What changed in this filing

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Item 1A. Risk Factors

2026-03-02 compared with 2025-03-24 · 72 added, 63 removed, 247 unchanged (35% of the section changed)

6 unchanged sentences

The Company also sells its products on a global basis, and therefore its export sales could be impacted by tariffs.

Several of the Company’s products are sourced internationally, including from China, where the U.S.

has imposed tariffs on specified products imported from China.

These tariffs have an impact on the Company’s material costs and have the potential to have an even greater impact, depending on the outcome of future trade negotiations and policies.

The Company is evaluating U.S.

government policy, which is subject to change in the current negotiating environment, pricing, its supply chain and its operational strategies to mitigate the impact of these tariffs;

however, there can be no assurances that any mitigation strategies employed will remain available under government policy or that the Company will be able to offset tariff-related costs or maintain competitive pricing of its products.

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.

government has indicated its intent to adopt a new approach to trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements.

For example, in early 2025, President Donald Trump signed executive orders imposing various tariffs on certain imports from Mexico, Canada, and China, and stated his intent to impose tariffs on any country that imposes tariffs on U.S.

Tariffs and changes in trade policy could materially increase our costs, disrupt our supply chain, and adversely affect our competitive position and results of operations.

Several of the Company’s products are sourced internationally, including from China.

government has imposed, and may continue to impose, tariffs on products imported from China and other countries.

Since early 2025, President Donald Trump signed executive orders imposing various tariffs on certain imports from Mexico, Canada, and China, and stated his intent to impose tariffs on any country that imposes tariffs on U.S.

Certain products that we buy from our suppliers are, and may in the future be, subject to these tariffs, which could increase our manufacturing costs.

We may not be able to pass these increased costs on to our customers without adversely affecting demand for our products.

The scope, duration, and impact of current and future tariffs remain highly uncertain.

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.

Additionally, the tariffs imposed by the U.S.

have resulted, and may in the future result, in threatened and actual retaliatory tariffs by other countries against U.S.

have resulted, and may in the future result, in retaliatory tariffs by other countries against U.S.

The Company also sells its products on a global basis;

and, therefore, if such retaliatory tariffs are imposed on exports of the Company’s products, this could make our exported products less competitive than products of our competitors who are not subject to such retaliatory tariffs.

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

government has indicated its intent to adopt a new approach to trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements.

The Company is evaluating U.S.

government policy, which is subject to change in the current negotiating environment, pricing, its supply chain and its operational strategies to mitigate the impact of these tariffs;

Any material reduction in sales or increase in costs resulting from tariffs or trade restrictions could have a material adverse effect on our business, financial condition, and results of operations.

On February 20, 2026, subsequent to year end, the U.S.

Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”).

The President immediately imposed replacement tariffs under Section 122 of the

Trade Act of 1974, which are temporary (150-day maximum duration), and has indicated intent to impose tariffs under other authorities going forward .

The Company may be entitled to refunds of IEEPA tariffs paid during 2025, but to the extent PSI passed tariff costs through to customers, the Company may be required to reimburse customers for such amounts, which could reduce or eliminate any net benefit from refunds.

The tariff environment remains highly uncertain.

Furthermore, escalating geopolitical tensions, including the ongoing conflict in Ukraine and instability in the Middle East, and developments in Venezuela could disrupt global supply chains, increase commodity prices, and create broader economic uncertainty that adversely affects our business.

Liquidity and Indebtedness

The Company’s management has concluded as of the filing of this 2024 Annual Report that, due to uncertainty surrounding the Company’s ability to extend or refinance its current debt agreements, substantial doubt exists as to its ability to continue as a going concern.

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 the Company will continue as a going concern.

In August 2024, the Company refinanced its debt through a new Uncommitted Revolving Credit Agreement (the “Revolving Credit Agreement”), with Standard Chartered Bank (“ Standard Chartered ”) and two other lenders.

Additionally, also in August 2024, the Company entered into a new Shareholder’s Loan Agreement (the “SLA”) with Weichai.

