What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-03-01 compared with 2021-03-31 · 407 added, 684 removed, 32 unchanged (97% of the section changed)

Corporate History and Background

On December 21, 2020 (the “Closing

Date”), Pivotal Investment Corporation II, a special purpose acquisition company incorporated on March 20, 2019 (“Pivotal”),

consummated a business combination pursuant to that certain Agreement and Plan of Reorganization, dated as of September 17, 2020

(the “Merger Agreement”), by and among Pivotal, PIC II Merger Sub Corp., a Delaware corporation and wholly owned subsidiary

of Pivotal (“Merger Sub”), and XL Hybrids, Inc., a Delaware corporation (“Legacy XL”).

Pursuant to the

terms of the Merger Agreement, a business combination between Pivotal and Legacy XL was effected through the merger of Merger Sub

with and into Legacy XL, with Legacy XL surviving as the surviving company and as a wholly-owned subsidiary of Pivotal (the “Merger”

and, collectively with the other transactions described in the Merger Agreement, the “Business Combination”).

Closing Date, and in connection with the closing of the Business Combination (the “Closing”), Pivotal Investment Corporation

II changed its name to XL Fleet Corp.

On December 21, 2020 (the “Closing Date”),

Pivotal Investment Corporation II, a special purpose acquisition company incorporated on March 20, 2019 (“Pivotal”), consummated

a business combination pursuant to that certain Agreement and Plan of Reorganization, dated as of September 17, 2020 (the “Merger

Agreement”), by and among Pivotal, PIC II Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of Pivotal (“Merger

Sub”), and XL Hybrids, Inc., a Delaware corporation (“Legacy XL”).

Pursuant to the terms of the Merger Agreement, a

business combination between Pivotal and Legacy XL was affected through the merger of Merger Sub with and into Legacy XL, with Legacy

XL surviving as the surviving company and as a wholly-owned subsidiary of Pivotal (the “Merger” and, collectively with the

other transactions described in the Merger Agreement, the “Business Combination”).

On the Closing Date, and in connection

with the closing of the Business Combination (the “Closing”), Pivotal Investment Corporation II changed its name to XL Fleet

Company Overview

We are a leading provider of fleet electrification solutions for commercial

vehicles in North America, with over 4,300 electrified powertrain systems sold and driven over 140 million miles by over 200 fleets

as of December 31, 2020.

Our vision is to become the world leader in fleet electrification solutions, with a mission of accelerating the

adoption of fleet electrification systems through cost effective, customer tailored and comprehensive solutions.

In over 10 years of operations, we have built

one of the largest end-use commercial fleet customer bases of any Class 2-6 vehicle electrification company in North America.

fleet electrification solutions for commercial vehicles provide the market with cost-effective hybrid and plug-in hybrid solutions with

on-board telematics that are widely available for sale and deployment across a broad range of popular vehicle chassis from the world’s

leading original equipment manufacturers (“OEMs”).

We believe we are positioned to capitalize on our market leadership

as we expand our product offering into additional propulsion technologies including full battery electric and hydrogen fuel cell systems,

heavier vehicles such as Class 7-8 vehicles, additional vehicles models in Class 2-6 and comprehensive vehicle charging and

energy solutions.

We currently sell most of our systems through a network of commercial vehicle upfitters, which we estimate already produces

over 100,000 commercial vehicles a year.

Our current electrified drive systems are

comprised of an electric motor that is mounted onto the vehicle’s drive shaft, an inverter motor controller, and a lithium-ion

battery pack to store energy to be used for propulsion.

We deploy our electrified drive systems (“XLH™”

“XLP™”) onto the chassis of vans, pickups, shuttle buses, delivery trucks, and many other commercial vehicles

produced by OEMs such as Ford, GMC, Chevrolet and Isuzu.

This technology can be installed as the vehicles are being manufactured by

industry standard second stage manufacturers known as upfitters in less than one day, with no negative impact on the vehicles’

operational performance, maintenance schedules or factory warranties.

Our electrified powertrain systems capture and store energy

during regenerative braking and subsequently deploy that energy into the driveline during acceleration, operating in parallel with

the existing OEM drive train.

In addition, our plug-in hybrid system offers the ability to supplement this energy via a connection

with an AC electricity source, including a level 1 or level 2 charger.

Our systems enable vehicles to burn less fuel and emit less

carbon dioxide (“CO2”), resulting in increases of up to a 25-50% miles per gallon (“MPG”) improvement and up

to a 20-33% reduction in greenhouse gas (“GHG”) emissions.

To date, vehicles deploying our electrification solutions

have driven over 150 million miles.

We are making fleet electrification affordable,

accessible, and easy-to-adopt for end-use customers.

Our current drive systems enable commercial vehicle fleet operators to make immediate

progress toward sustainability goals while the industry moves toward sustainable drive system vehicles that are available, affordable

and viable for commercial applications.

We are developing additional offerings to extend

our range of electrification options with plans to include full battery electric propulsion (“XL ELECTRIC™”) and, hydrogen

fuel cell electric systems.

We further intend to deliver our systems on a broader range of vehicle applications (including Class 8

products and electrified refuse vehicles, among other applications).

In addition, we plan to offer comprehensive charging solutions (“XL

GRID™”) and Electrification-as-a-Service (“EaaS”), which would finance and manage vehicles, powertrains, charging

systems, on-site power and energy storage systems while charging customers on a usage and time basis.

Class 2-6 includes vehicles generally

classified as light duty (less than 10,000 pounds) and medium duty (between 10,000 pounds and 60,000 pounds) under the gross vehicle

weight rating system.

Historically, Class 2-6 has consisted of 600,000 to 650,000 new vehicles manufactured and sold in North

America each year and Class 7-8 has ranged from 150,000 to 375,000 new vehicles per year.

In the year ended December 31, 2020, we

experienced significant COVID-19 pandemic-related disruptions.

Despite these disruptions, we had significant fleet sales volume

in the second half of 2020, with over 80% of our revenues realized in the third and fourth quarters of fiscal year 2020.

that revenue for 2021 will also be heavily weighted to the back half of the year.

Many of these COVID-19 pandemic-related disruptions

have continued into fiscal year 2021, with delays in government responses at the Federal, state, municipal and local levels and

postponements of purchases of our products by municipal and other departments due to major budget shortfalls.

In addition, we believe

that the impact of the global microchip shortage that the entire vehicle industry is currently experiencing will adversely impact

our operating results in fiscal year 2021.

Given these uncertainties and uncertainty related to vaccination speed and rates and

potential impacts of new variants of COVID-19, we believe there continues to be pandemic related risks to our business and our

results of operations.

We are a provider

of fleet electrification solutions for commercial vehicles in North America, offering our systems for vehicle electrification (our

“Power Drive” business) and through our energy efficiency and infrastructure solutions business, including charging

stations to enable customers to effectively plug in their electrified vehicles (our “XL Grid” business) .

XL Fleet has sold over 4,450 electrified powertrain systems that have been driven over 181 million miles by over 245 fleet

customers, as of December 31, 2021.

In over 10 years of operations, we believe that

we have built a large customer base deploying Class 2-5 vehicles across North America.

Our fleet electrification solutions for

commercial vehicles provide the market with cost-effective hybrid solutions with on-board telematics that are available for sale and

deployment across a broad range of popular vehicle chassis from the world’s leading OEMs.

We launched our XL Grid business in

December 2020 and with the acquisition of World Energy Efficiency Services, LLC (“World Energy”) in May 2021, we are

able to offer comprehensive solutions to commercial fleets to sustainably transform their operations.

With the acquisition of World Energy, we became a provider

of energy efficiency, renewable technology, electric vehicle charging station and other energy solutions to customers across the New England

By leveraging our comprehensive solutions in combination with project management and utility incentive and financing programs,

we assist companies throughout all aspects of the fleet vehicle electrification process.

We provide full-service electric vehicle charger

installations, including the assessment of a location’s electrical infrastructure, site layout of the charging area plan and equipment

installation.

We believe that the availability of robust electric vehicle charging and infrastructure solutions is critical to meeting

the long-term fleet electrification goals of our customers which in turn will translate into growth opportunities for the Company.

We are currently conducting a strategic

review which includes assessing our product and service offerings, strategy, processes and growth opportunities.

While this strategic

review is ongoing, the Company will be narrowing its focus in 2022 to concentrate on those areas of our Power Drive business that we believe

to be the most profitable, both in the short- and long-term.

