Hyliion Holdings Corp. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID: 248 ) F- 2 Consolidated Financial Statements Consolidated Balance Sheets F- 3 Consolidated Statements of Operations F- 4 Consolidated Statements of Stockholders’ Equity F- 5 Consolidated Statements of Cash Flows F- 6 Notes to Consolidated Financial Statements F- 7 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Hyliion Holdings Corp. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Hyliion Holdings Corp. 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 These financial statements are the responsibility of the Company’s management. 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 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. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matter 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 We have served as the Company’s auditor since 2020. Dallas, Texas February 13, 2024 F-2 Table of Contents HYLIION HOLDINGS CORP. CONSOLIDATED BALANCE SHEETS (Dollar amounts in thousands, except share data) December 31, 2023 2022 Assets Current assets Cash and cash equivalents $ 12,881 $ 119,468 Accounts receivable, net 40 1,136 Inventory — 74 Prepaid expenses and other current assets 18,483 9,795 Short-term investments 150,297 193,740 Total current assets 181,701 324,213 Property and equipment, net 9,987 5,606 Operating lease right-of-use assets 7,070 6,470 Intangible assets, net — 200 Other assets 1,439 1,686 Long-term investments 128,186 108,568 Total assets $ 328,383 $ 446,743 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 4,224 $ 2,800 Current portion of operating lease liabilities 847 347 Accrued expenses and other current liabilities 10,051 11,535 Total current liabilities 15,122 14,682 Operating lease liabilities, net of current portion 6,792 6,972 Other liabilities 203 1,515 Total liabilities 22,117 23,169 Commitments and contingencies (Note 14) Stockholders’ equity Common stock, $ 0.0001 par value; 250,000,000 shares authorized; 183,071,317 and 179,826,309 shares issued and outstanding at December 31, 2023 and 2022, respectively 18 18 Additional paid-in capital 404,045 397,810 Treasury stock, at cost; 37,062 and no shares as of December 31, 2023 and 2022, respectively ( 33 ) — (Accumulated deficit) retained earnings ( 97,764 ) 25,746 Total stockholders’ equity 306,266 423,574 Total liabilities and stockholders’ equity $ 328,383 $ 446,743 The accompanying notes are an integral part of these consolidated financial statements. F-3 Table of Contents HYLIION HOLDINGS CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollar amounts in thousands, except share and per share data) Year Ended December 31, 2023 2022 Revenues Product sales and other $ 672 $ 2,106 Total revenues 672 2,106 Cost of revenues Product sales and other 1,716 8,778 Total cost of revenues 1,716 8,778 Gross loss ( 1,044 ) ( 6,672 ) Operating expenses Research and development 82,240 110,370 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 income 13,808 5,724 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. F-4 Table of Contents HYLIION HOLDINGS CORP. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Dollar amounts in thousands, except share data) Common Stock Treasury Stock Additional Paid-In Capital (Accumulated Deficit) Retained Earnings Total Stockholders’ Equity 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 ) Share-based compensation — — — — 6,979 — 6,979 Net loss — — — — — ( 153,357 ) ( 153,357 ) Balance at December 31, 2022 179,826,309 18 — — 397,810 25,746 423,574 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 ) Balance at December 31, 2023 183,071,317 $ 18 ( 37,062 ) $ ( 33 ) $ 404,045 $ ( 97,764 ) $ 306,266 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents HYLIION HOLDINGS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar amounts in thousands) Year Ended December 31, 2023 2022 Cash flows from 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 and accretion of investments, net ( 2,868 ) 1,250 Noncash lease expense 1,496 1,244 Inventory write-down 1,139 5,641 (Gain) loss on impairment and disposal of assets ( 1 ) 19 Share-based compensation 6,217 6,979 Provision for doubtful accounts — 114 Acquired in-process research and development (Note 2) — 28,752 Change in operating assets and liabilities, net of effects of business acquisition: Accounts receivable 1,096 ( 1,180 ) Inventory ( 1,065 ) ( 5,601 ) Prepaid expenses and other assets 463 ( 571 ) Accounts payable 1,356 ( 4,660 ) Accrued expenses and other liabilities ( 3,020 ) 4,571 Operating lease liabilities ( 1,776 ) ( 1,305 ) Net cash used in operating activities ( 116,962 ) ( 116,877 ) Cash flows from investing activities Purchase of property and equipment and other ( 7,401 ) ( 2,885 ) Proceeds from sale of property and equipment 2 152 Purchase of in-process research and development — ( 14,428 ) Payments for security deposit, net ( 45 ) — Purchase of investments ( 189,670 ) ( 268,584 ) Proceeds from sale and maturity of investments 215,422 263,723 Net cash provided by (used in) investing activities 18,308 ( 22,022 ) Cash flows from financing activities Proceeds from exercise of common stock options 257 79 Taxes paid related to net share settlement of equity awards ( 239 ) ( 157 ) 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 Cash and cash equivalents and restricted cash, end of period $ 21,464 $ 120,133 The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents HYLIION HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except as separately indicated) Note 1. Description of Organization and Business Operations and Basis of Presentation Overview Hyliion Holdings Corp. 