The new Revolving Credit Agreement and the new SLA will mature on August 30, 2025 and August 31, 2025 , respectively, and have borrowing capacity of $120.0 million and $105.0 million, respectively.

As of December 31, 2024, the Company had $120.0 million of total borrowings outstanding under its debt agreements.

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.

To provide the Company with a more permanent source of liquidity, management plans to seek an extension and amendment and/or replacement of its existing debt agreements or seek additional liquidity from its current or other lenders before the maturity dates in 2025.

There can be no assurance that

the Company’s management will be able to successfully complete an extension and amendment of its existing debt agreements or obtain new financing on acceptable terms, when required or if at all.

These consolidated financial statements do not include any adjustments that might result from the outcome of the Company’s efforts to address these issues.

Furthermore, if the Company cannot raise capital on acceptable terms, it may not, among other things, be able to do the following:

• continue to expand the Company’s research and product investments and sales and marketing organization;

• expand operations both organically and through acquisitions;

• respond to competitive pressures or unanticipated working capital requirements.

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 and other requirements under the Revolving 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 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 new Revolving Credit Agreement and the new SLA, 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.

Its existing debt or any potential new debt could adversely affect its business and growth prospects.

As of December 31, 2024, the Company’s total debt obligations, including indebtedness under the Revolving Credit Agreement and SLA was $120.2 million .

Our liquidity could be adversely affected by volatility in demand, supply‑chain constraints, and significant capital investment requirements inherent in our engine manufacturing operations.

Our business requires substantial liquidity to fund working capital, capital expenditures, research and development, inventory purchases, and long‑term strategic initiatives.

We rely on cash generated from operations, supplemented by available credit facilities, to meet these needs.

Our ability to maintain adequate liquidity depends on several factors outside our control.

For example, fluctuations in customer demand—particularly in the heavy‑equipment, transportation, industrial, and power‑generation markets—can lead to uneven order patterns that impact cash inflows.

A sudden or prolonged decline in sales volumes could reduce operating cash flows and negatively affect our liquidity position.

Additionally, our manufacturing processes depend on the availability of raw materials and key components such as castings, electronics, and specialized metals.

Supply‑chain disruptions, including shortages, delivery delays, or sudden cost increases, may require us to hold higher levels of inventory or pay premium prices to secure materials.

These conditions could increase our working capital requirements, compress margins, and reduce available cash.

We also operate in a capital‑intensive industry that requires ongoing investment in production equipment, testing facilities, tooling, and emissions‑compliance technology.

If we are unable to generate sufficient cash from operations or secure financing on favorable terms, we may need to delay or scale back critical investments, which could impair our competitiveness and innovation pipeline.

Our access to credit markets may be affected by factors such as rising interest rates, tightening lending standards, deterioration in our credit metrics, or adverse changes in macroeconomic conditions.

If we are unable to refinance existing indebtedness or obtain additional funding when needed, we may face increased borrowing costs or constraints on our operational and strategic flexibility.

If any of these risks materialize, our liquidity, financial condition, and ability to execute our business strategy could be materially and adversely affected.

The Company’s existing debt or any potential new debt could adversely affect its business and growth prospects.

As of December 31, 2025, the Company’s total debt obligations, including indebtedness under the Revolving Credit Agreement were $96.6 million .

The Company’s debt arrangements contain and may contain in the future certain requirements, including specific financial and other covenants or restrictions.

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

The Company’s new Revolving Credit Agreement places limitations on its ability to make acquisitions and restricts its ability to incur additional indebtedness, while the SLA places 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 of funds under the SLA.

If the maturity of the indebtedness is accelerated, the Company may not have sufficient cash resources, or have the ability to obtain financing through alternative resources, to satisfy its debt and other obligations, and the Company may not be able to continue as a going concern.

The Company’s new Revolving Credit Agreement places limitations on its ability to make acquisitions and restricts its ability to incur additional indebtedness.

