What changed in this filing

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Item 1A. Risk Factors

2024-03-14 compared with 2023-04-14 · 63 added, 86 removed, 262 unchanged (36% of the section changed)

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In addition, spending may be materially and adversely affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, declines in income or asset values, energy shortages and cost increases, labor and healthcare costs and other economic factors.

In addition, uncertainty about, or a decline in, global or regional economic conditions may have a significant impact on the Company’s suppliers, contract manufacturers, logistics providers, distributors, and other channel partners.

Also, uncertainty about, or a decline in, global or regional economic conditions may have a significant impact on the Company’s suppliers, contract manufacturers, logistics providers, distributors, and other channel partners.

Potential effects include financial instability;

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• transportation delays and interruptions;

• potentially adverse income tax consequences;

• political and economic instability;

• terrorist activities;

• acts of war, including the events currently underway in Ukraine, which could lead to volatility in commodity availability and pricing, access to current or new markets, and general overall market volatility and weakness, among other factors;

• acts of war, including the events currently underway in Ukraine and Israel, which could lead to volatility in commodity availability and pricing, access to current or new markets, and general overall market volatility and weakness, among other factors;

• labor unrest;

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Any of these factors could have a material adverse effect on the Company’s business and results of operations.

Also, the Company is subject to, and may become subject to, various state, federal and international laws and regulations governing its business, environmental, labor, trade and tax practices.

Also, the Company is subject to, and may become subject to, various state, federal and international laws and regulations governing its business, environmental, labor and trade practices.

These laws and regulations, particularly those applicable to the Company’s international operations, are or may be complex, extensive and subject to change.

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Other legislation has been, and may in the future be, enacted in other locations in which the Company manufactures or sells its products.

If the Company or its component suppliers fail to timely comply with applicable legislation, its customers may refuse to purchase its products, or it may face increased operating costs as a result of taxes, fines or penalties.

In connection with complying with such environmental laws and regulations as well as with industry environmental initiatives, the standards of business conduct required by some of its customers and its commitment to sound corporate citizenship in all aspects of its business, the Company could incur substantial compliance and operating costs and be subject to disruptions to its operations and logistics.

In addition, if the Company were found to be in violation of these laws or noncompliant with these initiatives or standards of conduct, it could be subject to governmental fines, liability to its customers and damage to its reputation and corporate brand, any of which could cause its financial condition or results of operations to suffer.

Lastly, the Company’s overseas sales are subject to numerous stringent U.S.

and foreign laws, including the Foreign Corrupt Practices Act (“FCPA”) and comparable foreign laws and regulations, which prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S.

and other business entities for the purpose of obtaining or retaining business.

Safeguards that the Company implements to discourage these practices could prove to be ineffective, and violations of the FCPA and other laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against

the Company, including class action lawsuits and enforcement actions from the SEC, the United States Attorney’s Office for the Northern District of Illinois (“USAO”) and overseas regulators.

Any of these factors, or any other international factors, could impair the Company’s ability to effectively sell its power systems, or other products or services that it may develop, outside of the U.S.

The Company utilizes a global supply chain to source products, including engines, components and materials, which may subject it to tariffs, including U.S.

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Further, the imposition of tariffs on imports from China and other countries have the potential to materially and adversely impact the Company’s sales, profitability and future product launches.

The Company also sells its products on a global basis;

also sells its products on a global basis;

and, therefore, its export sales could be impacted by the tariffs.

Any material reduction in sales may have a material adverse effect on the Company’s results of operations.

COVID-19 Pandemic

The Company’s financial condition, results of operations and cash flows have been impacted by the COVID-19 pandemic and future periods may continue to be adversely affected by the COVID-19 pandemic or other outbreaks of infectious diseases or similar public health threats and the resulting economic impact.

Any outbreaks of contagious diseases and other adverse public health developments could have a material and adverse effect on the Company’s business, results of operations and financial condition.

The COVID-19 pandemic resulted in the implementation of significant governmental measures to control the spread of the virus, including quarantines, travel restrictions, business shutdowns and restrictions on the movement of people in the United States and abroad.

