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Item 1A. Risk Factors

2022-03-01 compared with 2021-03-31 · 1654 added, 1629 removed, 103 unchanged (97% of the section changed)

Summary Risk Factors

Our business is subject to numerous

risks and uncertainties, including those highlighted in the section entitled “Risk Factors,”

that represent challenges

that we face in connection with the successful implementation of our strategy and growth of our business.

The occurrence of one

or more of the events or circumstances described in the section entitled “Risk Factors,”

alone or in combination with

other events or circumstances, may have an adverse effect on our business, financial condition, results of operations, and prospects.

Our business is subject to numerous risks and uncertainties,

including those highlighted in the section entitled “Risk Factors,” that represent challenges that we face in connection with

the successful implementation of our strategy and growth of our business.

The occurrence of one or more of the events or circumstances

described in the section entitled “Risk Factors,” alone or in combination with other events or circumstances, may have an

adverse effect on our business, financial condition, results of operations, and prospects.

Such risks include, but are not limited to:

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Our business model requires further market penetration to drive growth and failure to expand would have a material adverse effect on our operating results and business and could result in substantial liabilities that exceed our resources.

If we fail to manage our growth effectively, include failing to attract and integrate qualified personnel, we may not be able to develop, produce, market and sell our electrified powertrain solutions successfully.

Our success will depend on our ability to economically source and coordinate

the installation of electrified powertrain solutions at scale, and our ability to develop and produce electrified powertrain solutions

of sufficient quality and appeal to customers on schedule and at scale is unproven.

If we fail to manage our growth effectively, including failing to attract and integrate qualified personnel, we may not be able to develop, produce, market and sell our electrified powertrain solutions successfully.

Our success will depend on our ability to economically source and coordinate the installation of electrified powertrain solutions at scale, and our ability to develop and produce electrified powertrain solutions of sufficient quality and appeal to customers on schedule and at scale is unproven.

If we are unable to successfully produce our electrified powertrain solutions, our business will be harmed.

We are dependent on vehicle OEMs, upfitters and body builders to bring our electrified powertrain solutions to market, which is subject to risks.

Our future growth is dependent upon the fleet industry’s willingness to adopt hybrid, plug-in hybrid, all electric and fuel cell electric vehicles (“xEVs”).

Our future growth in Power Drive sales is dependent upon the fleet industry’s willingness to adopt hybrid vehicles (“xEVs”).

We, the OEMs and our suppliers are subject to substantial regulation, and unfavorable changes to, or failure by us, the OEMs or our suppliers to comply with, these regulations could substantially harm our business and operating results.

We are highly dependent on the services of Dimitri N.

Kazarinoff, our Chief Executive Officer, and Thomas (Tod) J.

Hynes III, our President, and if we are unable to retain Mr.

Kazarinoff or Mr.

Hynes, attract and retain key employees and hire qualified management, technical and vehicle engineering personnel, our ability to compete could be harmed.

We are highly dependent on the services of Eric Tech, our Chief Executive Officer, and if we are unable to retain Mr.

Tech, attract and retain key employees and hire qualified management, technical and vehicle engineering personnel, our ability to compete could be harmed.

Future product recalls could materially adversely affect our business, prospects, financial condition and operating results.

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Our suppliers may rely on complex machinery for our component production, which involves a significant degree of risk and uncertainty in terms of operational performance and costs.

Our manufacturing operations are dependent upon third-party suppliers, including, in certain cases, single-source suppliers, making us vulnerable to supply shortages.

Insufficient warranty reserves to cover future warranty claims could materially adversely affect our business, prospects, financial condition and operating results.

● Our manufacturing operations are dependent upon third-party suppliers, including, in certain cases,

single-source suppliers, making us vulnerable to supply shortages.

Increased warranty claims could materially adversely affect our business, prospects, financial condition and operating results.

Our electrified powertrain solutions rely on software and hardware that is highly technical, and if these systems contain errors, bugs or vulnerabilities, or if we are unsuccessful in addressing or mitigating technical limitations in our systems, our business could be adversely affected.

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Developments in alternative technology or improvements in the internal combustion engine may adversely affect the demand for our electrified powertrain solutions.