As part of this refocusing effort, in February of 2022, we eliminated 51

full-time positions across the organization.

Market Opportunity

We estimate that the total addressable

market for our products and services is over $1 trillion, when considering the current global market for commercial vehicles, fuel

consumption, charging equipment and other operating expenses.

We intend to offer a wide array of electrified drive systems including

hybrid, plug-in hybrid, pure-electric and hydrogen fuel-cell electric systems to cover the full range of Class 2-8 commercial

and are expanding into the EaaS market, which includes leveraging our cloud-based data and strong industry relationships

to offer a comprehensive, all-in-one solution that includes electrified vehicles, charging infrastructure and data-based fleet

management and energy services.

There are estimated to be over 29 million

commercial trucks in use in the U.S.

alone, with roughly one million new commercial vehicles sold each year in North America (aside

from the below normal market conditions driven by COVID-19).

While commercial trucks serve a wide range of critical business and

societal functions, the vast majority are powered by gasoline and diesel fuel.

Transportation is now the leading source of GHG

emissions in the U.S., and many fleets are motivated (and increasingly mandated) to curb those emissions in their daily operations.

In their attempts to curb emissions,

commercial and municipal fleets are increasingly adopting electrification as their alternative propulsion technology of choice.

Demand for these vehicles has increased significantly in recent years, at the same time, broad adoption of electric vehicles is

unlikely to occur for a number of years in the fleet market, due to challenges including, but not limited to, the extreme drive

cycle and energy requirements of larger fleet vehicles, the high capital cost of battery electric vehicles , the lack of available

charging infrastructure to power the vehicles for frequent use cycles, and the dearth of commercially viable electric vehicles

available for purchase which meet the operating requirements of fleets.

We believe all electric solutions will make sense for certain

segments of the commercial fleet market and intend to develop all electric solutions for appropriate market segments.

We have built one of the largest end-use commercial fleet customer

bases of any Class 2-6 vehicle electrification company in North America.

Our fleet electrification solutions provide the market with

cost-effective, affordable hybrid and plug-in hybrid solutions with on-board telematics that are widely available for sale and deployment

across a broad range of popular vehicle chassis from the world’s leading OEMs.

As a result, we believe we are well-positioned

to capitalize on our market leadership as we expand our product offering into additional propulsion technologies including full battery

electric and hydrogen fuel cell systems, heavier vehicles such as Class 7-8 vehicles, additional vehicles models in Class 2-6

and comprehensive vehicle charging and energy solutions.

We believe that the opportunity for

expansion is even greater outside North America, particularly throughout Europe and Asia, which are adopting electrified vehicles

and deploying charging infrastructure more aggressively than in the Americas.

These continents have also historically been more

progressive in incentivizing and mandating CO2 emissions reductions, further accelerating the demand for these vehicles.

expand our operations, we intend to capitalize on the increasing global market demand.

We are exploring specific opportunities

for international sales in Asia, Europe, and South America and intend to commence sales in one or more of these regions by the

Our management team has past experience selling hybrid systems in Asia, Europe and South America and we intend to

grow our organizational capability further to facilitate international expansion.

At this point in time, we have not yet determined

a specific timeline for expansion in any particular international market.

Within the last two years, there has been substantial

disruption in the electrification of municipal and commercial fleets and renewed emphasis on decarbonization across many commercial sectors.

Federal and regional mandates and incentive programs are increasing the adoption rate of fleet electrification, particularly in fully-electric

These disruptive forces have led to the emergence and growth of more fully electric OEM vehicle offerings, reductions in the

availability of fossil fuel powered OEM vehicle chassis and the continuation of the microchip shortage.

In light of these and other factors,

we are re-assessing the risks and market opportunities for our Power Drives business.

Based upon that assessment, we have taken actions

during the first quarter of 2022 to scale back our Power Drive business.

We believe, however, that these same disruptions have

the ability to create more demand for our energy efficiency, infrastructure and vehicle charging business.

With commercial and municipal

fleets increasingly migrating to electric vehicles, we believe that organizations will require enhancements to their energy infrastructures

in charging stations and electrical distribution to recharge those vehicles.

Furthermore, organizations will need to invest significantly

in energy efficient solutions within their footprint to both free up kilowatt hour capacity for vehicle charging and to meet increasing

broad commitments to reduce their carbon footprint.

All of these electrification, distribution and efficiencies initiatives will create

demand for service providers who can assist fleet operators with implementation of solutions and navigation through the complex and rapidly

changing mandate and incentive landscape.

Our Technology and Products

Since our founding, we have developed an

extensive technology library and know-how that has enabled us to create proprietary commercial fleet electrification solutions

which are reliable and cost effective.

We have been producing and shipping our hybrid electric drive systems to customers since

2012, and we have deployed thousands of units for hundreds of fleets over that time period.

In 2017, we introduced our plug-in

hybrid electric drive system, which offers a more significant MPG and emissions improvement than the hybrid system, while enabling

customers to plug in their vehicles to a level 1 or level 2 charging station.

Combined, as of December 31, 2020, vehicles deploying

our electrification solutions have driven over 140 million total miles while realizing significant gains in MPG and substantial

reductions in CO2 emissions.

Our hybrid or plug-in hybrid system

is installed onto a traditional factory OEM chassis as it is manufactured at the industry standard second stage manufacturer and

transforms that vehicle into a more fuel-efficient hybrid/plug-in hybrid unit.

This is accomplished by adding an electric motor,

an advanced lithium-ion battery pack, and control software.

No other significant modifications to the vehicle are required, and

no changes are made to the internal combustion engine or transmission.

Our hybrid systems (branded as “XLH™”)

have been proven to improve MPG by up to 25% over standard gas-powered vehicles, while reducing CO2 emissions by up to 20%.

plug-in hybrid system, branded as “XL Plug-In™”

or “XLP™”, was named one of TIME magazine’s

The 100 Best Inventions of 2019.

The XLP offers an even more significant improvement in these metrics, demonstrating up to a 50%

MPG improvement and up to a 33% reduction in emissions.

Both systems allow the vehicle to continue

leveraging its internal combustion engine, while an electric motor mounted on the driveshaft provides an electric assist during

acceleration that reduces strain on the engine and lowers the amount of gas consumed.

During deceleration, that motor serves as

a generator that captures energy through a process called regenerative braking, which stores that energy in the system’s

battery pack.

When the vehicle accelerates, that power is transferred into the driveline once again, and the process repeats.

allows our systems to operate in parallel with the OEM drivetrain, maintain factory vehicle warranties, and regenerate energy automatically

to help power the vehicle.

Both the XLH and XLP system feature

certain standard individual components, although the specific specifications and mounting locations differ depending on the vehicle

chassis and electrification system used.

Our systems are custom designed, with components configured and mounted uniquely for each

compatible vehicle on which we operate.

While an XL system includes over 100 different parts in its bill of materials, the four

major components are illustrated and summarized below.

Electric traction motor .

The electric motor mounts onto the vehicle’s driveshaft, which has been modified to accommodate this component.

During deceleration, it leverages regenerative braking to capture energy normally wasted in braking and help slow the vehicle, reducing wear on the brakes.

During acceleration, it uses the recaptured energy to provide up to an additional 220 ft./lbs.

of torque into the driveline, reducing the load on the engine and thereby reducing fuel consumption.

Motor drive .

This inverter controls and conditions the back and forth flow of power to and from the battery pack, depending on whether the system is expelling energy (during acceleration) or capturing energy (during deceleration).

Control Module and Data Analytics Platform.

We install a control module and telematics unit (which is branded as “XL Link”).

The control module is the “brains”

of the electric powertrain and determines how to operate the powertrain based on driver demands and vehicle and powertrain conditions.

The telematics unit enables remote commissioning, remote software updates, remote service assessments, and transmits data to a proprietary cloud-based software system which can analyze various vehicle and systems metrics.

The XL Link platform also provides a useful tool for research and development (“R&D”) and we intend to expand this tool to facilitate fleet electrification planning (vehicle/powertrain selection and charging infrastructure planning).

Both the XLH and XLP systems feature a lithium ion battery pack of varying capacities (depending on whether it is a hybrid

or plug-in hybrid system).

This battery pack can be mounted under the chassis or in the bed of a pickup truck depending on the system

design and the configuration of the chassis on which it is mounted.