Further, the Company sources a significant amount of inventory from China, where the above mentioned governmental measures continue to be prominent.

These factors have impacted and may continue to impact the Company’s operations, financial condition and demand for the Company’s goods and services.

Due to the severity and longevity of the COVID-19 pandemic, the Company’s business, employees, customers, suppliers and stockholders may continue to experience significant negative impacts for future periods.

Such a negative impact on the Company’s business, results of operations and financial condition cannot be reasonably estimated at this time, but the impact may continue to be material in the future.

The degree to which the COVID-19 pandemic continues to impact the Company’s financial condition, cash flows, and results of operations depends upon future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration, location, and spread of future outbreaks, its severity, government and business measures to contain the virus and address its impact, and how quickly and to what extent normal economic and operating conditions can resume.

The Company cannot, at this time, predict the many potential future impacts of the COVID-19 pandemic, but it could have a material adverse effect on the Company’s business, prospects, financial condition, cash flows, and results of operations.

We may incur fines or penalties, damage to our reputation or other adverse consequences if our employees, suppliers, sub-suppliers or other contract parties, agents or business partners violate anti-bribery, competition, export and import, trade sanctions, data privacy, environmental, human rights or other laws.

We are subject to regulation under a wide variety of U.S.

federal and state and non-U.S.

laws, regulations and policies, including laws related to anti-corruption, human rights, anti-bribery, export and import compliance, trade sanctions, data privacy, anti-trust and money laundering, due to our domestic and global operations.

In particular, the U.S.

Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business, and we operate in many parts of the world that have experienced government corruption to some degree.

We cannot provide assurance our internal controls will always protect us from the improper conduct of our employees, suppliers, sub-suppliers or other contract parties, agents and business partners.

Violations of these laws, which are complex, may conflict with laws of other jurisdictions and often are difficult to interpret and apply, could subject us to civil or criminal investigations in the United States and other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties and related stockholder lawsuits, could lead to increased costs of compliance and could damage our reputation, business, financial condition, operating result s and cash flows.

Liquidity and Indebtedness

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As of December 31, 2023 , the Company had $144.8 million of total borrowings outstanding under its debt arrangements with Standard Chartered Bank (“Standard Chartered”) and Weichai.

O n March 24, 2023, the Company amended and restated its $130.0 million uncommitted senior secured revolving credit agreement with Standard Chartered (the “Third Amended and Restated Uncommitted Revolving Credit Agreement”), which extends the maturity date of loans outstanding under its previous credit facility to the earlier of March 22, 2024 or the demand of Standard Chartered.

The $130.0 million Third Amended and Restated Uncommitted Revolving Credit Agreement is subject to customary events of default and covenants and is secured by substantially all of the Company’s assets.

O n March 24, 2023, the Company amended and restated its $130.0 million uncommitted senior secured revolving credit agreement with Standard Chartered, the Third Amended and Restated Uncommitted Revolving Credit Agreement (the "Credit Agreement")”, which extends the maturity date of loans outstanding under its previous credit facility to the earlier of March 22, 2024 or the demand of Standard Chartered.

The $130.0 million Credit Agreement is subject to customary events of default and covenants and is secured by substantially all of the Company’s assets.

In addition, Standard Chartered has the right to demand payment of any and all outstanding borrowings and other amounts outstanding at any point in time at its discretion.

In connection with this Third Amended and Restated Uncommitted Revolving Credit Agreement, on March 24, 2023, the Company also amended three of the four shareholder’s loan agreements with Weichai, to among other things, extend the maturities thereof.

The first amended Shareholder's Loan Agreement (the "first amended Shareholder's Loan Agreement") continues to provide the Company with a $130.0 million subordinated loan under which Weichai is obligated to advance funds solely for purposes of repaying outstanding borrowings under the $130.0 million Third Amended and Restated Uncommitted Revolving Credit Agreement if the Company is unable to pay such borrowings.

The second amended Shareholder’s Loan Agreement (the “second amended Shareholder’s Loan Agreement”) continues to provide the Company with a $25.0 million subordinated loan at the discretion of Weichai.