Our beliefs regarding the ability of our electrified powertrain solutions to limit carbon intensity and reduce GHG emissions and contribute to global decarbonization may be based on materially inaccurate assumptions.

Our assumptions regarding the ability of our electrified powertrain solutions to limit carbon intensity and reduce GHG emissions and contribute to global decarbonization may be inaccurate.

We will incur increased costs as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives.

Our management has limited experience in operating a public company.

We intend in the future to expand internationally and will face risks associated with our international operations, including unfavorable regulatory, political, tax and labor conditions, which could harm our business.

We are subject to governmental export and import control laws and regulations.

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Concentration of ownership among our existing executive officers, directors and their respective affiliates may prevent new investors from influencing significant corporate decisions.

Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our common stock, par value $0.0001 (“Common Stock”).

Our charter contains anti-takeover provisions that could adversely affect the rights of our stockholders.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our Common Stock adversely, the price and trading volume of our Common Stock could decline.

A significant portion of our total outstanding shares of our Common Stock are restricted from immediate resale but may be sold into the market in the near future.

This could cause the market price of our Common Stock to drop significantly, even if our business is doing well.

We may issue additional Common Stock or preferred stock, including under our equity incentive plan.

Any such issuances would dilute the interest of our stockholders and likely present other risks.

We may by subject to legal proceedings related to shareholder derivative suits, product liability, patent, copyright or trademark infringements, or trade secret misappropriation claims, which may be time-consuming and expensive, hinder execution of our business and growth strategy or negatively affect the price of our Common Stock.

An investment in

our securities is speculative and involves a high degree of risk.

Before deciding whether to invest in our securities, you should

consider carefully the risks described below, together with other information in this Annual Report on Form 10-K and the other

information and documents we file with the SEC.

The occurrence of any of the following risks could have a material and adverse

effect on our business, reputation, financial condition, results of operations and future growth prospects, as well as our ability

to accomplish our strategic objectives.

As a result, the trading price of our Common Stock could decline and you could lose all

or part of your investment.

Additional risks and uncertainties not presently known to us or that we currently deem immaterial may

also impair our business operations and stock price.

We are subject to legal proceedings including an SEC investigation, stockholder

fiduciary duty suits, and shareholder class actions, and we may be subject to legal proceedings in the future including product liability,

patent, copyright or trademark infringements, or trade secret misappropriation claims, which may be time-consuming and expensive, hinder

execution of our business and growth strategy or negatively affect the price of our Common Stock.

An investment in our securities is speculative and

involves a high degree of risk.

Before deciding whether to invest in our securities, you should consider carefully the risks described

below, together with other information in this Annual Report on Form 10-K and the other information and documents we file with the SEC.

The occurrence of any of the following risks could have a material and adverse effect on our business, reputation, financial condition,

results of operations and future growth prospects, as well as our ability to accomplish our strategic objectives.

As a result, the trading

price of our Common Stock could decline and you could lose all or part of your investment.

Additional risks and uncertainties not presently

known to us or that we currently deem immaterial may also impair our business operations and stock price.

Risks Related to our Business and Industry

We are an early stage company with a history of losses, and we expect to incur significant expenses and continuing losses.

We incurred a net loss of approximately

$25.6 million and $14.9 million for the years ended December 31, 2020 and 2019, respectively.

We believe that we will continue

to incur operating and net losses until at least such time in the future as our annual revenue reaches over $200 million, which may occur later, or not at all.

have an established customer base and product line and our potential profitability is dependent upon the continued successful

development and successful commercial acceptance of our electrified powertrain solutions, which may occur later than anticipated, if

Our potential profitability is further contingent on the reduction in product system costs, which also may occur later than

anticipated, if at all.

We expect the rate at which we will

incur losses to be significantly higher in future periods as we:

expand product offerings to include anti-idle technology, onboard power, new versions of plug-in hybrid solutions, full battery electric propulsion, comprehensive charging and power solutions and hydrogen fuel cell enabled hybrid electric systems;

expand our production capabilities to produce our electrified powertrain solutions, including costs associated with outsourcing the production of our electrified powertrain solutions;

build up inventories of parts and components for our fleet electrification solutions;

produce an inventory of our electrified powertrain solutions;

expand our design, development, installation and servicing capabilities;

increase our sales and marketing activities and develop our distribution infrastructure;

increase our general and administrative functions to support our growing operations;

acquire and integrate other businesses.