In the future, we intend to leverage

our strong OEM and upfitter partnerships, internal engineering expertise and broad customer base to bring new electrification solutions

These include a wider array of available chassis options, deeper relationships with current and future OEM partners,

and an expansion of our electrification suite to include electric vehicles (“EV”) and potentially hydrogen fuel cell

enabled systems.

We expect to develop proof-of-concept prototypes of these new systems in 2021 and introduce such systems for sale

between late 2021 and late 2022.

We plan to offer charging and power management solutions.

Such solutions

are expected to include charging stations, onsite energy storage and power generation as well as system management.

This offering will

be branded as XL GRID, and we expect to work with a range of partners to provide a consolidated and comprehensive offering.

launched XL GRID in December 2020.

Further, we have a unique opportunity

to leverage our hardware, software and energy industry partnerships to potentially launch an EaaS offering.

Such an offering bundles

vehicles, xEV powertrains, charging infrastructure, power and energy supply and other services for customers to provide an easy

and low risk transition to fleet electrification and emissions reductions.

Such an offering has the potential to increase our product

sales and leverage the data in XL Link.

We expect that this offering will also create pools of fleet electrification assets which

are attractive to infrastructure and other investors, especially those with sustainability targets and focus.

We anticipate to

offer EaaS to select customers beginning in 2021.

Our XL Grid energy efficiency and infrastructure services

business is primarily project driven where we identify efficiency measures and infrastructure enhancements that commercial and municipal

customers can implement to improve efficiency and expand capacity for fleet electrification.

Many of our projects are partially funded

through incentives provided by regional electric utilities.

Typical energy efficiency projects address improvements in heating, ventilation

or air conditioning (“HVAC”) equipment, and the upgrade of lighting.

Infrastructure projects consist principally of the design

and build out of facilities and infrastructure to provide on-site vehicle charging.

An essential component of our XL Grid offering is

the technology assessment, regulatory and project management services we provide to assist the customer with maximizing the return on

its investment.

Our electrified Power Drives systems are comprised

of an electric motor that is mounted onto the vehicle’s drive shaft, an inverter motor controller, and a lithium ion battery pack

to store energy to be used for propulsion.

No other significant modifications to the vehicle are required, and no changes are made to

the internal combustion engine or transmission.

We deploy our electrified Power Drives systems (XLH™ and XLP™) onto the chassis

of vans, pickups, shuttle buses, delivery trucks, and many other commercial vehicles produced by leading OEMs such as Ford, RAM, GMC,

Chevrolet and Isuzu.

This technology can be installed as the vehicles are being manufactured by industry standard second stage manufacturers,

known as upfitters, in less than one day, with no negative impact on the vehicles’ operational performance or factory warranties

and with reduced maintenance cost.

Our electrified powertrain systems capture and store energy during braking and subsequently deploy

that energy into the driveline during acceleration, operating in parallel with the existing OEM drive train.

Our systems enable vehicles

to burn less fuel and emit less CO2.

To date, vehicles deploying our electrification solutions have driven over 181 million miles.

The Power Drive system allows the vehicle to continue leveraging its

internal combustion engine, while an electric motor mounted on the driveshaft provides an electric assist during acceleration that reduces

strain on the engine and lowers the amount of fuel consumed.

During deceleration, that motor serves as a generator that captures energy

through a process called regenerative braking, which stores that energy in the system’s battery pack.

When the vehicle accelerates,

that power is transferred into the driveline once again, and the process repeats.

This allows our systems to operate in parallel with

the OEM drivetrain, maintain factory vehicle warranties, and regenerate energy automatically to help power the vehicle.

We have begun leveraging the technology and know-how

of our Power Drive business into related electrification initiatives.

We have been awarded a contract with the US Military to develop a

retrofit kit for a tactical vehicle.

This kit, if adopted by the US Military, has the potential to be fitted to over 60,000 vehicles in

service today providing a significant fuel saving.

We also have in the prototype stage a fully-electric Class 6 refuse vehicle developed

in partnership with Curb Tender.

Industry and Competition

When we were founded in 2009, the commercial

vehicle electrification market was in the early stages and featured limited competition.

In recent years, however, the vehicle

electrification market has significantly expanded.

In the consumer (non-commercial) market, companies such as Tesla have helped

push electrification for passenger vehicles to the forefront, and many other startups have entered the space to capitalize on the

increased interest.

Nearly all traditional OEMs have accelerated and expanded their own electric vehicle lineups.

While we expect the trend toward increased competition to continue,

our management believes we are well-positioned to compete favorably.

Unlike the majority of companies in the vehicle electrification industry,

which produce light duty passenger vehicles targeted for the consumer (non-commercial) market, we have historically focused exclusively

on the commercial market.

In the commercial space, vehicles are heavily customized with bodies that are built to suit the application

for which they are purchased.

We have established relationships with a large network of companies that perform this work who are certified

to sell, install and service our electrification systems.

We credit this go to market strategy for our recent growth and ability to remain

customer-focused and responsive to market demand for our products.

As a result, we believe that we have built the largest and broadest

commercial fleet customer base for Class 2-6 hybrid and plug-in hybrid electric vehicles in North America.

There are few companies that we consider

to be direct competitors.

Companies such as Workhorse operate in the Class 2-6 market and others like Lordstown Motors Corp.

(“Lordstown”) are focused on bringing Class 2 EVs to market.

As we expand into the Class 7 and 8 markets,

we will face new competitors, such as Hyliion, Inc.

(“Hyliion”), which are focused on the Class 8/heavy truck

Several new and established OEMs are

currently building battery electric, or all electric, vehicles for the commercial market, but our management believes that these

OEMs are likely to focus where there is the most crossover with the consumer market (primarily small pickup trucks and vans).

our history, we have worked closely with traditional OEMs such as Ford, GM and Isuzu to provide electrification solutions for their

standard gas-powered vehicles, so we consider our relationship to such companies to be that of a market partner as opposed to a

However, with the continued interest being shown in EVs, we may experience competition from OEMs that release all electric

versions of the same vehicles being deployed with our systems.

We expect to continue to produce hybrid and plug-in hybrid versions

of those vehicles due to the operational advantages and customer preferences those products offer.

We further expect to expand

our product line into the larger medium and heavy duty EV applications.

As we expand our product line to include

EV applications, as well as Class 7-8 vehicle types, we will potentially begin competing with several other current and future

EV developers who are looking to serve those markets.

This could include current manufacturers such as Lion Electric Company, Hyliion,

Green Power Motor Company, Nikola Motor Company and Proterra, Inc.

If we expand into a full EaaS suite, in which we could offer

bundled packages of vehicles, charging infrastructure, energy and fleet management consulting on an as-needed basis, we would also

begin competing with several other companies who are considering entering the emerging EaaS space such as Nikola and their “bundled

pricing”.

In our 10-year existence, we have served over 200 end-use customers

deploying over 4,300 systems.

These systems have combined use in real world applications in excess of 140 million miles as of December

Our end-use customers most often purchase our systems from upfitters, OEM dealerships or other participants in our sales channels,

who are our direct customers.

Our end-use customer base is comprised of Fortune 500 corporate enterprises, public utilities, and municipalities

of all sizes, a group that we estimate to operate over one million vehicles globally.

We continue to develop these relationships with

new products while growing the base with new customers seeking sustainability options in the Class 2-6 commercial vehicle market.

We expect to continue to develop opportunities that lead to additional product offerings into the Class 7-8 commercial vehicle market.

For the fiscal year ended December 31,

2020, we had one customer that accounted for over 10% of our revenue.

Sales to Farmbro Inc., an upfitter, accounted for 68% of

our total revenue in fiscal 2020.

Our customer concentration has historically varied based on the receipt of large fleet orders,

a trend that we expect to continue in the near term.

We expect 2021 to follow typical customer

seasonal purchasing patterns, with a majority of our revenue coming in the third and fourth quarters of the year.

More than 80%

of our sales were recognized in the second half of 2020, and we’d expect a similar or even more pronounced concentration

of revenue in 2021.

Our customers typically purchase commercial

vehicles with a 3 to 6 month lead time.

All our orders are designed to meet a specified OEM vehicle chassis (VIN level), with production

and shipment coordinated to meet simultaneously via the industry standard ship-thru process.

Our systems are sourced and built

to exacting specifications in line with OEM production timelines and customer installation preferences, and supply is sourced to

meet these timelines.

Our sales and marketing team uses a software tool to track all sales opportunities to existing and potential

customers, identifying specific vehicles and our systems for such vehicles.