The fourth amended Shareholder's Loan Agreement (the “fourth amended Shareholder’s Loan Agreement”) agreement continues to provide the Company with access to up to $30.0 million of credit at the discretion of Weichai.

The maturity of the first Amended Shareholder's Loan Agreement was extended to April 24, 2024 , and the maturity of the fourth Amended Shareholder's Loan Agreement was extended to March 31, 2024.

The third Shareholder's Loan Agreement (the "third Shareholder's Loan Agreement") was amended on November 29, 2022 and extends the maturity to November 30, 2023.

The third amended Shareholder's Loan Agreement (the “third amended Shareholder’s Loan Agreement”) continues to provide the Company with access to up to $50.0 million of credit at the discretion of Weichai.

During 2023, the Company also amended four shareholder’s loan agreements with Weichai, to among other things, extend the maturities thereof.

The first amended Shareholder’s Loan Agreement (the "first Amended Shareholder's Loan Agreement") continues to provide the Company with a $130.0 million subordinated loan under which Weichai is obligated to advance funds solely for purposes of repaying outstanding borrowings under the $130.0 million Credit Agreement if the Company is unable to pay such borrowings.

The maturity of the first Amended Shareholder’s Loan Agreement was extended to April 25, 2024.

The second amended Shareholder’s Loan Agreement (the “second Amended Shareholder’s Loan Agreement”) continues to provide the Company with a $25.0 million subordinated loan at the discretion of Weichai and matures on May 20, 2024.

The third amended Shareholder’s Loan Agreement (the “third Amended Shareholder’s Loan Agreement”) continues to provide the Company with access to up to $50.0 million of credit at the discretion of Weichai and matures on November 30, 2024.

The fourth amended Shareholder’s Loan Agreement (the “fourth Amended Shareholder’s Loan Agreement”) continues to provide the Company with access to up to $30.0 million of credit at the discretion of Weichai and matures on March 31, 2024.

All of the amended shareholder loan agreements with Weichai are subject to customary events of default and covenants.

The Company has covenanted to secure any amounts borrowed under either of the agreements upon payment in full of all amounts outstanding under the $130.0 million Third Amended and Restated Uncommitted Revolving Credit Agreement.

The Company has covenanted to secure any amounts borrowed under either of the agreements upon payment in full of all amounts outstanding under the $130.0 million Credit Agreement.

Without additional financing, the Company anticipates that it will not have sufficient cash and cash equivalents to repay amounts owed under its existing debt arrangements as they become due.

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• respond to competitive pressures or unanticipated working capital requirements.

Additionally, as discussed above, the global economy continues to be impacted by the COVID-19 pandemic.

The potential for continued disruptions, economic uncertainty, and unfavorable oil and gas market dynamics may continue to have a material adverse impact on the results of operations, financial position and liquidity of the Company.

The Company’s management has concluded that, due to uncertainties surrounding the Company’s future ability to refinance, extend and amend, or repay its outstanding indebtedness under its existing debt arrangements, maintain sufficient liquidity to fund its business activities, and other requirements under the Third Amended and Restated Credit Agreement and other outstanding debt, in the future, substantial doubt exists as to its ability to continue as a going concern within one year after the date that these financial statements are issued.

The Company’s management has concluded that, due to uncertainties surrounding the Company’s future ability to refinance, extend and amend, or repay its outstanding indebtedness under its existing debt arrangements, maintain sufficient liquidity to fund its business activities, and other requirements under the Credit Agreement and other outstanding debt, in the future, substantial doubt exists as to its ability to continue as a going concern within one year after the date that these financial statements are issued.

The Company’s plans to alleviate the substantial doubt about its ability to continue as a going concern may not be successful, and it may be forced to limit its business activities or be unable to continue as a going concern, which would have a material adverse effect on its results of operations and financial condition.