Because we will incur the costs and

expenses from these efforts before we receive any incremental revenues with respect thereto, our losses in future periods are expected

to be significant.

In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts

may not result in revenues, which would have a material adverse effect on our results of operations and further increase our losses.

We may become subject to product liability claims,

which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

Product liability claims,

even those without merit or those that do not involve our products, could harm our business, prospects, financial condition and

operating results.

The automobile industry in particular experiences significant product liability claims, and we face inherent

risk of exposure to claims in the event our electric powertrain solutions do not perform or are claimed to not have performed as

As is true for other commercial vehicle suppliers, we expect in the future that our electrified powertrain solutions

will be installed on vehicles that will be involved in crashes resulting in death or personal injury.

Additionally, product liability

claims that affect our competitors may cause indirect adverse publicity for us and our products.

While we maintain product

liability insurance, our coverage may not be adequate to cover certain product liability claims, and we may not be able to obtain

adequate insurance coverage in the future at acceptable costs.

A successful product liability claim that exceeds our policy limits

could require us to pay substantial sums.

Our risks in this area are particularly pronounced given the relatively limited number

of electrified powertrain solutions delivered to date and limited field experience of our products.

Moreover, a product liability

claim against us or our competitors could generate substantial negative publicity about our products and business and could have

a material adverse effect on our brand, reputation, business, prospects, financial condition and operating results.

We rely on a limited number of customers for a large

portion of our revenues, and the loss of one or more such customers could have a material adverse impact on our business, financial

condition and results of operations.

We depend on a limited number

of customers for a significant portion of our revenue.

For the fiscal year ended December 31, 2020, we had one customer that

accounted for 68% of our revenue.

The loss of this customer could have a significant impact on our revenues and harm our business,

results of operations and cash flows.

We may not be able to further penetrate the fleet

market or enter into new markets in the future.

Our success, and our ability

to increase revenue and operate profitably, depends in part on our ability to expand our customer base, further penetrating the

Our future growth is dependent upon the fleet industry’s willingness

to adopt xEVs.

Our growth in the Power Drives business is highly dependent

upon the adoption of xEVs by the commercial and municipal fleet industry.

If the market for xEVs and our electrified powertrain solutions

does not develop at the rate or in the manner or to the extent that we expect, or if critical assumptions we have made regarding the efficiency

of our electrified powertrain solutions are incorrect or incomplete, our business, prospects, financial condition and operating results

will be harmed.

The fleet market for xEVs is characterized by rapidly changing technologies, price competition, numerous competitors including

OEMs, evolving government regulation and industry standards and uncertain customer demands and behaviors.

Factors that may influence the fleet market adoption

of xEVs vehicles include:

perceptions about xEV quality, safety, design, performance, reliability and cost, especially if adverse events or accidents occur that are linked to the quality or safety of xEVs;

the availability of fully-electric vehicles, which some customers may prefer due to incentives and/or a preference to do without a combustion motor entirely;

the perceived willingness of vehicle OEMs to honor factory warranties on vehicles equipped with our powertrain solutions;

perceptions about vehicle safety in general, including the use of advanced technology, such as vehicle electronics, batteries and regenerative braking systems;

the decline of vehicle efficiency and/or range resulting from deterioration over time in the ability of the battery to hold a charge;

changes or improvements in the fuel economy of internal combustion engines, the vehicle and the vehicle controls or competitors’ electrified systems;

the availability of service, charging and fueling and other associated costs for xEVs;

volatility in the cost of energy, electricity, oil and gasoline could affect buying decisions;

government regulations and economic incentives promoting fuel efficiency and alternate forms of energy, including new regulations mandating zero tailpipe emissions compared to overall carbon reduction;

the availability of tax and other governmental incentives to purchase and operate xEVs or future regulation requiring increased use of nonpolluting trucks;

macroeconomic factors.