This is used by our management to create projections

about future aggregate sales pipeline opportunities for our existing products.

Our management reviews our sales opportunity pipeline

data and applies our historic conversion rates of sales pipeline and historical experience with respect to lead time to create

revenue projections.

Our management believes that our revenue estimates and committed backlog are important indicators of expected

future performance.

Within our XL Grid business, we generally compete

against local, regional and national competitors.

Typically national competitors are much larger, operate across the United States and

often internationally, and offer products and services that extend beyond those that we offer.

These competitors often target customers

that are national and international in scope, whereas we are principally targeting commercial and municipal organizations within our

Northeast regional footprint.

Competitors who operate nationally include Ameresco, AECO and Willdan, as well as separate divisions of

many of the regional public utility companies.

There has been substantial growth in the electric vehicle

sector, which when combined with the reduced availability of OEM chassis for us to install Power Drives, represents significant competition.

For example, nearly all traditional OEMs and many new market entrants have accelerated and expanded their own electric vehicle lineups.

We expect that in our Power Drives business, our potential

customers will see electric vehicle manufacturers as our competitors.

These competitors include current manufacturers such as Lion Electric

Company, Hyliion, Inc., GreenPower Motor Company, Lightning eMotors, XOS, Inc., Nikola Motor Company and Proterra, Inc.

In our XL Grid business, our customers have traditionally

been small and medium sized businesses, as well as municipalities, such as schools and offices.

The XL Grid service is scalable, so customers

may include facilities in multiple locations throughout the U.S.

that can benefit from energy efficiency improvements, especially in

lighting and HVAC.

Given the growth that we expect to see in charging stations and energy infrastructure projects, we anticipate that

our customer pool may be larger than the small and medium sized businesses that we have traditionally served.

We believe that there will

be substantial new capital flowing into EV charging installation and customer-sited energy storage and energy generation infrastructure

Customers for our Power Drive systems are generally

commercial and government operators of large service and delivery fleets.

Our end-use customers most often purchase our systems from upfitters,

OEM dealerships or other participants in our sales channels, who are our direct customers.

Our end-use customer base is comprised of Fortune

500 corporate enterprises, public utilities, and municipalities of all sizes.

In our 11-year existence, we have served over 245 end-use

customers deploying over 4,450 systems.

These systems have combined use in real world applications in excess of 181 million miles

as of December 31, 2021.

Partnerships and Suppliers

Sales Upfit Channel Partnerships

We rely on an established upfitter partner

network with locations throughout the U.S.

and Canada to support the installation of our product via the industry standard ship-thru

and upfit processes.

Our upfitter partners are trained by our staff to use our Installation Process Platform and are certified

to install our full line of products.

Training is supported by our online step-by-step instruction manual for each kit, along with

remote commissioning designed to ensure a successful installation and customer satisfaction.

These same partners are also authorized

to act as resellers of our full product line to their respective customers using their own sales organizations.

Sales FMC Channel Partnerships

We market our systems in conjunction

with several major fleet management companies (“FMCs”) in North America and partner with their sales, consulting, and

vehicle engineering teams to support customer demand.

This channel allows us to expand our reach to over two million leased vehicles

with our portfolios.

OEM Channel Partnerships

We collaborate with vehicle manufacturers

to design, build, and deliver our systems in targeted fleet applications.

We anticipate that this segment will continue to grow

as the larger vehicle OEMs focus on electrification solutions based on consumer demand.

Production/Supply Chain Partnerships

We rely on third-party suppliers for

the provision and development of many of the key components and materials used in our electrified powertrain solutions.

obtain components from multiple, redundant suppliers whenever possible, some of the components used in our vehicles are purchased

from a single source or a limited number of sources.

We are reliant upon a single source, Parker Hannifin Corporation, for the

supply of motor components operating under a three-year non-exclusive supply agreement with volume and pricing commitments.

In the first half of 2020 as result

of the COVID-19 pandemic, we experienced multiple supply and service disruptions impacting our hybrid electric vehicle (“HEV”)

product line.

Our primary battery test facility halted testing of our HEV battery, preventing the validation of a newly designed

After several weeks, we were able to find an alternate test facility to restart the battery validation.

This required

sourcing, contracts, test plan development, training, and movement of essential hardware and equipment from the original location

in New York to California resulting in a several month delay.

Both test facility service providers are procured under a purchase

order service arrangement.

Further, a battery supply partner, operating

under a multi-year non-exclusive supply agreement with volume and pricing commitments, had significant supply disruptions in the

April-May timeframe due to sub-supplier impacts on the Indiana and Michigan labor forces.

In addition, a supplier with whom we

procure battery components under a month-to-month purchase order, had battery supply disruptions with a temporary closure of a

manufacturing plant in Michigan.

This closure impacted the supply of HEV batteries to us by several weeks.

As a leading provider of hybrid and plug-in hybrid electrification

systems for Class 2-6 commercial fleet vehicles, and with more than 140 million customer miles driven on our electrification

systems as of December 31, 2020, we believe that we are in a unique position to expand our product offering and capitalize on the increasing

demand for vehicle electrification.

We are one of only a few companies that have deployed thousands of xEV powertrains in the Class 2-6

commercial fleet market in the U.S.

and Canada, so we have established significant experience, data and relationships enabling scalable

production, supply chain and service compared to competitors with relatively few systems in operation.

We also have established global

customers and suppliers.

Our objective is to be a world leader in fleet electrification solutions, and our mission is to accelerate the

adoption of fleet electrification systems through cost effective, customer tailored and comprehensive solutions.

We have developed a strategy

for delivering additional value and expanding market share moving forward, with plans to:

Expand our xEV platform to include battery electric options.

We believe that our customer base is among the early adopters of commercial electrification, and that many customers are currently or may soon be interested in expanding into all-electric options.

Our position in the hybrid and plug-in hybrid electric market has enabled the development of strong relationships with existing customers and prospective customers, who may be prime candidates for adopting all electric versions of our systems in the future.

Furthermore, we believe that we have the potential to become the first major commercial fleet electrification provider to include a full suite of commercial xEV offerings (hybrid, plug-in hybrid, battery electric) in our offerings.

Expand offerings into new vehicle classes (7-8), chassis configurations and applications.

We are a leading provider of electrification systems for Class 2-6 commercial vehicles, with applications available for pickup trucks, cargo/passenger vans, buses, box trucks, step vans, ambulances, stripped chassis and more.

By expanding our lineup into Class 7 and 8 vehicles, we plan to add more medium- and heavy-duty options to our lineup, for applications such as refuse vehicles, city transit buses, tractor trailers, bucket trucks and more.

We believe that this expansion has the potential to create opportunities within a new market segment historically consisting of hundreds of thousands of vehicles sold each year in North America alone.

Expand offerings to include comprehensive charging solutions and power management through an offering branded as XL GRID™.

We have hundreds of fleet customers, which, in the aggregate, operate thousands of facilities across the U.S.

Most of these facilities do not have sufficient vehicle charging infrastructure, and we expect to leverage our customer relationships and fleet operational data to effectively deploy and manage charging systems.

These facilities typically have dozens and, in some cases, even hundreds of vehicles onsite, such that integrating charging with the existing building power system can create challenges.

We expect to offer onsite power and energy storage solutions to customers to help manage these challenges.

We also expect to offer services to help manage vehicle charging in order to reduce costs and increase the value of the fleet vehicle charging.

We may work with partners to offer certain aspects of this comprehensive offering.

Grow business globally to capitalize on worldwide demand for vehicle electrification.

Global markets, particularly Europe, Asia and India, are also adopting vehicle electrification.

By growing our commercial reach into these markets, we believe that we can build significant share and revenue opportunities within an untapped community of customers.

We currently work with many fleets in the U.S.

and Canada that operate vehicles globally, providing an opportunity to quickly expand worldwide within those fleets.

Build upon an established leadership position in fleet electrification as well as energy industry and infrastructure finance relationships to establish a fleet EaaS offering.

With our established and expanding product line of xEV solutions (“XLH™”, “XLP™”

and “XL ELECTRIC™”), a robust fleet electrification analytics platform (“XL Link”), and our future offering of comprehensive charging and power solutions (“XL GRID™”).

We believe we are well positioned to offer fleet EaaS.

In this offering, we aim to aggregate and package vehicles, electric powertrains, charging infrastructure, energy management and other services into an integrated offering to help customers rapidly reduce transportation related emissions.