Financial Condition, Results of Operations, and Cash Flows

1 unchanged sentence

The prices of some of the key components of the Company’s power systems are subject to fluctuation due to market forces, including changes in the costs of raw materials incorporated into these components.

Such price increases occur from time to

time due to increases in overall inflation, spot shortages of commodities, increases in labor costs or longer-term shortages due to market forces.

Such price increases occur from time to time due to increases in overall inflation, spot shortages of commodities, increases in labor costs or longer-term shortages due to market forces.

In particular, the prices of certain precious metals, such as palladium and rhodium, used in emissions-control systems fluctuate frequently and often significantly.

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Accordingly, future sales of the Company’s products will depend upon its products being certified to meet the existing and future air quality and energy standards imposed by the relevant regulatory agencies.

While the Company incurs significant research and development costs to ensure that its products

comply with emission standards and meet certification requirements in the regions in which its products are sold, the Company cannot provide assurance that its products will continue to meet those standards.

While the Company incurs significant research and development costs to ensure that its products comply with emission standards and meet certification requirements in the regions in which its products are sold, the Company cannot provide assurance that its products will continue to meet those standards.

The failure to comply with certification requirements would not only adversely affect future sales but could result in the recall of products or the imposition of civil or criminal penalties.

24 unchanged sentences

Also, customers, or potential customers, may not substitute natural gas, propane and gasoline-powered power systems for diesel power systems in response to these regulations.

In addition, to the extent that diesel power system manufacturers develop the ability to design and produce emission-compliant diesel power systems that are more competitive than the Company’s alternative-fueled power systems, customers and potential customers may be less likely to substitute alternative-fueled power systems for diesel power systems.

alternative-fueled power systems for diesel power systems.

Furthermore, if alternative-fueled power systems are substituted for diesel power systems, there can be no assurance that the Company’s power systems would capture any portion of the potential market increase.

42 unchanged sentences

The Company intends to retain its future earnings to support operations, to finance expansion and reduce debt.

Ownership of the Company’s stock is concentrated with Weichai and the founder of the Company, and therefore other stockholders’ ability to influence corporate matters is limited.

As of March 17 2025, Weichai beneficially owned 51.1% of the Company’s outstanding shares of Common Stock.

Additionally, Gary S.

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

Ownership of the Company’s stock is concentrated with Weichai and therefore other stockholders’ ability to influence corporate matters is limited.

As of February 26, 2026, Weichai owned 46.0% of the Company’s outstanding shares of Common Stock.

Weichai’s significant equity ownership in the Company, may be able to significantly influence, and 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.

1 unchanged sentence

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.

Our relationship with Weichai, a Chinese state-owned entity, and heightened U.S.-China geopolitical tensions could subject us to increased regulatory scrutiny, reputational harm, and operational restrictions.

The relationship between the United States and China has become increasingly strained in recent years, with ongoing tensions related to trade, technology, national security, and other matters.

government has taken, and may continue to take, actions that could affect companies with significant Chinese ownership or business relationships, including:

• Enhanced scrutiny by the Committee on Foreign Investment in the United States (CFIUS) of transactions involving Chinese-affiliated entities;

• Export control restrictions that could limit our ability to share technology or conduct business with Weichai or other Chinese entities;

• Sanctions or other restrictions targeting Chinese state-owned enterprises or their affiliates;

• Legislative or regulatory actions that could restrict or prohibit business relationships with Chinese state-owned entities;

• Increased disclosure requirements or other regulatory burdens applicable to companies with significant foreign government ownership.

Any such actions could disrupt our strategic collaboration with Weichai, limit our access to certain markets or technologies, increase our compliance costs, or subject us to reputational harm.

Additionally, negative public perception of companies with Chinese state ownership could adversely affect our relationships with customers, suppliers, and other business partners, particularly those in the defense, government contracting, or critical infrastructure sectors.

We cannot predict the nature, timing, or impact of future geopolitical developments or government actions.

Any material adverse developments in U.S.-China relations or actions targeting companies with Chinese state ownership could have a material adverse effect on our business, financial condition, results of operations, and stock price.