As an example, travel restrictions and social distancing efforts in response

to the COVID-19 pandemic have negatively impacted and will continue to negatively impact the commercial fleet industry, for an unknown,

but potentially lengthy, period of time.

Additionally, we may become subject to regulations that may require us to alter the design of

our electrified powertrain solutions, which could negatively impact customer interest in our products.

We may in the future experience additional competition in current

and potential future markets.

We work closely with traditional vehicle manufacturers

to provide electrification solutions for their standard gas-powered vehicles.

As a result, we have historically considered our relationship

to such companies to be that of a market partner as opposed to a competitor.

But as the vehicle electrification market continues to expand,

traditional vehicle manufacturers may develop and market xEV solutions in larger vehicles or all electric versions of the same vehicles

being deployed with our systems.

In particular, Tesla, Inc.

(“Tesla”), Hyliion, Inc.

(“Hyliion”) and Nikola Corporation

(“Nikola”) have announced their plans to bring Class 8 long haul battery electric vehicles and fuel cell electric vehicles

to the market over the coming years.

Cummins Inc., Daimler AG, Dana Incorporated, Navistar International Corporation, PACCAR Inc., Volvo

Group, XOS Trucks and other commercial vehicle manufacturers have also announced their plans to bring Class 8 battery electric vehicles

or fuel cell electric vehicles to the market.

In the event that traditional vehicle manufacturers

develop xEV solutions that compete with vehicles outfitted with our electrification solutions, we will experience increased industry competition.

Competitors may be able to deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, marketing

and support of their electric vehicles.

Additionally, such competitors may have greater name recognition, longer operating histories,

larger sales forces, broader customer and industry relationships and other resources than we do.

We may experience competition with respect

to recruiting and retaining qualified research and development, sales, marketing and management personnel, as well as further competition

in acquiring technologies complementary to, or necessary for, our products.

Additional mergers and acquisitions may result in even more

resources being concentrated in our competitors.

There are no assurances that customers will choose our electrified systems or vehicles

over those of our competitors, and future competition could have a material adverse effect on our business, financial condition and results

of operations.

We are an early stage company with a history of losses, and we expect

to incur significant expenses and continuing losses.

We incurred net income of approximately

$28.8 million (a net loss of approximately $61.3 million after adjusting for the favorable change in fair value of warrant liability of

approximately $90.1 million) for the year ended December 31, 2021 and net losses of approximately $60.6 million and $14.9 million for

the years ended December 31, 2020 and 2019, respectively.

We believe that we will continue to incur operating and net losses through the

We are currently conducting a review of the risks and opportunities of our current business and expect to adjust our future

strategy based upon the findings of this analysis.

Our future net income or loss will be dependent upon the determination and implementation

of this future strategy.

We expect the rate at which we will incur future losses will be impacted by the following:

which may be incurred in connection with the realignment of our business strategy, product offerings, research and development;

Costs to develop our electrified powertrain solutions;

Investment in and utilization of inventories

of parts and components;

Expansion of our product and service offerings in our XL Grid energy efficiency and infrastructure offerings;

Increase in our general and administrative functions to support our public company obligations;

Acquisition and integration of other businesses.

Because we will incur the costs and expenses from these

efforts before we receive any incremental revenues with respect thereto, our losses in future periods are expected to be significant.

In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenues,

which would have a material adverse effect on our results of operations and further increase our losses.

We may become subject to product liability claims, which could harm

our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

Product liability claims, even those without

merit or those that do not involve our products, could harm our business, prospects, financial condition and operating results.

The automobile

industry in particular experiences significant product liability claims, and we face inherent risk of exposure to claims in the event

our electric powertrain solutions do not perform or are claimed to not have performed as expected.

As is true for other commercial vehicle

suppliers, we expect in the future that our electrified powertrain solutions will be installed on vehicles that will be involved in crashes

resulting in death or personal injury.

Additionally, product liability claims that affect our competitors may cause indirect adverse publicity

for us and our products.

While we maintain product liability insurance,

our coverage may not be adequate to cover certain product liability claims, and we may not be able to obtain adequate insurance coverage

in the future at acceptable costs.

