What changed in this filing

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Item 1. Business

2025-03-24 compared with 2024-03-14 · 51 added, 63 removed, 220 unchanged (34% of the section changed)

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The Company manages the business as a single reportable segment.

The Company’s products are primarily used by global original equipment manufacturers (“OEMs”) and end-user customers across a wide range of applications and equipment that includes standby and prime power generation, demand response, microgrid, combined heat and power, arbor equipment, material handling (including forklifts), agricultural and turf, construction, pumps and irrigation, compressors, utility vehicles, light- and medium-duty vocational trucks, and school and transit buses.

As of January 1, 2024, the Company no longer sells emissions-certified engines into the on-road market.

The Company provides highly engineered, comprehensive solutions designed to meet specific customer application requirements and technical specifications, including those imposed by environmental regulatory bodies, including the U.S.

Environmental Protection Agency (“EPA”), the California Air Resources Board (“CARB”) and the People’s Republic of China’s Ministry of Ecology and Environment (“MEE,” formerly the Ministry of Environmental Protection), as well as regulatory bodies within the European Union (“EU”).

Environmental Protection Agency (“EPA”), the California Air Resources Board (“CARB”) and regulatory bodies within the European Union (“EU”).

The Company’s products include both sourced and internally designed and manufactured engines that are engineered and integrated with associated components.

These comprehensive power systems are tested and validated to meet quality, safety, durability and global environmental standards and regulations.

These comprehensive power systems are tested and validated to meet quality, safety, durability and environmental standards and regulations.

Through advanced research and development (“R&D”) and engineering capabilities, the Company is able to provide its customers with highly optimized, efficient, durable and emissions-compliant products that enhance their competitive position.

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The Company also designs and manufactures large, custom-engineered integrated electrical power generation systems for both standby and prime power applications.

The Company’s comprehensive power systems are tested and validated to meet quality, safety, durability and global environmental standards and regulations.

The Company’s engines and power systems include both emission-certified compression and spark-ignited internal combustion engines which are enabled by advanced controls to run on a wide variety of clean, alternative fuels, including natural gas, propane, and biofuels, as well as gasoline and diesel options, within the power systems, industrial and transportation end markets.

The Company’s comprehensive power systems are tested and validated to meet quality, safety, durability and environmental standards and regulations.

The Company sells engines and power systems, including both emission-certified compression ignition and spark-ignition internal combustion engines which are enabled by advanced controls to run on a wide variety of clean, alternative fuels, including natural gas, propane, and biofuels, as well as gasoline and diesel options, within the power systems, industrial and transportation end markets.

Natural gas, gasoline, propane, and biofuel engines range from 0.99 liters (“L”) to 53L, while Diesel options range from 20L to 88L.

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Sustained profitability

The Company continues to execute on its plan to enhance profitability through the review of its customer and product portfolio.

The Company continues to improve profitability through the review of its customer and product portfolio.

To date, this has resulted in strategic price increases in certain areas of the business, along with product redesign and the re-sourcing of certain components , to support improved margins.

This program is a multi-year effort and will entail a strategic

assessment of certain areas in which profitability does not meet established thresholds.

This program is a multi-year effort and will entail a strategic assessment of certain

areas in which profitability does not meet established thresholds.

The Company also continues to transform its manufacturing operations through the ongoing adoption of lean, agile and flexible lines, which provides opportunities for improved efficiency, margins and profitability, particularly as volume and sales increase.

The Company has also been investing heavily in the expansion of its heavy-duty engine product line, particularly through its collaboration with Weichai America Corp., a wholly-owned subsidiary of Weichai Power Co., Ltd.

The Company has also been investing heavily in the expansion of its heavy-duty engine product line, which has historically provided better margins, particularly through its collaboration with Weichai America Corp., a wholly-owned subsidiary of Weichai Power Co., Ltd.

(HK2338, 000338.SZ) (herein collectively referred to as “Weichai”).

This product line has historically provided better margins.

Weichai is the beneficial owner of 51.1% of the outstanding Common Stock.

Warranty expense mitigation efforts

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As part of this program, the Company has adopted tighter controls over spending and centralized certain business processes.

During 2023, the Company consolidated two of its leased facilities in the Chicago area to increase efficiencies and reduce overhead costs for engine manufacturing lines.