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 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 The accompanying consolidated financial statements include the accounts of Hyliion Holdings Corp. and its wholly owned subsidiary. Intercompany transactions and balances have been eliminated upon consolidation. 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”). 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”). Certain prior period balances have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes. These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business. The Company is an early-stage growth company and has generated negative cash flows from operating activities since inception. At 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. F-7 Table of Contents Note 2. Acquisitions and Disposals 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. Acquisitions 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. Note 3. Summary of Significant Accounting Policies 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 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 F-8 Table of Contents 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. Segment Information ASC 280, Segment Reporting , defines operating segments as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company operates as a single operating segment. The Company’s CODM is the chief executive officer, who has ultimate responsibility for the operating performance of the Company and the allocation of resources. The CODM uses cash flows as the primary measure to manage the business and does not segment the business for internal reporting or decision making. Concentration of Supplier Risk The Company is dependent on certain suppliers, the majority of which are single source suppliers, and the inability of these suppliers to deliver necessary components of the Company’s products in a timely manner at prices, quality levels and volumes that are acceptable, or the Company’s inability to efficiently manage these components from these suppliers, could have a material adverse effect on the Company’s business, prospects, financial condition and operating results. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity date of 90 days or less at the time of purchase to be cash and cash equivalents only if in checking, savings or money market accounts. Cash and cash equivalents include cash held in banks and money market accounts and are carried at cost, which approximates fair value. The Company maintains cash in excess of federally insured limits at financial institutions which it believes are of high credit quality and has not incurred any losses related to these balances to date. The Company believes its credit risk, with respect to these financial institutions to be minimal. Restricted Cash 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, 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 $ 21,464 $ 120,133 $ 259,110 Accounts Receivable Accounts receivable are stated at a gross invoice amount, net of an allowance for doubtful accounts. The allowance for doubtful accounts is maintained at a level considered adequate to provide for potential account losses on the balance based on 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, 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. F-9 Table of Contents The portion of our net accounts receivable from significant customers is summarized as follows: December 31, 2023 2022 Customer A — % 82 % Customer C — 12 — % 94 % Investments The Company’s investments consist of corporate bonds, U.S. treasury and agency securities, state and local municipal bonds and commercial paper, all of which are classified as held-to-maturity, with a maturity date of 36 -months or less at the time of purchase. The Company determines the appropriate classification of investments at the time of purchase and re-evaluates such designation as of each balance sheet date. Investments are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization, along with interest, is included in interest income. The Company uses the specific identification method to determine the cost basis of securities sold. Investments are impaired when a decline in fair value is judged to be other-than-temporary. The Company evaluates investments for impairment by considering the length of time and extent to which market value has been less than cost or amortized cost, the financial condition and near-term prospects of the issuer as well as specific events or circumstances that may influence the operations of the issuer and the Company’s intent to sell the security or the likelihood that it will be required to sell the security before recovery of the entire amortized cost. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to other income (expense) and a new cost basis in the investment is established. Fair Value Measurements ASC 820, Fair Value Measurements , clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level I : Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company can access at the measurement date; Level II : 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; and Level III : Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The Company believes its valuation methods are appropriate and consistent with other market participants, however the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The Company’s financial instruments consist of cash and cash equivalents and restricted cash, accounts receivable, investments, accounts payable and accrued expenses. 