A successful product liability claim that exceeds our policy limits could require us to pay substantial

Our risks in this area are particularly pronounced given the relatively limited number of electrified powertrain solutions delivered

to date and limited field experience of our products.

Moreover, a product liability claim against us or our competitors could generate

substantial negative publicity about our products and business and could have a material adverse effect on our brand, reputation, business,

prospects, financial condition and operating results.

We rely on a limited number of customers for a large portion of our

revenues, and the loss of one or more such customers could have a material adverse impact on our business, financial condition and results

of operations.

We depend on a limited number of

customers for a significant portion of our revenue.

For the fiscal year ended December 31, 2021, we had two customers that accounted for

78% of our revenue.

The loss of these customers could have a significant impact on our revenues and harm our business, results of operations

and cash flows.

We may not be able to further penetrate the fleet or energy efficiency/infrastructure

markets or enter into new markets in the future.

Our success, and our ability to increase

revenue and operate profitably, depends in part on our ability to expand our customer base into markets and products in which we can

operate profitably.

We are currently evaluating the risk and opportunities within our current businesses and based upon this evaluation

may modify our future strategy.

For our current businesses, for example, our success will in part be based upon further penetrating the

fleet markets comprised of corporations, municipalities and public utilities along with expansion into new markets.

established customer base in the light and medium duty commercial and municipal fleet markets, although there is no assurance that

we will be able to make additional sales to our existing or prior customers.

As part of our growth plan, an increase in revenue

is expected to be generated from further market penetration into the light and medium duty commercial and municipal fleet markets.

In addition, as we develop new technologies, part of the growth plan involves expansion into new markets, such as the heavy duty

commercial fleet market.

If we are unable to meet our customers’

performance requirements or industry specifications limiting

expansion into existing or new markets, our business, prospects, financial condition and operating results would be materially

And, in our XL Grid

business, success will in part be based upon growing the base of energy efficiency and infrastructure customers, both in our current

Northeast region, but also more broadly.

If we are unable to meet our customers’ performance requirements or industry specifications

limiting expansion into existing or new markets, our business, prospects, financial condition and operating results would be materially

adversely affected.

We may be unable to adequately control the costs

associated with our operations.

We will require significant

capital to develop and grow our business, including developing and producing our electrified powertrain solutions and building

We expect to incur significant expenses which will impact our profitability, including research and development expenses,

raw material procurement costs, sales and distribution expenses as we build our brand and market our electrified powertrain solutions,

and general and administrative expenses as we scale our operations and incur costs as a public company.

Our ability to become profitable

in the future will depend on our ability to complete the design and development of additional electrified powertrain solutions

to meet projected performance metrics and successfully market our electrified powertrain solutions and services.

Additionally,

for us to become profitable, we must develop powertrain solutions that are cost effective to help achieve our expected margins.

If we are unable to efficiently design, produce, market, sell, distribute and service our electrified powertrain solutions, our

margins, profitability and prospects would be materially and adversely affected.

Our business model requires further market penetration

to drive growth and failure to expand would have a material adverse effect on our operating results and business and could result

in substantial liabilities that exceed our resources.

We may be unable to adequately control the costs associated with our

We are in the process of a strategic

review to evaluate our offerings, processes, and growth opportunities to ensure that we are charting the proper strategic direction.

a preliminary result of this strategic review, we have decided to narrow our operational focus to more effectively and judiciously execute

on our strategy moving forward.

We are focusing our effort and resources on what we consider to be the most profitable areas of our business

and reducing some aspects of our hybrid offering.

As part of this plan to narrow our focus, we have taken some actions to align our team

and resources to better reflect our near-term needs.

As part of this, we have eliminated 51 full-time positions across the organization

in February to ensure that we are operating efficiently.

We will require capital to develop our business, including developing and producing

our electrified powertrain solutions, our energy efficiency and infrastructure business and any new businesses that we may enter into.

We expect to incur expenses which will impact our profitability, including research and development expenses, raw material procurement

costs, sales and distribution expenses as we manage our brand and market our products and services, and general and administrative expenses

as we scale our operations and incur costs as a public company.

Our ability to become profitable in the future will depend on our ability

to deliver products and solutions that meet customer and market demands in a profitable manner and manage our expenses efficiently.

we are unable deliver these profitable solutions, our margins, profitability and prospects would be materially and adversely affected.