Strengthen the business through the optimization of business systems and technology

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Continuing to build on its broad product offering, the Company received EPA certification for its 32L and 40L heavy-duty engines in 2018 and for its 53L heavy-duty engines in 2019.

These heavy-duty engines provide a natural-gas-fueled power range from 500 kilowatt-electric (“kWe”) to 1.25 megawatt (“MW”), allowing it to serve a greater portion of the demand response, microgrid, combined heat and power, and oil and gas markets.

Additionally, in 2019, the Company received EPA emergency standby certification for its 20L, 40L and 53L diesel engines, which provide a power range of 550 kWe to 1.65 MW.

These diesel engines are largely designed for power systems market applications including emergency power, wastewater treatment, and oil and gas exploration and production.

These heavy-duty engines provide a natural-gas-fueled power range from 500 kilowatt-electric (“kWe”) to 1.25 megawatt (“MW”), allowing the Company to serve a greater portion of the demand response, microgrid, combined heat and power, and oil and gas markets.

Additionally, in 2019, the EPA granted emergency standby certification for certain diesel engines sold by the Company, which are largely designed for emergency use in critical infrastructure applications.

Also, the engines can handle mission critical customer operations in the health care, data center, hospitality and transportation industries.

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• the worldwide growth of intermittent sources of energy, such as wind and solar, and an aged electric grid in the United States, coupled with power outage activity due to weather or power shutdowns, are driving increased demand for generators, microgrids and demand response equipment;

• increasingly stringent regulations and growing efforts to reduce emissions are driving demand for clean energy and alternatives to diesel power engines (e.g., EPA Tier 4 emission standards, CARB regulations, MEE policies in China, and grants, rebates and other incentives for adopting clean energy applications), in several markets such as the power generation market for microgrids and oil and gas applications, school bus and arbor care markets, among others;

• increasingly stringent regulations and growing efforts to reduce emissions are driving demand for clean energy and alternatives to diesel power engines in several markets such as the power generation market for microgrids, oil and gas applications, and arbor care markets, among others;

• growth in data centers and their increasing demand for electricity, which is driving growth for backup power (commercial generators/microgrids);

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Throughout the Company’s history, it has evolved from a provider of diesel power systems to becoming a major supplier of power systems fueled by alternatives to diesel, including gasoline, propane, and natural gas, among others.

By leveraging the deep industry experience of its engineering and new-product development teams, the Company is continuing to take steps to broaden the range of its power system product offerings, including engine classes, power ratings and the OEM and direct user market categories into which it supplies products.

By leveraging the

deep industry experience of its engineering and new-product development teams, the Company is continuing to take steps to broaden the range of its power system product offerings, including engine classes, power ratings and the OEM and direct user market categories into which it supplies products.

The Company plans to capitalize on its technologically sophisticated, in-house design, prototyping, testing and application engineering capabilities to further refine its superior power system te chnology.

In 2023, due to increasing demand for new energy and latest market trends, the Company began to offer battery packs for its industrial market.

Due to increasing demand for new energy and latest market trends, the Company continues to offer battery packs for its industrial market.

Leverage the Company’s relationship with Weichai

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In January 2022, PSI and Société Internationale des Moteurs Baudouin (“Baudouin”), a subsidiary of Weichai, entered into an international distribution and sales agreement which enables Baudouin to bring PSI’s power systems line of products into the European, Middle Eastern, and African markets, which resulted in $1.1 million of sales during the year ended December 31, 2024 .

Beginning January 2024, this agreement automatically extends for additional one-year terms unless notice is given by one of the parties.

In addition to sales, Baudouin will manage service, support, warranty claims, and technical requests.

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• fuel-agnostic strategy;

• demonstrated expertise in on- and off-road applications;

• demonstrated expertise in off-road applications;

• ability to leverage Weichai’s strengths and capabilities;

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The ISO 9000 family of quality management standards, which must be met in order to become ISO certified, is designed to help organizations monitor and improve the quality and delivery of their products and/or services to their customers.

The Company also uses tools such as Six Sigma, Lean Manufacturing, 80/20, Value Stream Mapping and other manufacturing engineering strategies to help manage its business, build quality, drive performance and continually improve culture within the manufacturing operations’ teams.