The consolidated financial statements included herein have been prepared assuming that the Company will continue as a going concern and contemplating the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

The Company’s ability to continue as a going concern is dependent on generating profitable operating results, having sufficient liquidity, maintaining compliance with the covenants and other requirements under the Third Amended and Restated Credit Agreement and shareholder loan agreements, in the future, and extending and amending, refinancing or repaying the indebtedness outstanding under the Company’s existing debt arrangements.

The Company’s ability to continue as a going concern is dependent on generating profitable operating results, having sufficient liquidity, maintaining compliance with the covenants and other requirements under the Credit Agreement and shareholder loan agreements, in the future, and extending and amending, refinancing or repaying the indebtedness outstanding under the Company’s existing debt arrangements.

The Company has a significant amount of indebtedness and is highly leveraged.

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The failure or the inability to meet such obligations under existing debt or any new debt could materially and adversely affect the Company’s business and financial condition.

In addition, the Company’s debt obligations could make it more vulnerable to adverse economic and industry conditions and could limit its flexibility in planning for or reacting to changes in its business and the industries in which it

The Company’s indebtedness and the cash flow needed to satisfy its debt obligations and the covenants contained in current and potential future debt agreements could have important consequences, including the following:

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• making the Company more vulnerable in the event of a downturn in its business.

The Company’s Third Amended and Restated Credit Agreement places limitations on its ability to make acquisitions and restricts its ability to incur additional indebtedness, while certain loan agreements with Weichai place limitations or restrictions on the Company’s usage of borrowed funds.

The Company’s Credit Agreement places limitations on its ability to make acquisitions and restricts its ability to incur additional indebtedness, while certain loan agreements with Weichai place limitations or restrictions on the Company’s usage of borrowed funds.

Any future failure by the Company to comply with the financial covenants set forth under the Company’s debt agreements, if not cured or waived, could result in the acceleration of debt maturities or prevent the Company from accessing availability.

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Under its bylaws and certain indemnification agreements, the Company has obligations to indemnify current and former officers and directors and certain current and former employees.

Based on cumulative legal fees and settlements incurred, the Company fully exhausted its primary directors and officers insurance coverage of $30.0 million during the first quarter of 2020.

Further, during 2021 the Company also exhausted most of its primary $10 million side A insurance coverage.

Additional expenses currently expected to be incurred and that may occur in the future and/or liabilities that may be imposed in connection with actions against certain of the Company’s past and present directors and officers and certain current and former employees who are entitled to indemnification will be funded by the Company with its existing cash resources.

Since exhausting its primary directors’ and officers’ liability insurance coverage in early 2020, the Company has incurred $15.8 million related to its indemnification obligation in 2022 and 2021 combined.

Expenses that may occur in the future and/or liabilities that may be imposed in connection with actions against certain of the Company’s past and present directors and officers and certain current and former employees who are entitled to indemnification would be funded by the Company with its existing cash

The Company has incurred less than $0.1 million related to its indemnification obligation in 2023 and 2022 combined.

With a verdict reached in the USAO trial matter involving former officers and employees in September 2021, coupled with a settlement reached in the SEC matter involving former officers and employees in June 2022, the Company’s potential future costs for indemnity obligations related to these matters should cease.

T he Company has approximately $8.8 million accrued for the reimbursement to Travelers Casualty and Surety Company of America (“Travelers”) related to the matter involving former officers and employees.

In June 2020, the Company entered into a new directors’ and officers’ liability insurance policy, which was renewed in June 2021, and again in June 2022.

The insurance policy includes standard exclusions including for any ongoing or pending litigation such as the disclosed investigations by the SEC and USAO.

T he Company entered into a new directors’ and officers’ liability insurance policy, which expires in July 2024 .

Financial Condition, Results of Operations, and Cash Flows

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We have had material weaknesses in our internal controls in the past and we cannot be certain that we will be successful in maintaining adequate internal control over our financial reporting and financial processes in the future.

The existence of any material weakness or significant deficiency would require management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies, and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner.

The existence of any material weakness or significant deficiencies would require management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies, and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner.

The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations, subject us to investigations from regulatory authorities or cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect us.

The Company has experienced substantial net losses in recent fiscal years.