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

Weichai entered into an Investor Rights Agreement (the “Rights Agreement”) with the Company upon execution of the SPA.

In March 2017, Weichai entered into an Investor Rights Agreement (the “Rights Agreement”) with the Company.

The Rights Agreement provides Weichai with majority representation on the Company’s Board and management representation rights.

2 unchanged sentences

With Weichai being the majority owner of the Company’s outstanding shares of its Common Stock, Weichai is able to exercise control over matters requiring stockholders’ approval, including, among other matters, the election of the Directors, amendment of the Company’s Certificate of Incorporation and approval of significant corporate transactions.

This control could have the effect of delaying or preventing

a change of control of the Company or changes in management and will make the approval of certain transactions impractical without the support of Weichai.

This control could have the effect of delaying or preventing a change of control of the Company or changes in management and will make the approval of certain transactions impractical without the support of Weichai.

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.

Artificial Intelligence Risk Factors

The increasing use of artificial intelligence technologies by our competitors, customers, and suppliers could impact our competitive position.

Artificial intelligence (“AI”) and machine learning technologies are rapidly evolving and are increasingly being adopted across industries, including in manufacturing.

Our competitors, customers, and suppliers may adopt AI technologies that could affect our competitive position.

If we fail to effectively adopt and integrate AI technologies, or if our competitors do so more successfully, we could experience a decline in our competitive position.

We may also face risks from AI technologies used by third parties, including vendors, customers, and service providers, over which we have limited control.

Any material disruption to our supply chain or competitive disadvantage resulting from third-party AI adoption could adversely affect our business, financial condition, and results of operations.

General Risk Factors

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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 because of 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 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.

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Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud.

There is no assurance that material weaknesses or significant deficiencies in internal controls will not be identified in the future or that we

will be successful in adequately remediating any such material weaknesses or significant deficiencies.

There is no assurance that material weaknesses or significant deficiencies in internal controls will not be identified in the future or that we will be successful in adequately remediating any such material weaknesses or significant deficiencies.

We may in the future discover areas of our internal controls that need improvement.

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Declines in profitability due to changes in volume, market pricing, cost or the business environment could result in charges that could have an adverse effect on the Company’s results of operations.

Significant adverse changes to the Com pany’s business environment and future cash flows could cause the recognition of material impairment charges in future periods.

adverse changes to the Com pany’s business environment and future cash flows could cause the recognition of material impairment charges in future periods.

The Company currently faces, and will continue to face, significant competition.

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The Company believes that the success of its business depends, in substantial part, upon its proprietary technology, information, processes and know-how.

The Company does not own any material patents and relies on a combination of trademark and trade

secret laws, along with confidentiality agreements, contractual provisions and licensing arrangements, to establish and protect its intellectual property rights.

The Company does not own any material patents and relies on a combination of trademark and trade secret laws, along with confidentiality agreements, contractual provisions and licensing arrangements, to establish and protect its intellectual property rights.

Despite the Company’s efforts to protect its intellectual property rights, existing laws may afford only limited protection, and the Company’s actions may be inadequate to protect its intellectual property rights or to successfully defend itself against claims from others that the Company has violated their intellectual property rights.

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

Expenses that may occur in the future and/or liabilities not covered by the Company’s directors and officers liability insurance policy, 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 resources.

the Company with its existing cash resources.

T he Company directors’ and officers’ liability insurance policy renews annually and expires in July 2026 .

The Company’s inability to generate sufficient taxable income in the future may limit the Company’s ability to use net operating loss (“NOL”) carryforwards to reduce future tax payments.

The Company has NOL carryforwards with which to offset its future taxable income for U.S.

federal income tax reporting purposes.

If the Company should fail to generate a sufficient level of taxable income prior to the expiration of the NOL carryforward periods, then it will lose the ability to apply the NOLs as offsets to future taxable income.

Similar limitations also apply to certain U.S.

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.

8 unchanged sentences

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