The Company uses tools such as Six Sigma, Lean Manufacturing, 80/20, Value Stream Mapping and other manufacturing engineering strategies to help manage its business, build quality, drive performance and continually improve culture within the manufacturing operations’ teams.

The Company also uses a customer relationship management database to help collect customer feedback and to track overall quality performance at its OEM customers.

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Research, Development and Engineering

The Company’s research, development and engineering programs are focused on new product development, enhancements to current products, in addition to performance and quality improvements across its product lines.

The Company’s research, development and engineering programs are focused on new product development and enhancements to current products, in addition to performance and quality improvements across its product lines.

Its efforts are market driven, with the sales team identifying and defining market requirements and trends and its engineering and new-product development groups reviewing existing power system portfolios and developing new solutions that build upon the technology within that portfolio.

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From time to time, the Company enters into agreements with its customers to fund a portion of the research, development and engineering costs of a particular project.

These reimbursements are accounted for as a reduction of the related research, development and engineering expenditure.

These reimbursements are accounted for as a reduction of the related research,

development and engineering expenditure.

The Company’s net research, development and engineering expenditures for 2024 and 2023 were $20.1 million and $19.5 million, respectively.

Supplier Relationships

In addition to producing its own engines, the Company has established relationships with its suppliers for certain engines that are integrated into its comprehensive power systems, the most significant of which are Doosan Infracore Co., Ltd.

(“Doosan”), a subsidiary of Doosan Group, Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd.

(“SAME”) and Weichai.

In addition to producing its own engines, the Company has established relationships with its suppliers for certain engines that are integrated into the Company’s comprehensive power systems, the most significant of which are HD Hyundai Infracore Co., LTD (“HD Hyundai”), a subsidiary of HD Hyundai, Shenyang Packson Technology Co., LTD.

(“SPY”), Chongqing Duchengrongfeng Mechanic Manufacture Co., Ltd (“CDM”) and Weichai.

The Company also sources other power system components and coordinates design efforts with third-party suppliers for some of its key components.

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The Company delivers this assembly to its customers’ production lines ready to install into the customers’ product.

The Company is party to a supply agreement with Doosan, under which it purchases and distributes specified Doosan engines within a territory consisting of the United States, Canada and Mexico.

On October 1, 2019, the supply agreement with Doosan was amended and extended to December 31, 2023.

Following December 31, 2023 the supply agreement automatically extends for additional one-year terms unless a notice of termination is provided by either party six months prior to the scheduled expiration.

On July 1, 2022, th e supply agreement was amended to remove exclusivity and the minimum product purchase commitments.

The Company was also party to a supply agreement with SAME, for the exclusive purchase and distribution of engines around the world, with the exception of China (including Hong Kong, Macao and Taiwan), within the forklift market.

Near the end of 2023, the importing of SAME products was suspended as a result 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.

The Company is party to a nonexclusive supply agreement with HD Hyundai, under which it purchases and distributes specified HD Hyundai engines within a territory consisting of the United States, Canada and Mexico with no minimum product purchase commitments.

Beginning in 2024, the supply agreement automatically extends for additional one-year terms unless a notice of termination is provided by either party six months prior to the scheduled expiration.

In November 2023, the Company entered into a supply agreement with CDM, for the exclusive purchase and distribution of engines in North and South America, in the industrial and power system markets.

The Company entered into this supply agreement to source certain engines previously supplied by Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd.

(“SAME”), whose ability to supply product was suspended because of the intensified enforcement and expansion of the UFLPA near the end of 2023.

Beginning December 2024, the supply agreement automatically extends for additional one-year terms unless a notice of termination is provided by either party six months prior to scheduled expiration.

In November 2023, the Company also entered into a supply agreement with SPY, for the exclusive purchase and distribution of engines in North and South America, in the industrial and power system markets.

The Company entered into this supply agreement to source certain engines previously supplied by SAME, whose ability to supply product was suspended because of the intensified enforcement and expansion of the UFLPA near the end of 2023.

Beginning December 2024, the supply agreement automatically extends for additional one-year terms unless a notice of termination is provided by either party six months prior to scheduled expiration.

Product Support

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None of the members of the Company’s workforce are represented by a union or covered by a collective bargaining agreement.

Part of the Company’s values focus on developing and maintaining a world class workforce through personal accountability, teamwork, customer service and innovation.