Our business model requires further market penetration to drive growth

and failure to expand would have a material adverse effect on our operating results and business and could result in substantial liabilities

that exceed our resources.

It is difficult to predict our

future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our

In the event that actual results differ from our estimates or we adjust our estimates in future periods, our operating

results and financial position could be materially affected.

Our future results depend on the successful implementation of our

management’s growth strategies –

including the launch of new products and services through our XL Grid and EaaS offerings

- and are based on assumptions and events over which we have only partial or no control.

These initiatives and products may not

generate as much revenue, cost more to bring to market, and create greater liabilities than we anticipate.

We will continue

to encounter risks and difficulties frequently experienced by early stage companies, including scaling up our infrastructure and

headcount, and may encounter unforeseen expenses, difficulties or delays in connection with our growth.

In addition, as a result

of the capital-intensive nature of our business, we can be expected to continue to sustain substantial operating expenses without

generating sufficient revenues to cover expenditures.

Any investment in us is therefore highly speculative and could result in

the loss of your entire investment.

future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business.

In the event that actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial

position could be materially affected.

Our future results depend on the successful implementation of our management’s growth strategies

– including the launch of new products and services - and are based on assumptions and events over which we have only partial or

These initiatives and products may not generate as much revenue, cost more to bring to market, and create greater liabilities

than we anticipate.

We will continue to encounter risks and difficulties frequently experienced by early stage companies, including scaling

up our infrastructure and headcount, and may encounter unforeseen expenses, difficulties or delays in connection with our growth.

as a result of the capital-intensive nature of our business, we may sustain substantial operating expenses without generating sufficient

revenues to cover expenditures.

We may require continued capital investment.

We should have sufficient

capital in the near future for the design, development and manufacture of electrified powertrain solutions.

However, we may require additional

capital investment in the future to fund operations, continue research and development and improve infrastructure.

no assurance that we will have access to the capital we need on favorable terms when required or at all.

If we cannot raise additional

funds when we need them, our financial condition and business could be materially adversely affected.

If we fail to manage our growth effectively, including

failing to attract and integrate qualified personnel, we may not be able to develop, produce, market and sell our electrified powertrain

solutions successfully.

Any failure to manage our

growth effectively could materially and adversely affect our business, prospects, operating results and financial condition.

intend to expand our operations significantly.

We expect our future expansion to include:

We expect to have sufficient capital

for the next 12 months for the design, development and manufacture of our products.

However, we may require additional capital investment

in the future to fund operations, continue research and development and improve infrastructure.

There can be no assurance that we will

have access to the capital we need on favorable terms when required or at all.

If we cannot raise additional funds when we need them,

our financial condition and business could be materially adversely affected.

If we fail to manage our growth effectively, including failing to

attract and integrate qualified personnel, we may not be able to develop, produce, market and sell our products and services successfully.

Any failure to manage our growth

effectively could materially and adversely affect our business, prospects, operating results and financial condition.

While the Company

intends to narrow our focus in the Power Drive business in 2022 to concentrate on those areas of that business that we consider to be

the most profitable, we intend to grow our operations in those remaining areas.

We expect our future growth to include:

expanding the management team;

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controlling expenses and investments in anticipation of expanded operations;

establishing or expanding design, production, sales and service facilities;

implementing and enhancing administrative infrastructure, systems and processes;

expanding into international markets;

acquiring other businesses.

We intend to continue to

hire a significant number of additional personnel, including controls and systems engineers, design and development engineers and

production personnel for our electrified powertrain solutions.

Because our electrified powertrain solutions are based on a different

technology platform than traditional internal combustion engines, individuals with sufficient training in electrified vehicles

may not be available to hire, and as a result, we will need to expend significant time and expense training any newly hired employees.

Competition for individuals with experience designing and producing electrified vehicles and their software is intense, and we

may not be able to attract, integrate, train, motivate or retain additional highly qualified personnel.

The failure to attract,

integrate, train, motivate and retain these additional employees could seriously harm our business, prospects, financial condition

and operating results.