We expect to work with infrastructure investors to provide non-dilutive capital to finance these assets.

We believe that such an offering can reduce the barriers to adopting fleet electrification on a broader scale.

Value Proposition

We were founded on the principal of delivering electrification solutions

to customers in ways that were affordable, offered clear and immediate economic advantages, significantly lowered CO2 emissions, and which

were easily adoptable.

We began by developing hybrid electric drive systems, which are far less expensive than battery electric options

and require no additional charging infrastructure to operate.

As battery prices have decreased, the infrastructure has slowly matured,

and companies have become more capable of adopting plug-in vehicles, we have expanded our lineup to include plug-in hybrid options to

meet this need.

Though trends toward battery electric

vehicles continue to develop, we expect that the demanding drive cycles of many commercial fleet applications will limit the rate

of EV adoption in many market segments.

There are significant challenges preventing fleets from moving forward with large numbers

of EVs, including high capital cost and lack of reliable and proven fleet-capable product options.

As a result, demand for HEV

and plug-in hybrid electric vehicle (“PHEV”) fleet options remains strong, and we believe our focus on hybrid

and plug-in hybrid options aligns with current market demand for reliable and proven fleet options that are currently available

for deployment.

These readily available solutions provide immediate fuel economy and sustainability value while overcoming the

most pressing challenges of their all-electric counterparts.

While we plan to introduce EV options that align with our customers’

ability to purchase, deploy and operate these vehicles in certain segments, we believe that our hybrid and plug-in hybrid electric

drive solutions offer a number of strong value propositions for fleets today:

No charging infrastructure is required .

Our hybrid and plug-in hybrid electric systems are self-charging, using regenerative braking to supplement the power of the internal combustion engine, which burns less fuel due to the hybrid assist.

While the plug-in hybrid systems are able to leverage external power sources, they are not dependent upon those sources to operate the vehicle when there is a chance to supplement with an external power source, such that standard level 1 or level 2 chargers, which are more widely available and less expensive to install, are sufficient for providing their additional power.

expensive to purchase and operate .

Our HEV and PHEV solutions can be purchased at a fraction of the cost of currently available

battery-powered all electric commercial fleet vehicles, delivering immediate value and lowering operating expenses over time.

Our systems may qualify for a wide range of state incentives throughout the country, but even without utilizing those programs,

we believe that our systems represent one of the most cost effective electrification solutions available for commercial fleet

Readily available for fleet vehicles and applications .

Because our systems are compatible with existing OEM chassis that are already in use for fleet applications, they can be quickly installed onto a wide range of popular fleet vehicles from multiple vehicle manufacturers.

This creates continuity for fleets and familiarity for drivers.

In addition, these vehicles continue to leverage an internal combustion engine, so there is no “range anxiety”

Immediate fuel savings and sustainability value .

Because they are readily deployable, our hybrid and plug-in hybrid systems can provide immediate value on fuel economy and sustainability targets.

The systems can help fleets make up to 25-50% MPG improvements while reducing emissions by as much as one third.

While our hybrid and plug-in hybrid electric drive systems currently

offer many immediate benefits over full electric propulsion, they also help to accelerate the transition to full electric propulsion vehicles

as those technologies and supporting infrastructures continue to develop.

In the meantime, we are leveraging our electric powertrain supply

chain and technology to develop all-electric system options, which we expect to introduce in 2022.

We believe the high cost of more sustainable

drive systems, such as all electric, are a significant barrier to adoption for commercial fleets, especially in market segments

with demanding end use applications not suitable for current EV technology.

We are uniquely positioned to reach a very broad market

with our hybrid and plug-in hybrid offering, including drive cycle and end use applications that are currently not viable for all

electric solutions.

We believe we will have an advantage with respect to the introduction of all electric solutions in certain

market segments, as we expect to be able to leverage the real world operating data, various customer and operational relationships,

and charging infrastructure it establishes with our hybrid and plug-in hybrid offering.

We believe that we are also uniquely positioned to leverage our significant

installed base of customers, fleet vehicles and telematics data to expand into new lines of business.

This may include new electrification

categories, new vehicle classes and application possibilities (including Class 8 products and electrified refuse vehicles, among

other applications), and new business models (such as EaaS).

In our XL Grid business, we purchase lighting and infrastructure

equipment from major national and international equipment suppliers.

We rely on a skilled group of sub-contractors to install and implement

our energy efficiency and infrastructure solutions.

our Power Drive business, we rely on an established upfitter partner network with locations throughout the U.S.

and Canada to support

the installation of our product via the industry standard ship-thru and upfit processes.

We, or our upfitters, arrange for the customers’

purchase of the vehicle chassis in which our products are installed.

This requires advance planning and coordination between us and the

OEM to schedule chassis production and specifications of each vehicle to ensure conformance with the specifications of our products.

We rely on third-party suppliers for the provision

and development of many of the key components and materials used in our electrified powertrain solutions.

While we obtain components from

multiple, redundant suppliers whenever possible, some of the components used in our vehicles are purchased from a single source or a limited

number of sources.

We are reliant upon a single source, Parker Hannifin Corporation, for the supply of motor components operating under

a three-year non-exclusive supply agreement with volume and pricing commitments.

In the case of batteries, we rely on more than one supplier.

Strategy and Value Proposition

We are currently conducting a strategic review

of the risks and market opportunities of our businesses.

Based upon our initial indications, we are taking actions in the first quarter

of 2022 to narrow our operational focus and concentrate efforts and resources on the most profitable areas of the business.

this process, we will be strategically reducing some aspects of our Power Drive product lines and limiting those offerings to those platforms

and applications that we believe are most scalable and provide the most substantial return on investment.

As part of this realignment,

we have recently taken actions to align our team and resources with our short-term needs.

In February 2022, the Company eliminated 51

full-time positions across the organization.

The severance charges related to this reduction were approximately $1.3 million.

continue to invest in and grow the energy efficiency and infrastructure offerings of our XL Grid business.

Our goal is to leverage our core competencies

in electrification and energy efficiency to deliver to customers cost effective solutions that help them to realize their goals in electrification

and decarbonization of operations.

Manufacturing and Production

We produce our hybrid and plug-in hybrid electrification systems from

components manufactured by third party suppliers.

We also rely on system installation support from certified upfitters as required to

meet demand volume.

Our production team resides at a leased facility in Quincy, IL.

The site capabilities include receiving, warehousing,

production/kitting, delivery, install/upfit training and system/component level troubleshooting.

Our support functions, including

supply chain, quality, and engineering operate remotely with daily contact with the production team.

We produce our electrification systems and energy efficiency

and infrastructure equipment from components manufactured by third party suppliers.

We also rely on system installation support from certified

upfitters as required to meet demand volume.

Our production team capabilities include receiving, warehousing, production/kitting, delivery,

install/upfit training and system/component level troubleshooting.

Our support functions, including supply chain, quality, and engineering

operate remotely with daily contact with the production team.

Sales and Marketing

We maintain a sales and marketing team

designed to promote, sell and communicate to our core target customers throughout the U.S.

The sales team is organized

to cover both direct sales to customers and indirect sales through our two largest channels:

sales and installation partners (vehicle

upfitters) and fleet management companies (leasing and consulting organizations).

This structure has enabled our expansion into

established networks of fleet customers throughout the U.S.

The marketing team is organized to execute across external

and internal go to market functions across the business, from strategy and message development to full scale program and campaign

The marketing team is responsible for managing and executing against all aspects of our digital and offline market

This includes maintenance of the XL brand identity, website, digital and social media properties, online and offline

advertising and demand generation, events, public relations, customer communications and more.

We expect to expand our sales and marketing

capabilities and presence as we continue to grow.

We maintain a sales and marketing team designed to

promote, sell and communicate to our core target customers throughout the U.S.

Research and Development

We conduct research and development

for product development at our headquarters located in Boston, MA, and also at our Southern California Technical Center in Foothill

Both facilities are equipped with prototyping and testing capabilities to support product development.

As needed, we

supplement testing with outside test facilities to support product development along with ensuring compliance to applicable standards

and regulations such as Federal Motor Vehicle Safety Standards (“FMVSS”).

To support development, both facilities have

engineering and support staff.

We develop both hybrid electric and plug-in electric solutions that

are designed to integrate into OEM vehicles without voiding OEM warranties.