Company values include focusing on developing and maintaining a world class workforce through personal accountability, teamwork, customer service and innovation.

The Company monitors and manages attrition.

It approves, through its human resources department, the replacement of key positions that it believes are critical to sustaining improved business performance and analyzes departure data to continually improve upon the experience of employees.

Turnover for salaried employees in 2023 was approximately 17.0% .

The Company’s talent management and succession planning process includes the identification of key positions based on current and future business strategies, the identification of potential successors, and a plan for talent development.

Turnover for salaried employees in 2024 was approximately 9.5%.The Company’s talent management and succession planning process includes the identification of key

positions based on current and future business strategies, the identification of potential successors, and a plan for talent development.

The Company focuses on attracting and retaining the best employees by providing market competitive pay and benefits.

This ensures sustainability of the organization.

The Company’s short-term and long-term incentive plans are designed to provide a

variable pay opportunity to reward the attainment of key financial and operational goals as well as shareholder value creation.

The Company’s short-term and long-term incentive plans are designed to provide a variable pay opportunity to reward the attainment of key financial and operational goals as well as shareholder value creation.

In addition to the base and variable pay plans, the Company offers employees other benefits including medical, paid-time off, and retirement savings plans.

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Employees participate in training sessions focused on these topics and are encouraged to promote behaviors that protect others from risk of injury.

The Company sets annual targets for its Total Recordable Incident Rate (“TRIR”) and Days Away, Restricted or Transferred (“DART”) and regularly reviews these metric s.

The Company sets annual targets for its Total Recordable Incident Rate (“TRIR”) and Days Away, Restricted or Transferred (“DART”) and regularly reviews these metri cs.

For 2024, the Company achieved an overall TRIR of 4.418, meaning that for every 100 employees, 0.40 employees incurred an injury that resulted in recordable medical treatment.

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The Company’s reporting facilities follow the guidelines required for its federally enforceable state operating permits (FESOP) used with the Illinois Environmental Protection Agency (IEPA), and the Wisconsin Department of Natural Resources (WDNR) Type-B permit guidelines.

This includes monitoring the emissions produced from these locations as part of the requirements within the states PSI operates.

This includes monitoring the emissions produced from these locations as part of the requirements within the states where PSI operates.

A majority of PSI's current production utilizes traditional utility supply.

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The Company’s power systems are subject to extensive statutory and regulatory requirements that directly or indirectly impose standards governing exhaust emissions, evaporative emissions, greenhouse gas (“GHG”) emissions and noise.

The Company’s power systems are subject to compliance with regulatory standards imposed by the EPA, state regulatory agencies in the United States, including the CARB, and other regulatory agencies around the world, such as the MEE.

Because its engines are sold into both off-road and on-road markets, the Company must ensure certification to the specific regulations within the applicable statutory segment.

The Company’s power systems are subject to compliance with regulatory standards imposed by the EPA, state regulatory agencies in the United States, including CARB, and other regulatory agencies around the world.

Although as of January 1, 2024, the Company no longer sells engines into the on-road market, because its engines are still sold into the off-road market, the Company must ensure certification to the specific regulations within the applicable statutory segment.

For products sold into the U.S.

market, both EPA and CARB have imposed specific regulations on engines used in both off-road equipment and on-road vehicles.

market, both EPA and CARB have imposed specific regulations on engines used in off-road equipment.

These regulations generally serve to restrict exhaust emissions, with a primary focus on oxides of nitrogen, hydrocarbons and carbon monoxide.

Exhaust emission regulations for engines used in off-highway industrial and power generation equipment vary based upon the use of the equipment into which the engine is incorporated (such as stationary power generation or mobile off-highway industrial equipment) and the type of fuel used to drive the power system.

Similarly, on-road regulations from the EPA and CARB focus on the same exhaust constituents as well as sophisticated requirements to meet on-board diagnostic (“OBD”) system regulations.

Emissions of GHGs such as carbon dioxide, methane and nitrogen dioxide are also regulated, with more stringent requirements which started in 2021.

Exhaust emission regulations for engines used in off-road industrial and power generation equipment vary based upon the use of the equipment into which the engine is incorporated (such as stationary power generation or mobile off-highway industrial equipment) and the type of fuel used to drive the power system.

