of convertible note payable derivative liability 2,656

Fair value adjustments 1,358

Settlement of convertible notes payable derivative liabilities ( 12,365 )

Balance at December 31, 2020 $ —

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

The carrying value of our inventory at December 31, 2023 and 2022 is summarized as follows:

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

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

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

During the years ended December 31, 2023 and 2022, we recorded write-downs of $ 1.1 million and $ 5.6 million, respectively, included primarily in cost of revenues.

Capital Structure

As discussed in Note 1 and Note 4, on October 1, 2020, the Company consummated the Business Combination, which has been accounted for as a reverse recapitalization.

Pursuant to the Certificate of Incorporation as amended on October 1, 2020 and as a result of the reverse recapitalization, the Company has retrospectively adjusted the Legacy Hyliion preferred shares and Legacy Hyliion common shares issued and outstanding prior to October 1, 2020 to give effect to the Exchange Ratio used to determine the number of shares of common stock of the combined entity into which they were converted.

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $ 0.0001 per share.

The Company’s board of directors is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, option or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series.

The Company’s Board is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, option or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series.

At December 31, 2023 and 2022, there were no shares of preferred stock issued and outstanding.

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Authorized for future grant under 2020 Equity Incentive Plan 6,988,626

Public Warrants:

On March 4, 2019, TortoiseCorp completed an initial public offering that included warrants for shares of common stock (the “Public Warrants”).

Each Public Warrant entitled the holder to the right to purchase one share of common stock at an exercise price of $ 11.50 per share.

No fractional shares were issued upon exercise of the Public Warrants.

The Company could elect to redeem the Public Warrants, in whole and not in part, at a price of $ 0.01 per Public Warrant if (i) 30 days’ prior written notice of redemption is provided to the holders, and (ii) the last reported sale price of the Company’s common stock equals or exceeds $ 18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 -trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders.

Upon issuance of a redemption notice by the Company, the warrant holders had a period of 30 days to exercise for cash, or on a cashless basis.

On the Closing Date, there were 11,650,458 Public Warrants issued and outstanding.

Private Placement Warrants:

Simultaneous with TortoiseCorp’s initial public offering in March 2019, Tortoise Borrower purchased warrants at a purchase price of $ 1.00 per warrant in a private placement (the “Private Placement Warrants”).

The Private Placement Warrants could not be redeemed by the Company so long as the Private Placement Warrants are held by the initial purchasers, or such purchasers’ permitted transferees.

The Private Placement Warrants had terms and provisions identical to those of the Public Warrants, including as to exercise price, exercisability and exercise period, except if the Private Placement Warrants were held by someone other than the initial purchasers’ permitted transferees, then the Private Placement Warrants were redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

On the Closing Date, there were 6,660,183 Private Warrants issued and outstanding.

Forward Purchase Warrants:

Simultaneous with the consummation of the Business Combination in October 2020, 875,000 Forward Purchase Warrants to purchase shares of common stock were issued in connection with the forward purchase agreement (See Note 4).

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

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

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

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

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

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

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

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

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

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

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

Authorized for future issuance under the Hyliion Holdings Corp.

Employee Stock Purchase Plan 1,800,000

Treasury Stock

In December 2023, we announced a share repurchase program which has no expiration date, authorizing the repurchase of up to $ 20.0 million in shares.

Share-Based Compensation

2016 Equity Incentive Plan

For periods prior to the reverse recapitalization (See Note 4), the Hyliion Inc.

2016 Equity Incentive Plan (the “2016 Plan”), as amended in August 2017 and approved by the board of directors (the “Board”), permitted the granting of various awards including stock options (including both nonqualified options and incentive options), stock appreciation rights (“SARs”), stock awards, phantom stock units, performance awards and other share-based awards to employees, outside directors and consultants and advisors of the Company.

The Hyliion Inc.

2016 Equity Incentive Plan (the “2016 Plan”), as amended in August 2017 and approved by the Board, permitted the granting of various awards including stock options (including both nonqualified options and incentive options), stock appreciation rights (“SARs”), stock awards, phantom stock units, performance awards and other share-based awards to employees, outside directors and consultants and advisors of the Company.

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

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

the Legacy Option divided by the Exchange Ratio.

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

No further grants can be made under the 2016 Plan.