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. Inventories Inventory is comprised of raw materials, work in process and finished goods and includes the cost of raw materials, freight, direct and indirect labor and allocations of other conversion costs and overhead. Semi-truck inventory is valued using the specific identification cost method and all other inventory is valued using the moving-average cost method. Inventory is stated at the lower of cost or net realizable value. 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 F-10 Table of Contents selling price of inventory less the estimated cost to convert the inventory on-hand into a finished product and other costs, which we determined includes the cost of installation and validation, to align with the transfer of control to customers in our revenue policy. Inventory write-downs are first allocated to all other inventory with any residual allocated to semi-truck inventory. Once inventory is written-down based on a lower of cost or net realizable value analysis, that amount establishes the new carrying value of inventory if written-down at year end, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Interim impairments are reversed and reassessed at each reporting period. During the fourth quarter of 2021, we changed from a research and development phase to a production phase for our Hybrid system product. 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 Prepaid expenses and other current assets include prepaid insurance, rent and supplies, which are expected to be recognized, received or realized within the next 12 months. Property and Equipment, Net Property and equipment, net is stated at cost less accumulated depreciation, or if acquired in a business combination, at allocated fair value at the date of acquisition. Depreciation is calculated using the straight-line method, based upon the following estimated useful lives: Production machinery and equipment 2 to 7 years Vehicles 3 to 7 years Leasehold improvements shorter of lease term or 7 years Demo fleet systems 2 to 3 years Furniture and fixtures 3 years Computers and related equipment 3 to 7 years Major renewals and improvements are capitalized, while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed as incurred. When property and equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss on the disposition is recorded in the consolidated statement of operations as a component of other income (expense). All long-lived assets are located in the United States. Impairment of Long-Lived Assets The Company reviews long-lived assets, including property and equipment and intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that an asset group’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analysis in accordance with ASC 360-10, Impairment or Disposal of Long-Lived Assets , which requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. 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. Revenue The Company follows five steps to recognize revenue from contracts with customers under ASC 606, Revenue from Contracts with Customers, which are: • Step 1: Identify the contract(s) with a customer; • Step 2: Identify the performance obligations in the contract; F-11 Table of Contents • Step 3: Determine the transaction price; • Step 4: Allocate the transaction price to the performance obligations in the contract; and • Step 5: Recognize revenue when (or as) a performance obligation is satisfied. 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, 2023 2022 Hybrid systems and other $ 416 $ 1,082 Class 8 semi-truck prepared for Hybrid system upfit 256 1,024 Total product sales and other $ 672 $ 2,106 The portion of our revenues from significant customers is summarized as follows: Year Ended December 31, 2023 2022 Customer A 65 % 60 % Customer B — 10 Customer G 25 — 90 % 70 % Leases We determine if an arrangement is a lease at inception of the contract. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and operating lease liabilities, net of current portion in the accompanying consolidated balance sheets. 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. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate the present value for lease payments is the Company’s incremental borrowing rate, which is determined based on information available at lease commencement and is equal to the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. The Company uses the implicit rate when readily determinable. F-12 Table of Contents The Company’s real estate leases may include one or more options to renew, with the renewal extending the lease term for an additional one to five years . The exercise of lease renewal option is at the Company’s sole discretion. In general, the Company does not consider renewal options to be reasonably likely to be exercised, therefore renewal options are generally not recognized as part of the ROU assets and lease liabilities. Lease costs for lease payments are recognized on a straight-line basis over the lease term, unless there is a transfer of title or purchase option reasonably certain to be exercised. The Company does not record operating leases with an initial term of twelve months or less (“short-term leases”) in the consolidated balance sheets. Interest expense is recognized using the effective interest rate method, and the ROU asset is amortized over the useful life of the underlying asset. Warranties 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. We recognize the cost of the warranty upon transfer of control based