The Company generated a net loss in fiscal year 2021 and has an accumulated deficit as of December 31, 2022.

The net loss experienced in 2021 was principally attributable to reduced gross profit as a result of higher material, tariff and freight costs (which were not fully recovered through pricing), significant warranty expenses (mostly related to certain engines sold into the transportation end market), and unfavorable product mix.

In addition, the Company incurred significant legal and professional expenses associated with indemnifications of certain former employees of the Company.

Some of these costs could remain in future periods.

The Company could incur restructuring and impairment charges as it evaluates its portfolio of assets and identifies opportunities to restructure its business to optimize its cost structure.

The Company continuously evaluates its portfolio of assets and its operational structure in an effort to identify opportunities to optimize its cost structure including as a result of its on-going business needs and its high warranty costs.

The Company continuously evaluates its portfolio of assets and its operational structure in an effort to identify opportunities to optimize its cost structure as a result of its on-going business needs and its high warranty costs.

These actions could result in restructuring and related charges, including but not limited to asset impairments and employee termination costs, any of which could be significant and could adversely affect the Company’s results of operations.

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The Company may incur liabilities for warranty claims as a result of defective products or components, including claims arising from defective products or components provided by its suppliers that are integrated into its power systems.

The provisions the Company makes for warranty accrual may not be sufficient, or it may be unable to rely on a warranty provided by a third-party manufacturer or recover costs incurred associated with defective components or products provided by its suppliers.

The provisions the Company makes for warranty accruals may not be sufficient, or it may be unable to rely on a warranty provided by a third-party manufacturer or recover costs incurred associated with defective components or products provided by its suppliers.

The Company may recognize additional expenses as a result of warranty claims in excess of its current expectations.

Such warranty claims may necessitate a redesign, re-specification, a change in manufacturing processes and/or a recall of its power systems, which could have a material adverse impact on the Company’s financial condition and results of

operations and on existing or future sales of its power systems and other products.

Even in the absence of any warranty claims, a product deficiency such as a manufacturing defect or a safety issue may necessitate a product recall, which could have a material adverse impact on the Company’s financial condition and results of operations and on existing or future sales.

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There are no assurances that the Company will have adequate financial or technical resources in the future to maintain compliance with government emissions standards.

Historically, the Company’s 6.0L and 8.8L gasoline engines qualified for the small manufacturer exemption for Phase 1 GHG under Title 40 of the Code of Federal Regulation Section 1036.150(d).

Starting in 2020, as a result of the Weichai ownership change in April 2019, those products no longer qualified for the exemption and must meet Phase 1 GHG standards.

In order to address the impact of the transition of its emission regulation requirements in 2021, the Company licensed its technology to a third-party small manufacturer to produce and certify the 6.0L gasoline engine and utilized averaging, banking, and trading compliance provisions for the sale of its 8.8L gasoline engine.

Prior to 2020, the Company’s 6.0L and 8.8L gasoline engines qualified for the small manufacturer exemption for Phase 1 GHG under Title 40 of the Code of Federal Regulation Section 1036.150(d).

gasoline engine.

The Company ended the program to outsource and sell the certified 6.0L engines effective December 31, 2021.

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The Company’s business could be harmed by adverse changes in its relationships with these suppliers if its competitors gain access to such technology.

The viability of certain key third-party suppliers, or the exiting by certain suppliers of certain business lines, could require the Company to find other suppliers for

materials or components.

Continuing into 2022, the Company experienced delays in its supply chain due to temporary shortages of raw materials and container delays of overseas materials as bottlenecks occurred at ports in Asia and North America.

This, in turn, has caused delivery delays to some of the Company’s customers.

If future work stoppages were to be prolonged or expanded in scope, there could be additional supply shortages, which could continue to impact the Company’s ability to deliver its products to customers on schedule.

Some components cannot be quickly or inexpensively re-sourced to another supplier due to long lead times and contractual commitments that might be required by another supplier in order to provide the components or materials.

The viability of certain key third-party suppliers, or the exiting by certain suppliers of certain business lines, could require the Company to find other suppliers for materials or component s.