The option exercise price for all grantees equals the stock’s estimated fair value on the date of the grant, after giving effect to the Exchange Ratio.

The Board determined the fair value of common stock at the time of grant by considering a number of objective and subjective factors, including independent third-party valuations of the Company’s common stock, operating and financial performance, the lack of liquidity of capital stock, and general and industry-specific economic outlook, amongst other factors.

The Company believes the fair value of the stock options granted to nonemployees was more readily determinable than the fair value of the services received.

The fair value of each option is estimated on the date of the grant using the Black-Scholes option-pricing model in order to measure the compensation cost associated with the award.

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

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

Expected volatility 70.0 %

Expected term 6.1 years

Risk-free interest rate 1.7 %

Expected dividend yield 0.0 %

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

• Expected volatility :

The expected volatility was determined by examining the historical volatility of a group of industry peers, as the Company did not have any trading history for the Company’s common stock.

• Expected term :

For employees, the expected term is determined using the “simplified” method, as prescribed by the SEC’s Staff Accounting Bulletin No.

107, Share-Based Payment, to estimate on a formula basis the expected term of the Company’s employee stock options, which are considered to have “plain vanilla” characteristics.

For nonemployees, the expected term represents the contractual term of the option.

• Risk-free interest rate :

The risk-free interest rate was based upon quoted market yields for the United States Treasury instruments with terms that were consistent with the expected term of the Company’s stock options.

• Expected dividend yield:

The expected dividend yield was based on the Company’s history and management’s current expectation regarding future dividends.

Employee and nonemployee stock options generally vest over four years , with a maximum term of ten years from the date of grant.

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Outstanding at December 31, 2021 3,157,889 $ 0.16 6.6 years

Granted 2,797,828 0.23

Exercised ( 563,617 ) 0.17

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Outstanding at December 31, 2023 522,971 $ 0.20 4.3 years

Exercised ( 563,617 ) 0.17

Forfeited ( 52,833 ) 0.20

Outstanding at December 31, 2022 2,541,439 $ 0.15 3.7 years

Exercisable at December 31, 2023 473,239 $ 0.20 4.1 years

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There were no options with an exercise price greater than the market price on December 31, 2023 to exclude from the intrinsic value computation.

The intrinsic value of options exercised during the years ended December 31, 2022, 2021 and 2020 was $ 2.4 million, $ 42.8 million and $ 18.4 million, respectively.

Share-based compensation expense under the 2016 Plan for the years ended December 31, 2022, 2021 and 2020 was $ 0.1 million, $ 0.1 million and $ 0.3 million, respectively.

There was $ 0.1 million of unrecognized compensation expense related the 2016 Plan at December 31, 2022, which is expected to be recognized over the remaining vesting periods, with a weighted-average period of 0.9 years.

The intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was $ 2.4 million and $ 2.4 million, respectively.

Share-based compensation expense under the 2016 Plan for the years ended December 31, 2023 and 2022 was nil and $ 0.1 million, respectively.

There was no unrecognized compensation expense related the 2016 Plan at December 31, 2023.

2020 Equity Incentive Plan

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Under the 2020 Plan, the Company may grant an aggregate of 12,200,000 shares of common stock in the form of nonstatutory stock options, incentive stock options, SARs, restricted stock awards, performance awards and other awards.

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

No stock options have been granted under the 2020 Plan.

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

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1,556,794 $ 11.01

2,504,939 4.10

Vested ( 470,426 ) 11.07

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6 Excludes 59,584 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established.

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

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

7 Excludes 633,750 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established.

Share-based compensation expense under the 2020 Plan for the years ended December 31, 2023 and 2022 was $ 6.2 million and $ 6.9 million, respectively.

The fair value of RSUs that vested during the years ended December 31, 2023 and 2022 was $ 2.8 million and $ 1.7 million, respectively.

There was $ 4.9 million of unrecognized compensation expense related to the 2020 Plan at December 31, 2023, which is expected to be recognized over the remaining vesting periods, subject to forfeitures, with a weighted-average period of 1.5 years.

As a result of execution of the Plan and failure to meet fiscal 2023 performance conditions for certain awards to employees, we expect 0.8 million RSU awards to be forfeited in the first quarter of fiscal 2024.