Our success will depend on

our ability to economically source and coordinate the installation of electrified powertrain solutions at scale, and our ability to develop

and produce electrified powertrain solutions of sufficient quality and appeal to customers on schedule and at scale is unproven.

Our business depends in

large part on our ability to execute our plan to develop, produce, assemble, market, sell, install and service our electrified

powertrain solutions.

Over the long-term, we intend

to continue to hire additional personnel as needed for our current and future business.

Because we operate in evolving technology fields,

such as vehicle electrification, energy efficiency and vehicle charging, individuals with sufficient training may not be available to

hire, and as a result, we will need to expend significant time and expense training any newly hired employees.

Competition for individuals with

this experience is intense, and we may not be able to attract, integrate, train, motivate or retain additional highly qualified personnel.

The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm our business, prospects,

financial condition and operating results.

Our success within our Power Drives business will depend on our ability

to economically source and coordinate the installation of electrified powertrain solutions at scale, and our ability to develop and produce

electrified powertrain solutions of sufficient quality and appeal to customers on schedule and at scale is unproven.

Our Power Drives business depends

in large part on our ability to execute our plan to develop, produce, assemble, market, sell, install and service our electrified powertrain

In particular, we rely on Parker Hannifin Corporation to supply all of our motors.

We further rely on other

third parties to supply wire harnesses and inverters, each of which are used in our electrified powertrain solutions.

source all components and assemble them into systems which are sent to our upfitter partners.

These upfitter partners then install

and commission our electrified powertrain solutions.

While these arrangements can lower operating costs and enable rapid increases

in installations, they also reduce our direct control over installation.

Such diminished control may have an adverse effect on

the quality or quantity of products or services, or our flexibility to respond to changing conditions.

We rely on single-source

suppliers to supply and produce certain components and rely on upfitter partners for installation of our electrified powertrain

Any failure of these suppliers or partners to perform could require us to seek alternative suppliers or to expand our

production capabilities, which could incur additional costs and have a negative impact on our cost or supply of components or finished

In addition, production, logistics in supply or production areas, or transit to final destinations can be disrupted for

a variety of reasons including, but not limited to, natural and man-made disasters, information technology system failures, commercial

disputes, military actions, economic, business, labor, environmental, public health or political issues or international trade

We, along with our supply chain and

upfitter partners, have limited experience to date in high volume production of our electrified powertrain solutions.

know if the sources of component supply and/or upfitters at scale will remain reliable to enable us to meet the quality, price,

engineering, design and production standards, as well as the production volumes, required to successfully mass market our electrified

powertrain solutions.

Even if we and our upfitter partners are successful in developing our high volume production capability and

processes and in reliably sourcing our component supply, we do not know whether we will be able to do so in a manner that avoids

significant delays and cost overruns, including as a result of factors beyond our control such as problems with suppliers and vendors,

or in time to meet our vehicle commercialization schedules or to satisfy the requirements of customers.

Any failure to develop

such production processes and capabilities within our projected costs and timelines could have a material adverse effect on our

We further rely on other third parties to

supply batteries, wire harnesses and inverters, each of which are used in our electrified powertrain solutions.

We currently source all

components and assemble them into systems which are sent to our upfitter partners.

These upfitter partners then install and commission

our electrified powertrain solutions.

While these arrangements can lower operating costs and enable rapid increases in installations,

they also reduce our direct control over installation.

Such diminished control may have an adverse effect on the quality or quantity of

products or services, or our flexibility to respond to changing conditions.

We rely on single-source suppliers to supply

and produce certain components and rely on upfitter partners for installation of our electrified powertrain solutions.

Any failure of

these suppliers or partners to perform could require us to seek alternative suppliers or to expand our production capabilities, which

could incur additional costs and have a negative impact on our cost or supply of components or finished goods.

In addition, production,

logistics in supply or production areas, or transit to final destinations can be disrupted for a variety of reasons including, but not

limited to, natural and man-made disasters, information technology system failures, commercial disputes, military actions, economic, business,

labor, environmental, public health or political issues or international trade disputes.

We, along with our supply chain and upfitter partners,

have limited experience to date in high volume production of our electrified powertrain solutions.