S ome components cannot be quickly or inexpensively re-sourced to another supplier due to long lead times and contractual commitments that might be required by another supplier in order to provide the components or materials.

Any extended delay in receiving engines or other critical components, or the inability of third-party suppliers to meet the Company’s quality, quantity or cost requirements, could impair or prohibit the Company’s ability to deliver products to its OEM customers.

The loss of certain of the Company’s exclusive supply and distribution agreements, coupled with the Company’s inability to manufacture or source alternative products, could have a material adverse impact on its financial results.

The Company is the exclusive supplier and distributor of certain engine products sourced from certain engine manufacturers.

The agreements provide the Company with the exclusive rights to distribute the associated products in certain geographic regions.

The Company may not be able to extend the agreements or may not achieve acceptable pricing.

For example, the Company was an exclusive supplier of the GM 6.0L engine to OEMs and GM has discontinued the engine.

The Company does not have an agreement with GM to supply on-highway OEMs with GM’s successor product to the 6.0L engine.

If the Company is not able to maintain the arrangements or achieve competitive pricing, then it may need to find alternative products through either alternative supply sources or the design and manufacture of competitive products to meet customer demands.

The loss of any of the exclusive supply agreements and failure to source alternative products could have a materially adverse impact on the Company’s financial results.

In addition, the exclusive agreements often include minimum purchase requirements.

The statute compliance disruptions associated with goods shipped from certain regions in China could cause supply chain interruptions and raw material shortages.

In December 23, 2021, the UFLPA became law in the United States.

The UFLPA, among other matters, prohibits the import of goods from the Xinjiang Uyghur Autonomous Region of the People’s Republic of China.

In July 2023, the Company began experiencing delays in the imports of raw materials directly related to the UFLPA.

Near the end of 2023, the importing of certain forklift products was suspended because of the intensified enforcement and expansion of the UFLPA.

The Company is actively working to re-source these products through new channels as quickly as possible to minimize the effect on future sales while maintaining the Company’s high-quality standards.

Statute compliance disruptions could continue in the future and could result in further delay of importing raw materials needed to fulfil future orders while the Company works to comply with requests in regards to the UFLPA.With the ongoing enforcement and expansion of the UFLPA, the Company has increased the vetting of new and existing vendors with links to the applicable areas to mitigate the likelihood of future disruption of imports.

Growth and Profitability

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As a result, sales of the Company’s products could be severely impacted during periods of a prolonged depression in energy prices, rig counts and capital expenditures which could have a material adverse effect on the Company’s results of operations.

The Company estimates that as much as approximately $47.0 million and $25.0 million of its 2022 and 2021 net sales, respectively, were attributable to the sale of products used within the

oil and gas industry.

The potential impact of future disruptions, continued economic uncerta inty, and depressed crude oil prices and low rig count levels may have a significant adverse impact that may result in the recognition of material impairments or other related charges.

The Company estimates that as much as approximately $72.1 million and $47.0 million of its 2023 and 2022 net sales, respectively, were attributable to the sale of products used within the oil and gas industry.

The potential impact of future disruptions, continued economic uncertainty, and depressed crude oil prices and low rig count levels may have a significant adverse impact that may result in the recognition of material impairments or other related charges.

The introduction of new products, including new engines that the Company develops, and the continued expansion of products in the power systems and transportation markets may not succeed or achieve widespread acceptance.

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New developments in power system technology may negatively affect the development or sale of some or all of the Company’s power systems or make them noncompetitive or obsolete.

Other companies, some of which have longer operating histories, greater name recognition and significantly greater financial and marketing resources than the Company, are currently engaged in the development of products and technologies that are similar to, or may be competitive with, certain of the Company’s products and power system technologies.

Other companies, some of which have longer operating histories, greater name recognition and significantly greater

financial and marketing resources than the Company, are currently engaged in the development of products and technologies that are similar to, or may be competitive with, certain of the Company’s products and power system technologies.

If the markets for its products grow as the Company anticipates, competition may intensify, as existing and new competitors identify opportunities in such markets.