Employee Stock Purchase Plan

The Company has an authorized employee stock purchase plan (the “ESPP”) that would enable employees to contribute up to 15 % of their base compensation toward the purchase of the Company’s common stock at 85 % of its market value on the first or last day of each offering period.

The ESPP has not been implemented through December 31, 2023.

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

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

In May 2023, the Company executed a lease for its facility in Milford, Ohio, with a term through 2028 including the option to extend the term for up to two consecutive terms of three years , which was not reasonably certain to be exercised at the commencement date.

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

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Year Ended December 31,

2022 2021 2020

Operating lease costs:

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Variable lease cost 682 622

Sublessor income — ( 38 ) ( 326 )

Total operating lease costs $ 3,429 $ 2,742

Finance lease costs:

Amortization of right-of-use assets $ — $ 74 $ 112

Interest on lease liabilities — 1 21

Total finance lease costs $ — $ 75 $ 133

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

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Total property and equipment, net $ 9,987 $ 5,606

Depreciation expense for the years ended December 31, 2022, 2021 and 2020 totaled approximately $ 1.1 million, $ 0.8 million and $ 0.8 million respectively.

For the year ended December 31, 2022, $ 0.3 million and $ 0.8 million was included in selling, general and administrative expenses and research and development expenses, respectively, in the consolidated statements of operations.

For the year ended December 31, 2021, $ 0.1 million and $ 0.7 million was included in selling, general and administrative expenses and research and development expenses, respectively, in the consolidated statements of operations.

For the year ended December 31, 2020, $ 0.1 million and $ 0.7 million was included in selling, general and administrative expenses and research and development expenses, respectively, in the consolidated statements of operations.

For the years ended December 31, 2022, 2021 and 2020, there was nil depreciation expense included in cost of revenues.

Intangible Assets, Net

The gross carrying amount and accumulated amortization of separately identifiable intangible assets at December 31, 2022 and 2021 is summarized as follows:

December 31, 2022

Intangible Asset Useful Life Weighted Average Remaining Life Gross Carrying Value Accumulated Amortization Net

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

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

$ 649 $ ( 449 ) $ 200

December 31, 2021

Intangible Asset Useful Life Weighted Average Remaining Life Gross Carrying Value Accumulated Amortization Net

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

$ 578 $ ( 343 ) $ 235

Total amortization expense for the years ended December 31, 2022, 2021 and 2020 was $ 0.1 million, $ 0.1 million and $ 0.1 million, respectively, and is included within selling, general and administrative expenses in the consolidated statements of operations.

Total future amortization expense for finite-lived intangible assets at December 31, 2022 is summarized as follows:

Depreciation expense for the years ended December 31, 2023 and 2022 totaled approximately $ 3.2 million and $ 1.1 million, respectively.

For the year ended December 31, 2023, $ 0.6 million, $ 1.7 million, and $ 0.9 million was included in selling, general and administrative expenses, research and development expenses and exit and termination costs, respectively, in the consolidated statements of operations.

For the year ended December 31, 2022, $ 0.3 million and $ 0.8 million was included in selling, general and administrative expenses, and research and development expenses, respectively, in the co nsolidated statements of operations.

Accrued Expenses and Other Current Liabilities

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Other accrued liabilities 1,922 928

Accrued severance, contract termination, and other charges 4,013 —

$ 10,051 $ 11,535

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Year Ended December 31,

2022 2021 2020

Current tax expense:

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Intangible assets, net 5,522 6,001

Property and equipment, net — 13

Total deferred tax assets 104,571 78,917

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Operating lease right of use asset, net 1,485 1,359

Intangible assets, net — 49

Property and equipment, net 283 83

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Year Ended December 31,

2022 2021 2020

Provision at statutory rate of 21% $ ( 25,937 ) $ ( 32,205 )

Non-deductible convertible debt interest expense — — 227

Non-deductible gain related to warrant conversions — — ( 76,293 )

State tax expense — 492

Stock options 520 533

Transaction costs — — ( 2,947 )

Shares issued in connection with a Commercial Matters Agreement — — 2,100

Other 865 ( 231 ) ( 102 )

R&D tax credit — ( 4,021 )

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The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

Management considere d the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will not realize the benefits of these deductible differences at December 31, 2023.

The Company had federal net operating loss carryforwards of $ 297.9 million and $ 229.5 million at December 31, 2023 and 2022, respectively.