A product development process is followed to ensure the products

meet quality and timing targets while taking concepts through to production.

We integrate a mixture of commercially available components

and proprietary developed products to create electrified powertrain solutions.

The XL developed hybrid controller that provides supervisory

function and control over all subsystems of the electrified solution utilizes a modular software architecture.

This approach facilitates

a quicker adaption of the software updates required for different components used in the development of an electrified powertrain solution.

A key feature of our hybrid and

plug-in hybrid controller is the ability to remotely monitor the performance and status of the powertrain solution including diagnostics

If required, we can remotely push software updates to the controller to implement updated software or address certain

issues without having to bring the vehicle into a service center for such an update.

Additionally, if required, the system can

be remotely disabled should there be a safety concern with how the vehicle is operating.

Our R&D organization leadership

and team have extensive experience in the commercial vehicle industry, including drive systems for the full range of Class 2-8

commercial vehicles.

Our team has established concept and prototype designs for all electric range plug-in hybrid electric vehicle

systems and controls, pure electric drive systems and controls, and hydrogen fuel cell electric drive systems, including heavy

duty Class 7-8 applications in addition to the currently available hybrid and plug-in hybrid drive systems already available.

We conduct vehicle electrification research and development

in support of our Power Drive offerings at our 3 locations:

our corporate headquarters in Boston, MA, the Southern California Technical

Center in Foothill Ranch, CA and at our Michigan Technical Center in Wixom, MI.

These facilities are equipped with prototyping and testing

capabilities to support product development.

As needed, we supplement testing with outside test facilities to support product development

along with ensuring compliance to applicable standards and regulations such as Federal Motor Vehicle Safety Standards (“FMVSS”).

To support development, these facilities have engineering and support staff.

As part of our strategic reduction of our Power Drive business,

we will be terminating research and development activities in Boston, MA in the first half of 2022.

We have begun leveraging the technology and know-how

of our Power Drive business into related electrification initiatives.

We are developing a prototype for the US Military of a kit that can

be retrofitted to tactical vehicles in the field.

This development started in 2021 and will continue throughout 2022.

Development is being

conducted according to the required US Military standards.

We also have in the prototype stage a fully-electric Class 6 refuse vehicle

developed in partnership with Curb Tender.

Intellectual Property

Our success depends in part upon our ability to protect our core technology

and intellectual property, and we rely on a combination of patents, know-how, copyrights, trademarks, trade secrets and non-disclosure

agreements to establish and protect our intellectual property.

As of December 31, 2020, we had 25 issued patents, including one international

patent from China.

In addition, as of December 31, 2020, we had 15 patent applications that were published (or awaiting publication)

and are under examination at the U.S.

Our success depends in part upon our ability to protect

our core technology and intellectual property, and we rely on a combination of patents, know-how, copyrights, trademarks, trade secrets

and non-disclosure agreements to establish and protect our intellectual property.

As of December 31, 2021, we had 27 issued patents,

including one international patent from China.

In addition, as of December 31, 2021, we had 14 patent applications that were published

(or awaiting publication) and are under examination at the U.S.

Patent Office.

We also have four provisional patent application that have been filed with the U.S.

We also have four provisional patent application that have

been filed with the U.S.

Patent Office.

In addition to the above, eleven trademarks have been assigned to us.

Our intellectual property portfolio

largely relates to mechanical systems, software, vehicle data analysis, vehicle control strategies, and data processing/management,

and the utilization of data to optimize vehicle functions.

Intellectual property is generated organically as part of our product

development efforts.

Concepts, ideas and solutions that are generated are reviewed to determine if they are patentable, and we

hold regular executive level reviews to determine if disclosures are to be further processed for filing as a patent application.

We cannot conclusively state that any

pending applications, existing patents or future patents will be definitively useful in protecting or promoting our business and

growth plans.

Please see the section entitled “

Risk Factors ”

for additional information on the risks associated

with our intellectual property strategy and portfolio.

We currently operate four separate leased facilities

across the U.S., strategically positioned across the East coast, Midwest and West coast in order to best leverage proximity to customers,

partners and employee talent pools.

Our headquarters are located in Brighton,

MA, a neighborhood of Boston.

This flagship facility houses the majority of the executive leadership team, along with engineering,

sales & marketing, finance, human resources, service and supply chain functions.

The facility includes a mixture of upper

floor offices and lower floor automotive engineering equipment, including vehicle lifts and a dynamometer which enables the team

to conduct extensive system and emissions testing on-site.

Our lease was extended to February 29, 2022.

Our production team resides at a leased facility

in Quincy, IL.

Our intellectual property portfolio largely relates

to mechanical systems, software, vehicle data analysis, vehicle control strategies, and data processing/management, and the utilization

of data to optimize vehicle functions.

Intellectual property is generated organically as part of our product development efforts.

ideas and solutions that are generated are reviewed to determine if they are patentable, and we hold regular executive level reviews to

determine if disclosures are to be further processed for filing as a patent application.

We cannot conclusively state that any pending applications,

existing patents or future patents will be definitively useful in protecting or promoting our business and growth plans.

Please see the

section entitled “ Risk Factors ” for additional information on the risks associated with our intellectual property strategy

and portfolio.

We currently operate five separate leased facilities across the U.S.,

strategically positioned across the East coast, Midwest and West coast in order to best leverage proximity to customers, partners and

employee talent pools.

Our headquarters is located in Brighton, MA, a neighborhood of Boston.

This flagship facility houses members of the executive leadership team, along with the engineering, sales & marketing, finance, human

resources, service and supply chain functions.

The facility includes a mixture of upper floor offices and lower floor automotive engineering

equipment, including vehicle lifts and a dynamometer which enables the team to conduct extensive system and emissions testing on-site.

Our lease was extended to August 31, 2022.

In 2021 our production team moved into a new leased facility in Quincy,

It is strategically located near OEM and key upfitter partner headquarters facilities.

This facility is predominantly

responsible for receiving material inventory and completing and shipping finished kits to customers.

Site capabilities include receiving,

warehousing, production/kitting, delivery, install/upfit training and basic system/component level troubleshooting.

Our lease expires

on December 31, 2021.

We also operate a facility in Foothill

Ranch, CA which houses members of the engineering team that were brought into the business through the 2019 acquisition of Quantum

Fuel’s electrification division.

This team includes expertise in electrical, mechanical and systems engineering and is responsible

for new product development, testing and component integration.

Our lease expires in February 2025, with the option to extend for

an additional 60-month term.

Effective February, 2021 we opened a location

in Wixom, MI, which will serve as a fleet electrification technology center to support the design, development, testing and validation

of a wide range of commercial vehicle electrification solutions.

The facility includes a component test lab including vibration

capability, a vehicle chassis dynamometer, an electronics lab and battery testing equipment.

This facility is predominantly responsible

for receiving material inventory and completing and shipping finished kits to customers.

Site capabilities include receiving, warehousing,

production/kitting, delivery, install/upfit training and basic system/component level troubleshooting.

Our lease expires on April 30,

We also operate a facility in Foothill Ranch, CA which houses members

of the engineering team that were brought into the business through the 2019 acquisition of Quantum Fuel’s electrification division.

This team includes expertise in electrical, mechanical and systems engineering and is responsible for new product development, testing

and component integration.

Our lease expires on February 28, 2025, with the option to extend for an additional 60-month term.

Effective February 2021 we opened a location in Wixom,

MI, which will serve as a fleet electrification technology center to support the design, development, testing and validation of a wide

range of commercial vehicle electrification solutions.

The facility includes a component test lab including vibration capability,

a vehicle chassis dynamometer, an electronics lab and battery testing equipment.

Our lease expires in February 2024.

In addition, roughly 10 percent

of our employees work remotely on a regular basis across a range of functions for whom frequent travel is required, including sales & marketing,

service and quality.

Throughout the COVID-19 pandemic, the majority of our employees have worked remotely unless required to be

at a facility to perform their core functions.

As of December 31, 2020, we had

59 full time employees.

We have not experienced any work stoppages, do not include any labor unions and consider our relationship

with employees to be very good.

We lease a facility in Worcester, MA that houses members of the World

The lease expires in September 2023.

In addition, roughly 10 percent of our employees work remotely on a

regular basis across a range of functions for whom frequent travel is required, including sales & marketing, service and quality.

Throughout the COVID-19 pandemic, the majority of our employees have worked remotely unless required to be at a facility to perform their

core functions.