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The Company may not be able to incorporate such technologies into its product offerings, or it may be required to devote substantial resources to do so.

The success of its business depends in large part on its ability to provide single assembly, integrated, comprehensive, technologically sophisticated power

systems to its customers.

The success of its business depends in large part on its ability to provide single assembly, integrated, comprehensive, technologically sophisticated power systems to its customers.

The development or enhancement by its competitors of similar capabilities could adversely affect the Company’s business.

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The Company’s success depends on its ability to attract, retain and motivate a highly-skilled and diverse management team and workforce.

During 2022 , the Company has experienced significant leadership changes, including appointing a new interim Chief Executive Officer and a new Chief Financial Officer.

Executive leadership transitions can be difficult to manage and could cause disruption to the Company’s business.

Failure to ensure that the Company has the depth and breadth of management and personnel with the necessary skill set and experience could impede its ability to deliver growth objectives and execute its operational strategy.

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Ownership of the Company’s stock is concentrated among certain former employees and Weichai, therefore limiting other stockholders’ ability to influence corporate matters.

As of April 10, 2023, Weichai beneficially owned 51.2% of the Company’s outstanding shares of Common Stock.

As of March 7, 2024, Weichai beneficially owned 51.2% of the Company’s outstanding shares of Common Stock.

Additionally, Gary S.

Winemaster, the Company’s founder, former Chairman of the Board, former Chief Executive Officer, and President and nonexecutive Chief Strategy Officer, beneficially owned approximately 14.5% of the Company’s outstanding shares of Common Stock, and Kenneth J.

Winemaster, the Company’s founder, former Chairman of the Board of Directors (the “Board”), former Chief Executive Officer, and President and nonexecutive Chief Strategy Officer, beneficially owned approximately 14.4% of the Company’s outstanding shares of Common Stock, and Kenneth J.

Winemaster, the Company’s co-founder and former Executive Vice President, beneficially owned approximately 9.6% of the Company’s outstanding shares of Common Stock.

E ach of these stockholders, by virtue of

their significant equity ownership in the Company, may be able to significantly influence, and, in the case of Weichai, control the outcome of all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions.

E ach of these stockholders, by virtue of their significant equity ownership in the Company, may be able to significantly influence, and, in the case of Weichai, control the outcome of all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions.

The interests of these stockholders may not coincide with the interests of other stockholders.

The concentration of ownership might also have the effect of delaying or preventing a change of control of the Company that other stockholders may view as beneficial.

With the exercise of the Weichai Warrant, Weichai alone owns a majority of the outstanding shares of Common Stock and, therefore, it possesses voting control over the Company sufficient to prevent any change of control from occurring.

Weichai alone owns a majority of the outstanding shares of Common Stock and, therefore, it possesses voting control over the Company sufficient to prevent any change of control from occurring.

Weichai maintains certain rights through its Investor Rights Agreement with the Company.

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federal tax credits.

Unanticipated changes in our effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities could adversely affect our profitability.

We are subject to income taxes in the United States jurisdictions.

Our effective tax rate and cash tax liability in the future could be adversely affected by the enactment of new tax legislation, changes in the level and mix of earnings in jurisdictions with differing statutory tax rates, and changes in the valuation of deferred tax assets and liabilities.

The carrying value of deferred tax assets, which are predominantly in the United Sates, is dependent on our ability to generate future taxable income in the United States.

We are also subject to ongoing tax audits globally.

These audits can involve complex issues, which may require an extended period of time to resolve and can be highly judgmental.

Tax authorities may disagree with certain of our tax reporting positions and, as a result, assess additional taxes against us.

We regularly assess the likely outcomes of these audits to determine the appropriateness of our gross unrecognized tax benefits.

The amounts ultimately paid upon resolution of current and future tax audits could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on our income tax provision.

Cyber Risk Factors

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The Company continuously seeks to maintain a robust program of information security and controls, but the impact of a material information technology event could have a material adverse effect on its reputation and results of operations.

Unresolved Staff Comments.

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

What changed 10-K

Item 1A. Risk Factors