The Company continues to make significant investments into the necessary intellectual property that supports full compliance of the Company’s engines now and into the foreseeable future.

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Tier 4 and Stage V regulations call for reductions in levels of particulate matter and oxides of nitrogen.

The Company’s entry into the transportation end market began in 2013 with the development of its 8.8L power systems targeted for 2015 regulatory standards.

In 2014, the EPA and CARB certified the Company’s new engine as a Model Year 2015 product for liquid propane gas (“LPG”) and compressed natural gas (“CNG”) fuels, and in 2015 the Company launched its first propane-fueled engine for on-road applications.

To assist the adoption of alternative-fueled vehicles in the marketplace, the EPA and CARB granted alternative-fueled engines an exemption from OBD regulations until 2018 (CARB) /2019 (EPA).

Gasoline engines are not exempt from OBD regulations, therefore, in 2017, the Company achieved full OBD certification for its 2018 and beyond gasoline 6.0L and 8.8L products.

The knowledge gained from this gasoline OBD development was applied to the Company’s alternative-fueled engines for 2019 after all OBD exemptions ended as of December 31, 2018.

In 2016, the EPA launched new Phase 1 GHG emission regulations.

New EPA Phase 2 GHG emission regulations began January 1, 2021.

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 had to meet Phase 1 GHG standards.

In order to address the impact of the transition of its emission regulation requirements in 2020 and 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.

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

The Company is utilizing averaging, banking, and trading compliance provisions for compliance with the EPA Phase 2 GHG emission regulations.

The initial and ongoing certification requirements vary by power system application and market segment.

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Once a power system is certified, regulatory agencies impose ongoing compliance requirements, which include testing newly produced power systems on a regular quarterly schedule to ensure ongoing compliance with applicable regulations.

In addition, there are field audit requirements, which require the removal of power systems from service at specified stages of their useful lives to perform confirmatory exhaust emissions testing and/or OBD system audits and testing.

All of the Company’s emission-certified power systems meet existing exhaust emission standards of the EPA and CARB.

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Present Position with the Company

(Dino) Xykis 64 2020 Chief Executive Officer, Chief Technical Officer

(Dino) Xykis 65 2020 Chief Executive Officer

Xun (Kenneth) Li 55 2022 Chief Financial Officer

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(Dino) Xykis was appointed as the Chief Executive Officer on April 24, 2023, after serving as Interim CEO since June 2, 2022.

Xykis was also appointed as the Company’s Chief Technical Officer on March 15, 2021.

Xykis also served as the Company’s Chief Technical Officer from March 15, 2021 until July 9, 2024.

He is responsible for the oversight of the Company and its advanced product development, engineering design and analysis, on-highway engineering, applied engineering, emissions and certification, Waterford, Michigan engineering operations, program management and product strategic planning.

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Lehner was appointed as the General Counsel on March 4, 2024.

Lehner is an accomplished Legal Counsel who has more than 20 years of legal experience in the areas of complex commercial litigation, arbitration, regulatory compliance, internal controls and strategy, among others.

Lehner is an accomplished legal advisor who has more than 25 years of legal experience in the areas of corporate and board governance, dispute resolution, regulatory compliance, internal controls and strategy, among others.

Most recently, from May 2020 to February 2024, Mr.

Lehner served as associate general counsel for Guaranteed Rate, LLC, a leading mortgage company, where he was a member of the executive leadership management team with primary responsibility for litigation and legal risk management.

Lehner served as associate general counsel and deputy general counsel for Guaranteed Rate, LLC, a leading mortgage company, where he was a member of the legal leadership team with primary responsibility for litigation and risk management.

Prior to this role, from 2015 through 2020, Mr.

Lehner was a partner with Kelly, Drye & Warren, LLP, where his practice focused on commercial litigation, regulatory, internal investigations and government enforcement actions.

Prior to Kelly, Drye & Warren, LLP, from 1997 to 2014, Mr.

Lehner was a partner with Kelley Drye & Warren LLP, where his practice focused on commercial litigation, regulatory and internal investigations and government enforcement actions.

Prior to Kelley Drye & Warren LLP, from 1997 to 2014, Mr.

Lehner worked at several other prestigious law firms.

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

What changed 10-K

Item 1. Business