As of December 31, 2021, we had 177 full time

employees, including 34 employees at World Energy Efficiency Services.

We have not experienced any work stoppages, do not include any

labor unions and consider our relationship with employees to be very good.

Government Regulations

We operate in an industry that is subject

to extensive regulation.

We operate in an industry that is subject to extensive

Regulatory compliance and product safety are our key areas of focus.

As part of product development cycles,

regulatory compliance is assessed early on in the development program and plans are implemented to assure compliance when a product

is released to customers.

We also operate in an industry that

is subject to extensive environmental regulation, which has become more stringent over time.

The environmental laws and regulations

to which we are subject govern, among others, water use, air emissions, use of recycled materials, energy sources, the storage,

handling, treatment, transportation and disposal of hazardous materials, the protection of the environment, natural resources and

endangered species and the remediation of environmental contamination.

We may be required to obtain and comply with the terms and

conditions of multiple environmental permits, many of which are difficult and costly to obtain and could be subject to legal challenges.

Compliance with such laws and regulations at an international, regional, national, provincial and local level is an important aspect

of our ability to continue our operations.

Environmental standards applicable to

us are established by the laws and regulations of the countries in which it operates, standards adopted by regulatory agencies

and the permits and licenses that it holds.

Each of these sources is subject to periodic modifications and increasingly stringent

requirements.

Violations of these laws, regulations or permits and licenses may result in substantial civil and criminal fines,

penalties, orders to cease the violating operations or to conduct or pay for corrective works.

In some instances, violations may

also result in the suspension or revocation of permits and licenses.

As part of product development cycles, regulatory compliance

is assessed early on in the development program and plans are implemented to assure compliance when a product is released to customers.

We also operate in an industry that is subject to extensive

environmental regulation, which has become more stringent over time.

The environmental laws and regulations to which we are subject govern,

among others, water use, air emissions, use of recycled materials, energy sources, the storage, handling, treatment, transportation and

disposal of hazardous materials, the protection of the environment, natural resources and endangered species and the remediation of environmental

contamination.

We may be required to obtain and comply with the terms and conditions of multiple environmental permits, many of which

are difficult and costly to obtain and could be subject to legal challenges.

Compliance with such laws and regulations at an international,

regional, national, provincial and local level is an important aspect of our ability to continue our operations.

Environmental standards applicable to us are established

by the laws and regulations of the countries in which we operate, standards adopted by regulatory agencies and the permits and licenses

that we hold.

Each of these sources is subject to periodic modifications and increasingly stringent requirements.

Violations of these

laws, regulations or permits and licenses may result in substantial civil and criminal fines, penalties, orders to cease the violating

operations or to conduct or pay for corrective works.

In some instances, violations may also result in the suspension or revocation of

permits and licenses.

Vehicle Safety and Testing Regulation

The vehicles containing our systems

are subject to, and required to comply with, numerous regulatory requirements established by the National Highway Traffic Safety

Administration (“NHTSA”), including applicable FMVSS.

The OEMs must self-certify that its vehicles meet or are exempt

from all applicable FMVSSs before a vehicle can be imported into or sold in the U.S.

There are numerous FMVSSs that apply

to our systems that are included in our customers’

The vehicles containing our systems are subject to,

and required to comply with, numerous regulatory requirements established by the National Highway Traffic Safety Administration (“NHTSA”),

including applicable Federal Motor Vehicle Safety Standards (“FMVSS”).

The OEMs must self-certify that its vehicles meet or

are exempt from all applicable FMVSSs before a vehicle can be imported into or sold in the U.S.

There are numerous FMVSSs that apply to our systems

that are included in our customers’ vehicles.

Examples of these requirements include:

Electric Vehicle Safety—limitations on electrolyte spillage, battery retention, and avoidance of electric shock following specified crash tests;

Flammability of Interior Materials—burn resistance requirements for materials used in the occupant compartment;

Crash Tests for High-Voltage System Integrity—preventing electric shock from high voltage systems.

We are also required to comply with

other NHTSA requirements and federal laws administered by NHTSA, including early warning reporting requirements regarding warranty

claims, field reports, death and injury reports, foreign recalls, and owner’s manual requirements.

Electric Vehicle Safety—limitations on electrolyte spillage, battery retention, and avoidance of electric shock following specified crash tests;

Flammability of Interior Materials—burn resistance requirements for materials used in the occupant compartment;

Crash Tests for High-Voltage System Integrity—preventing electric shock from high voltage systems.

We are also required to comply with other NHTSA requirements

and federal laws administered by NHTSA, including early warning reporting requirements regarding warranty claims, field reports, death

and injury reports, foreign recalls, and owner’s manual requirements.

CARB Emissions Compliance and Certification

hybrid and plug-in hybrid systems are fitted to vehicles that have been certified to meet the requirements of U.S.

Environmental

Protection Agency (the “EPA”) and California Air Resources Board (“CARB ”).

The OEMs are responsible for ensuring compliance with the appropriate regulations for the base vehicle for emissions, fuel economy

and on-board diagnostics.

CARB classifies the XL system as an

aftermarket fit system / device.

As such, CARB requires that an Executive Order (“EO”) is obtained for the sale of

the system intended for use on a vehicle to be operated in the state of California.

In order to obtain the EO, we are required

to submit an application to CARB for each vehicle group or family, which is required for each model year.

The vehicle models included

in a group or family are determined by the level of commonality of vehicle systems on both the base vehicle and the hybrid or plug

in hybrid systems that are fitted.

CARB will then issue a test order that

details the required testing and the specification of the vehicle to be used to demonstrate compliance.

The essence of the testing

is not to confirm the performance of the hybrid or plug-in hybrid system fitted to the vehicle, but to demonstrate that addition

of the system does not negatively impact the emissions or diagnostic monitoring performance of the vehicle.

We have obtained a number of EOs for prior model years and are in the

Our hybrid and plug-in hybrid systems are fitted to

vehicles that have been certified to meet the requirements of U.S.

Environmental Protection Agency (the “EPA”) and California

Air Resources Board (“CARB”).

The OEMs are responsible for ensuring compliance with the appropriate regulations for the base

vehicle for emissions, fuel economy and on-board diagnostics.

CARB classifies the XL hybrid and plug-in system as

an aftermarket fit system / device.

As such, CARB requires that an Executive Order (“EO”) is obtained for the sale of the

system intended for use on a vehicle to be operated in the state of California.

In order to obtain the EO, we are required to submit an

application to CARB for each vehicle group or family, which is required for each model year.

The vehicle models included in a group or

family are determined by the level of commonality of vehicle systems on both the base vehicle and the hybrid or plug-in hybrid systems

that are fitted.

CARB will then issue a test order that details the

required testing and the specification of the vehicle to be used to demonstrate compliance.

The essence of the testing is not to confirm

the performance of the hybrid or plug-in hybrid system fitted to the vehicle, but to demonstrate that addition of the system does not

negatively impact the emissions or diagnostic monitoring performance of the vehicle.

In 2021 we have obtained 7 EOs for hybrid systems covering

2021 and 2022 Model Years, and in February 2022 received an EO for the sale of our battery electric Ford F-600 platform.

We are in the

process of conducting testing against CARB issued test orders for future products to be introduced into the California market.

1 unchanged sentence

include requirements to collect data from vehicles in the field (in-use data).

We are pursuing new model certification with CARB.

We were previously certified under CARB

and are currently pursuing re-certification under CARB for 2021.

Our prior products offered in California were done on an individual

model basis and specific for each model year.

We are now pursuing approval of our systems on a system basis, which would, if approved,

enable sales of a broader range of our products in California for multiple models and over multiple model years, subject to changes

in design of our products.

There can be no assurance that we will be able to obtain any such approvals on a system basis or otherwise.

Future XL products may include battery

electric vehicles, which would require a different certification process and would be subject to both CARB and EPA testing in order

to demonstrate electric range and qualify for credits if appropriate.

For light duty vehicles, a zero emission vehicle certification

would be required.

Heavy duty electric vehicles are subject to the CARB Zero-Emission Powertrain Certification Program.

We have obtained our first EO for our first battery

electric vehicle.

This is based on the conversion of a 2021MY vehicle.

An application has been filed for a 2022 MY vehicle and an EO

is expected to be issued by March 31, 2022.

Battery Safety and Testing Regulation

Our electrified powertrain solutions

are intended to meet the International Organization for Standardization’s standards for electrically propelled vehicles in

vehicle operational safety specifications and connecting to an external power supply.