on estimated and historical claims rates and fulfillment costs, which are variable. Should product failure rates and fulfillment costs differ from these estimates, material revisions to the estimated warranty liability would be required. Warranty expense is recorded as a component of cost of revenue. Marketing, Promotional and Advertising Costs 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 $ 1.3 million and $ 1.1 million for the years ended December 31, 2023 and 2022, respectively. Research and Development Expense Research and development costs did not meet the requirements to be recognized as an asset as the associated future benefits were at best uncertain and there was no alternative future use at the time the costs were incurred. Research and development costs include, but are not limited to, outsourced engineering services, allocated facilities costs, depreciation on equipment utilized in research and development activities, internal engineering and development expenses, materials, internally-developed software and employee related expenses (including salaries, benefits, travel, and share-based compensation) related to development of the Company’s products and services. Share-Based Compensation 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 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. We recognize compensation expense for awards with only service conditions on a straight-line basis over the requisite service period for the entire award. 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. 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. Income Taxes 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. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Due to the Company’s history of losses since inception, the net deferred tax assets have been fully offset by a valuation allowance at December 31, 2023 and 2022. Uncertain tax positions taken or expected to be taken in a tax return are accounted for using the more likely than not threshold for financial statement recognition and measurement. 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. 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 F-13 Table of Contents period. 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 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): Disclosures by Business Entities about Government Assistance , to increase transparency of government assistance which requires annual disclosures about transactions with a government entity that are accounted for by applying a grant or contribution accounting model by analogy. The pronouncement is effective for fiscal years beginning after December 15, 2021. The Company adopted ASU 2021-10 for the year ended December 31, 2022 with no material impact and updated its related disclosures. Note 4. Investments 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 at December 31, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Commercial paper $ 35,218 $ 18 $ ( 10 ) $ 35,226 U.S. government agency bonds 27,602 56 ( 186 ) 27,472 State and municipal bonds 15,262 1 ( 48 ) 15,215 Corporate bonds and notes 200,401 515 ( 255 ) 200,661 $ 278,483 $ 590 $ ( 499 ) $ 278,574 Fair Value Measurements at December 31, 2022 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Commercial paper $ 36,675 $ 2 $ ( 161 ) $ 36,516 U.S. government agency bonds 12,441 6 ( 328 ) 12,119 State and municipal bonds 40,104 28 ( 628 ) 39,504 Corporate bonds and notes 213,088 76 ( 3,344 ) 209,820 $ 302,308 $ 112 $ ( 4,461 ) $ 297,959 December 31, 2023 December 31, 2022 Amortized Cost Fair Value Amortized Cost Fair Value Due in one year or less $ 150,297 $ 149,934 $ 193,740 $ 191,094 Due after one year through five years 128,186 128,640 108,568 106,865 $ 278,483 $ 278,574 $ 302,308 $ 297,959 F-14 Table of Contents Note 5. Fair Value Measurements The fair value measurements of our financial assets at December 31, 2023 and 2022 are summarized as follows: Fair Value Measurements at December 31, 2023 Level I Level II Level III Total Cash and cash equivalents $ 12,881 $ — $ — $ 12,881 Restricted cash 8,583 — — 8,583 Held-to-maturity investments: Commercial paper — 35,226 — 35,226 U.S. government agency bonds — 27,472 — 27,472 State and municipal bonds — 15,215 — 15,215 Corporate bonds and notes — 200,661 — 200,661 $ 21,464 $ 278,574 $ — $ 300,038 Fair Value Measurements at December 31, 2022 Level I Level II Level III Total Cash and cash equivalents $ 119,468 $ — $ — $ 119,468 Restricted cash 665 — — 665 Held-to-maturity investments: Commercial paper — 36,516 — 36,516 U.S. government agency bonds — 12,119 — 12,119 State and municipal bonds — 39,504 — 39,504 Corporate bonds and notes — 209,820 — 209,820 $ 120,133 $ 297,959 $ — $ 418,092 Note 6. Inventory The carrying value of our inventory at December 31, 2023 and 2022 is summarized as follows: December 31, 2023 2022 Raw materials $ — $ — Work in process — — Finished goods — 74 $ — $ 74 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, 2023 and 2022, we recorded write-downs of $ 1.1 million and $ 5.6 million, respectively, included primarily in cost of revenues. Note 7. Capital Structure 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 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. F-15 Table of Contents Common Stock At December 31, 2023, the following shares of common stock were reserved for future issuance: Stock options issued and outstanding 522,971 Authorized for future grant under 2020 Equity Incentive Plan 6,988,626 Authorized for future issuance under the Hyliion Holdings Corp. Employee Stock Purchase Plan 1,800,000 