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

million has an indefinite carryforward period.

At December 31, 2023, $ 10.5 million of this amount will begin to expire in 2036 and the remaining $ 287.4 million has an indefinite carryforward period.

The Company had state net operating loss carryforwards of $ 12.5 million and $ 12.5 million at December 31, 2023 and 2022, respectively, that will begin to expire beginning in 2036 and research and development credits of $ 4.7 million that will begin to expire in 2037.

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Economic Incentive Agreement

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

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

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

As the terms of the EDC grant agreement require the Company to meet and maintain all of the performance requirements throughout the term of the agreement, the Company has not substantially met all the conditions for the grant funding received.

Should the Company fail to meet and maintain any performance requirements, all amounts received from the EDC are subject to refund.

Accordingly, total grant funding of $ 0.9 million recorded as part of other liabilities as of December 31, 2022 will continue to be reflected as an other non-current liability until all related performance requirements have been met through the end of the agreement on December 31, 2025.

As the terms of the EDC grant agreement require the Company to meet and maintain all of the performance requirements throughout the term of the agreement and the Company did not meet the conditions for the grant funding received through December 31, 2023, all amounts received from the EDC are subject to refund.

Accordingly, total grant funding of $ 1.1 million is included within other current accrued liabilities as of December 31, 2023.

Total grant funding of $ 0.9 million was included within other noncurrent liabilities as of December 31, 2022.

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

Legal Proceedings

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

and certain other matters relating thereto.

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

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

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

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

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

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

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

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

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

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

Net (Loss) Income Per Share

As a result of the reverse recapitalization (see Note 4), the Company has retroactively adjusted the weighted average shares outstanding prior to October 1, 2020 to give effect to the Exchange Ratio used to determine the number of shares of common stock into which they were converted.

The computation of basic and diluted net (loss) income per share for the years ended December 31, 2022, 2021 and 2020 is summarized as follows (in thousands, except share and per share data):

The Company is periodically involved in legal proceedings, legal actions and claims arising in the nor mal course of business, including proceedings relating to product liability, intellectual property, safety and health, employment and other matters.

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

Net Loss Per Share

The computation of basic and diluted net loss per share for the years ended December 31, 2023 and 2022 is summarized as follows (in thousands, except share and per share data):

Year Ended December 31,

2022 2021 2020

Net (loss) income attributable to common stockholders $ ( 153,357 ) $ ( 96,048 ) $ 324,117

Weighted average shares outstanding, basic 175,400,486 172,216,477 104,324,059

Weighted average shares outstanding, diluted 175,400,486 172,216,477 112,570,960

Net (loss) income per share, basic $ ( 0.87 ) $ ( 0.56 ) $ 3.11

Net loss per share, diluted $ ( 0.87 ) $ ( 0.56 ) $ ( 0.35 )

Potential common shares excluded from the computation of diluted net (loss) income per share because including them would have had an anti-dilutive effect for the years ended December 31, 2022, 2021 and 2020 are summarized as follows:

Net loss attributable to common stockholders $ ( 123,510 ) $ ( 153,357 )

Weighted average shares outstanding, basic and diluted 181,411,069 175,400,486

Net loss per share, basic and diluted $ ( 0.68 ) $ ( 0.87 )

Potential common shares excluded from the computation of diluted net loss per share because including them would have had an anti-dilutive effect for the years ended December 31, 2023 and 2022 are summarized as follows:

Year Ended December 31,

2022 2021 2020

Unexercised stock options 522,971 2,541,439

1 unchanged sentence

3,908,044 6,647,112

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

* Potential common shares from unvested restricted stock units for the years ended December 31, 2023 and 2022 include 633,750 and 1,336,667 shares, respectively, where no accounting grant date has been established.

Supplemental Cash Flow Information

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Year Ended December 31,

2022 2021 2020

Cash paid for interest $ — $ —

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Year Ended December 31,

2022 2021 2020

Supplemental disclosure of noncash investing and financing activities:

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

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

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

1 unchanged sentence

Retirement Plan

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

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

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

The 401(k) plan eligibility conditions require participants are at least 21 years old to participate.

Eligibility entry date is the first of the month following date of hire, or the first of the month following the date the employee turns 21 years old.

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

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data