Additionally, we may incorporate other battery

system standards of the International Organization for Standardization in our electrified powertrain solutions.

Our battery portfolio has leveraged three

commercially available Li-ion batteries.

Our electrified powertrain solutions are intended to

meet the International Organization for Standardization’s standards for electrically propelled vehicles in vehicle operational safety

specifications and connecting to an external power supply.

Additionally, we may incorporate other battery system standards of the International

Organization for Standardization in our electrified powertrain solutions.

Our battery portfolio has leveraged three commercially available Lithium-ion

Further, we have developed a hybrid battery and a plug-in hybrid pack with industry partners.

The commercially available batteries were designed and tested by the suppliers, while the developed packs went under stringent

testing to comply with Society of Automotive Engineers International J2929 Standard, “Safety Standard for Electric and Hybrid

Vehicle Propulsion Battery Systems Utilizing Lithium Based Rechargeable Cells.”

We have developed and instituted the

recommended practice for conductive charging systems to the SAE International Surface Vehicle Standard J1722 SAE Electric Vehicle

and Plug in Hybrid Electric Vehicle Conductive Charge Coupler.

We have designed systems in accordance

to SAE J2344 Guidelines for Electric Vehicle Safety mandating use of Hazardous Voltage Interlock Loop, charge interlocks, access

cover interlocks, grounding practices and safety labeling for Electrical Energy Storage devices following the recommended practice

of SAE J2936.

All XL developed batteries have been

tested and meet the requirements for USDOT Federal Regulations Title 49 Part 173.185 General Requirements for Shipments and Packaging;

Lithium Cells and Batteries issued by the Pipeline and Hazardous Materials Safety Administration.

Testing was performed following

the UN Recommendations on the Transport of Dangerous Goods;

The commercially available batteries

were designed and tested by the suppliers, while the developed packs went under stringent testing to comply with Society of Automotive

Engineers International J2929 Standard, “Safety Standard for Electric and Hybrid Vehicle Propulsion Battery Systems Utilizing Lithium

Based Rechargeable Cells.”

We have developed and instituted the recommended practice

for conductive charging systems to the SAE International Surface Vehicle Standard J1722 SAE Electric Vehicle and Plug in Hybrid Electric

Vehicle Conductive Charge Coupler.

We have designed systems in accordance to SAE J2344

Guidelines for Electric Vehicle Safety mandating use of Hazardous Voltage Interlock Loop, charge interlocks, access cover interlocks,

grounding practices and safety labeling for Electrical Energy Storage devices following the recommended practice of SAE J2936.

All XL developed batteries have been tested and meet

the requirements for USDOT Federal Regulations Title 49 Part 173.185 General Requirements for Shipments and Packaging;

Lithium Cells and

Batteries issued by the Pipeline and Hazardous Materials Safety Administration.

Testing was performed following the United Nations (“UN”)

Recommendations on the Transport of Dangerous Goods;

Manual of Tests and Criteria Section 38.3.

Our battery packs and modules have met

the compliance requirements of the UN Manual of Tests and Criteria demonstrating our ability to ship the battery packs with completion

of the following tests:

Our battery packs and modules have met the compliance

requirements of the UN Manual of Tests and Criteria demonstrating our ability to ship the battery packs with completion of the following

Altitude Simulation

2 unchanged sentences

Legal Proceedings

From time to time, we may become involved

in legal proceedings or be subject to claims arising in the ordinary course of our business.

Regardless of outcome, such proceedings

or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors and

there can be no assurances that favorable outcomes will be obtained.

On March 8, 2021, a putative class action

complaint was filed in federal district court for the Southern District of New York (Suh v.

XL Fleet Corp., et al., Case No.

1:21-cv-02002)

against us and certain of our current officers and directors (the “Suh Complaint”).

On March 12, 2021, a second putative

class action complaint was filed in federal district court for the Southern District of New York (Kumar v.

XL Fleet Corp., et al.,

1:21-cv-02171) against us and certain of our current officers and directors (the “Kumar Complaint”).

the Suh Complaint and the Kumar Complaint allege that certain public statements made by the defendants between October 2, 2020

and March 2, 2021 violated Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder.

We believe that

the allegations asserted in the Suh Complaint and Kumar Complaint are without merit, and we intend to vigorously defend both lawsuits.

There can be no assurance, however, that we will be successful.

At this time, we are unable to estimate potential losses, if any,

related to either lawsuit.

From time to time, we may become involved in legal

proceedings or be subject to claims arising in the ordinary course of our business.

Regardless of outcome, such proceedings or claims

can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors and there can be no

assurances that favorable outcomes will be obtained.

Beginning on March 8, 2021, two putative class

action complaints were filed in the federal district court for the Southern District of New York against us and certain of our current

officers and directors.

The cases were consolidated as In re XL Fleet Corp.

Securities Litigation , Case No 1:21-cv-02171, a lead

plaintiff was appointed, and an amended consolidated complaint was filed on July 20, 2021.

The amended complaint alleges that certain

public statements made by the defendants between September 18, 2020 and March 31, 2021 violated Sections 10(b) and 20(a) of the Exchange

Act and Rule 10b-5 promulgated thereunder.

Our motion to dismiss the amended complaint was denied on February 17, 2022.

The Company believes

that the allegations asserted in the securities class action are without merit, and we intend to vigorously defend the action.

be no assurance, however, that we will be successful.

At this time, we are unable to estimate potential losses, if any, related to this

On September 20, 2021, and October 19, 2021, two

class actions were filed in the Delaware Court of Chancery against certain of the Company’s current officers and directors, and

the Company’s sponsor, Pivotal Investment Holdings II LLC.

The actions were consolidated as In re XL Fleet (Pivotal) Stockholder

Litigation , C.A.

2121-0808, and an amended consolidated class action complaint was filed on January 31, 2022.

The amended complaint

alleges various breaches of fiduciary duty, and aiding and abetting breaches of fiduciary duty, for purported actions relating to the

negotiation and approval of the December 21, 2020 merger and organization of Legacy XL to become XL Fleet Corp., and purportedly materially

misleading statements made in connection with the merger.

The Company believes that the allegations asserted in the action are without

merit, and the Company intends to vigorously defend the lawsuit.

The Company has received requests for information

including a subpoena, from the Securities and Exchange Commission (“SEC”) related to, among other things, the Company’s

business combination with XL Hybrids, Inc.

and the related PIPE financing, the Company’s sales pipeline and revenue projections,

purchase orders, suppliers, CARB approvals, fuel economy from our Power Drive products, customer complaints, and disclosures and other

matters in connection with the foregoing.

According to the subpoena, the investigation is a fact-finding inquiry and does not mean that

the SEC has concluded that there is a violation of the law.

We intend to provide the requested information and cooperate fully with the

SEC investigation.

Corporate Information

Our principal executive

offices are located at 145 Newton Street, Boston, Massachusetts 02135, and our telephone number is (617) 718-0329.

address is www.xlfleet.com and the information contained in, or that can be accessed through, our website is not part of this Annual

Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K.

Our principal executive offices are located at 145 Newton Street, Boston,

Massachusetts 02135, and our telephone number is (617) 718-0329.

Our website address is www.xlfleet.com and the information contained

in, or that can be accessed through, our website is not part of this Annual Report on Form 10-K and should not be considered part of this

Annual Report on Form 10-K.

Information Available on the Internet

Our internet address is

www.xlfleet.com, to which we regularly post copies of our press releases as well as additional information about us.

reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, are available

to you free of charge through the Investor Relations section of our website as soon as reasonably practicable after such materials

have been electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).

The SEC maintains

an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding

issuers that file electronically with the SEC.

We include our web site address in this Annual Report on Form 10-K only as an inactive

textual reference.

Information contained in our website does not constitute a part of this report or our other filings with the

Our internet address is www.xlfleet.com, to which we regularly post

copies of our press releases as well as additional information about us.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q,

current reports on Form 8-K, and all amendments to those reports, are available to you free of charge through the Investor Relations section

of our website as soon as reasonably practicable after such materials have been electronically filed with, or furnished to, the Securities

and Exchange Commission (the “SEC”).

The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy

and information statements, and other information regarding issuers that file electronically with the SEC.

We include our web site address

in this Annual Report on Form 10-K only as an inactive textual reference.

Information contained in our website does not constitute a part

of this report or our other filings with the SEC.

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