9,311,597 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. Note 8. Share-Based Compensation 2016 Equity Incentive Plan 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. No further grants can be made under the 2016 Plan. Employee and nonemployee stock options generally vest over four years , with a maximum term of ten years from the date of grant. These awards become available to the recipient upon the satisfaction of a vesting condition based on a period of service. Activity in the 2016 Plan for the years ended December 31, 2023 and 2022 is summarized as follows: Number of Options Weighted Average Exercise Price (in Dollars) Weighted Average Remaining Contractual Term Outstanding at December 31, 2021 3,157,889 $ 0.16 6.6 years Exercised ( 563,617 ) 0.17 Forfeited ( 52,833 ) 0.20 Outstanding at December 31, 2022 2,541,439 0.15 3.7 years Exercised ( 1,936,018 ) 0.13 Forfeited ( 82,450 ) 0.22 Outstanding at December 31, 2023 522,971 $ 0.20 4.3 years Exercisable at December 31, 2023 473,239 $ 0.20 4.1 years At December 31, 2023, the options outstanding and exercisable had an intrinsic value of $ 0.3 million and $ 0.3 million, respectively. 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, 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 On October 1, 2020, the Company’s shareholders approved a new long-term incentive award plan (the “2020 Plan”) in connection with the Business Combination. The 2020 Plan is administered by the Board and the compensation committee. The selection of participants, allotment of shares, determination of price and other conditions are approved by the Board and the compensation committee at its sole discretion in order to attract and retain personnel instrumental to the success of the Company. 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 stock options have been granted under the 2020 Plan. F-16 Table of Contents Employee and director RSUs for which a grant date has been established generally vest over three to four years from the date of grant. These awards become available to the recipient upon the satisfaction of a vesting condition based on a period of service, and performance conditions (for certain awards to employees). Activity in the 2020 Plan for the years ended December 31, 2023 and 2022 is summarized as follows: Number of Units Weighted Average Grant Date Fair Value (in Dollars) Unvested at December 31, 2021 1 1,556,794 $ 11.01 Granted 2 2,504,939 4.10 Vested ( 470,426 ) 11.07 Forfeited 3 ( 822,207 ) 8.44 Unvested at December 31, 2022 4 2,769,100 5.51 Granted 5 2,192,900 2.57 Vested ( 1,350,172 ) 5.28 Forfeited 6 ( 860,505 ) 4.53 Unvested at December 31, 2023 7 2,751,323 $ 3.59 1 Excludes 1,910,914 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established. 2 Excludes 204,167 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established. 3 Excludes 130,000 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established. 4 Excludes 1,336,667 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established. 5 Excludes 25,000 shares underlying RSU awards with performance conditions, which have not been accounted for because no accounting grant date has been established. 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. 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. Note 9. Leases The Company enters into operating leases for its corporate office, temporary offices, vehicles and equipment. In addition, the Company may enter into arrangements whereby portions of the leased premises are subleased to third parties and are classified as operating leases. In 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. F-17 Table of Contents In December 2021, the Company amended the lease for its corporate office. This amendment increased the amount of space under the original lease, adjusted the monthly lease payments, and decreased the term of the lease through 2027. The Company accounted for this extension as a lease modification and recorded a decrease to the operating lease ROU asset and lease liability. The lease amendment includes the option to extend the term for up to two consecutive terms of five years , which was not reasonably certain to be exercised at the modification date. The following table provides a summary of the components of lease income, costs and rent, which are included within research and development and selling, general and administrative expense: Year Ended December 31, 2023 2022 Operating lease costs: Operating lease cost $ 2,239 $ 1,921 Short-term lease cost 508 199 Variable lease cost 682 622 Total operating lease costs $ 3,429 $ 2,742 The following table provides the weighted-average lease terms and discount rates used for the Company’s operating leases: December 31, 2023 2022 Weighted-average remaining lease term: Operating leases 3.6 years 4.3 years Weighted-average discount rate: Operating leases 8.7 % 7.1 % The following table provides a summary of operating lease liability maturities for the next five years and thereafter at December 31, 2023: 2024 $ 1,497 2025 2,900 2026 2,989 2027 1,426 2028 306 Thereafter — Total minimum lease payments 9,118 Less: imputed interest ( 1,479 ) Total lease obligations $ 7,639 Note 10. Property and Equipment, Net Property and equipment, net at December 31, 2023 and 2022 is summarized as follows: December 31, 2023 2022 Production machinery and equipment $ 10,376 $ 5,897 Vehicles 2,013 817 Leasehold improvements 2,236 1,002 Office furniture and fixtures 223 162 Computers and related equipment 1,963 1,367 16,811 9,245 Less: accumulated depreciation ( 6,824 ) ( 3,639 ) Total property and equipment, net $ 9,987 $ 5,606 F-18 Table of Contents 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. Note 11. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities at December 31, 2023 and 2022 are summarized as follows: December 31, 2023 2022 Accrued professional services and other $ 2,606 $ 5,834 Accrued compensation and related benefits 1,510 4,773 Other accrued liabilities 1,922 928 Accrued severance, contract termination, and other charges 4,013 — $ 10,051 $ 11,535 Note 12. Warranties The change in warranty liability for the years ended December 31, 2023 and 2022 is summarized as follows and included within accrued expenses and other current liabilities and other liabilities in the consolidated balance sheets: Year ended December 31, 2023 2022 Balance at beginning of period $ 527 $ 44 Accrual for warranties issued 218 644 Net changes in accrual related to pre-existing warranties ( 154 ) ( 7 ) Warranty charges ( 182 ) ( 154 ) Balance at end of period $ 409 $ 527 Note 13. Income Taxes The income tax provision for the years ended December 31, 2023 and 2022 is summarized as follows: Year Ended December 31, 2023 2022 Current tax expense: Federal $ — $ — State — — Total current tax expense $ — $ — Deferred tax (benefit) expense: Federal $ ( 25,328 ) $ ( 34,296 ) State — ( 40 ) Valuation allowance 25,328 34,336 Total deferred tax expense $ — $ — 19 Table of Contents The components of deferred taxes at December 31, 2023 and 2022 are summarized as follows: December 31, 2023 2022 Deferred tax assets: Federal net operating loss carryforwards $ 62,561 $ 48,186 State net operating loss carryforwards 491 491 Operating lease obligation 1,604 1,537 Section 174 expenditures 26,444 14,840 R&D tax credit 4,714 4,714 Other 3,235 3,148 Intangible assets, net 5,522 6,001 Total deferred tax assets 104,571 78,917 Less: valuation allowance ( 102,803 ) ( 77,475 ) Deferred tax assets, net of valuation allowance 1,768 1,442 Deferred tax liabilities: Operating lease right of use asset, net 1,485 1,359 Property and equipment, net 283 83 Total deferred tax liabilities 1,768 1,442 Net deferred tax assets $ — $ — The reconciliation of taxes at the federal statutory rate to the Company’s provision for income taxes for the years ended December 31, 2023 and 2022 is summarized as follows: Year Ended December 31, 2023 2022 Provision at statutory rate of 21% $ ( 25,937 ) $ ( 32,205 ) State tax expense — 492 Stock options 520 533 Other 89 865 R&D tax credit — ( 4,021 ) Change in valuation allowance 25,328 34,336 $ — $ — In assessing the realizability of deferred tax assets, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. 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 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, 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. The Company's ability to utilize a portion of net operating loss carryforwards and credits to offset future taxable income, and tax, respectively, is subject to certain limitations under Section 382 of the Internal Revenue Code upon changes in equity ownership of the Company. Due to such limitation, $ 2.0 million of the Company’s net operating loss and less than $ 0.1 million of the Company’s R&D credits will expire unused, regardless of taxable income in future years. F-20 Table of Contents The Company files a United States federal income tax return, as well as income tax returns in various states. The tax returns for years 2020 and thereafter remain open for examination. However, the taxing authorities have the ability to review the propriety of tax losses created in closed tax years to the extent such losses are utilized in an open tax year. Note 14. Commitments and Contingencies Economic Incentive Agreement During the year ended December 31, 2018, the Company entered into an agreement with the Cedar Park Economic Development Corporation (“EDC”), whereby the Company 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 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 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. Note 15. 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, 2023 2022 Numerator: Net loss attributable to common stockholders $ ( 123,510 ) $ ( 153,357 ) Denominator: 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, 2023 2022 Unexercised stock options 522,971 2,541,439 Unvested restricted stock units* 3,385,073 4,105,673 3,908,044 6,647,112 * 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. F-21 Table of Contents Note 16. Supplemental Cash Flow Information Supplemental cash flow information for the years ended December 31, 2023 and 2022 is summarized as follows: Year Ended December 31, 2023 2022 Cash paid for interest $ — $ — Cash paid for taxes $ — $ — Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ ( 2,470 ) $ ( 1,921 ) Right-of-use assets obtained in exchange for lease obligations $ 2,096 $ — Year Ended December 31, 2023 2022 Supplemental disclosure of noncash investing and financing activities: Common stock issued for purchase of assets $ — $ 16,115 Acquisitions of property and equipment and intangible assets included in accounts payable and other $ 292 $ 59 Note 17. 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 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. The Company has also established a Profit Sharing plan in which the employer may make contributions on the employee’s behalf (“discretionary employer contributions”). The Company did not make any Profit Sharing contributions during the years ended December 31, 2023 and 2022. 22 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.