We do not know if the sources of component

supply and/or upfitters at scale will remain reliable to enable us to meet the quality, price, engineering, design and production standards,

as well as the production volumes, required to successfully mass market our electrified powertrain solutions.

Even if we and our upfitter

partners are successful in developing our high volume production capability and processes and in reliably sourcing our component supply,

we do not know whether we will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of

factors beyond our control such as problems with suppliers and vendors, or in time to meet our vehicle commercialization schedules or

to satisfy the requirements of customers.

Any failure to develop such production processes and capabilities within our projected costs

and timelines could have a material adverse effect on our business, prospects, financial condition and operating results.

We may experience significant delays in the design, production and

launch of our electrified powertrain solutions, which could harm our business, prospects, financial condition and operating results.

Any delay in the financing, design, production

and launch of our electrified powertrain solutions could materially damage our brand, business, prospects, financial condition and operating

There are often delays in the design, production and commercial release of new products, and to the extent these delays postpone

the launch of new electrified powertrain solutions, our growth prospects could be adversely affected as we may fail to grow our market

We integrate electrified solutions into OEM vehicles, and if the OEM makes unexpected changes to the function of the vehicle, this

could significantly delay the development and therefore launch of our electrified powertrain solutions.

We will rely on upfitter partners

to install our electrified powertrain solutions, and if they are not able to produce product at scale or meet our specifications, we may

need to expand our production capabilities, which would cause us to incur additional costs.

Furthermore, 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, and to the

extent they experience any delays, we may need to seek alternative suppliers.

If we experience delays by our suppliers, we could experience

delays in delivering on our timelines.

If we are unable to successfully produce our electrified powertrain

solutions, our business will be harmed.

There are numerous potential ways we could

be unable to produce our electrified powertrain solutions.

Our suppliers’ production facilities, which are used to produce components

for our electrified powertrain solutions, would be costly to replace and could require substantial lead time to replace and qualify for

Our suppliers’ production facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes,

flooding, fire and power outages, or by health epidemics, such as the recent COVID-19 pandemic, which may render it difficult or impossible

for us to produce our electrified powertrain solutions for some period of time.

The inability to produce our electrified powertrain solutions

or the backlog that could develop if our production facilities and the production facilities of our outsourcing partners and suppliers

are inoperable for even a short period of time may result in the loss of customers or harm our reputation.

Although we maintain insurance

for damage to our property and the disruption of our business, this insurance may not be sufficient to cover all of our potential losses

and may not continue to be available to our on acceptable terms, if at all.

We are dependent on vehicle OEMs, upfitters and body builders to

bring our electrified powertrain solutions to market, all of which are subject to risks.

Because we do not manufacture complete vehicles,

we are dependent on vehicle OEMs and body builders to provide vehicle chassis for our electrified powertrain solutions.

We rely on upfitters

for the installation of our electrified powertrain solutions.

Reliance on OEMs, body builders and upfitters for the production and installation

of our electrified powertrain solutions is subject to risks with respect to operations that are outside our control.

By way of example,

the current global microchip shortage significantly limited the availability of chassis from several vehicle OEMs in the current year.

If OEMs or body builders are not able to produce vehicle chassis and provide them to us or upfitters, or a change in governmental regulations

or policies occurs, we would need to develop our own vehicle on which to install our electrified powertrain solutions.

Either case could

have a negative impact on our ability to sell our electrified powertrain solutions at anticipated prices or margins or in expected timeframes.

Additionally, we may permit returns of vehicles installed with our electrified powertrain solutions, which may result in significant additional

costs to us if we are required to convert the vehicles back to their original form.

There is risk of potential disputes with our upfitters,

and we could be affected by negative publicity related to our upfitter partners whether or not such publicity is related to their collaboration

Our ability to successfully build a premium brand could also be adversely affected by perceptions about the quality of our upfitter

partners’ workmanship.

In addition, although we are involved in each step of the supply chain, production and installation processes,

because we also rely on our upfitter partners and suppliers to meet our quality standards, there can be no assurance that the final product

will meet expected quality standards.

We may be unable to enter into new agreements or extend

existing agreements with upfitter partners on terms and conditions acceptable to us and therefore may need to contract with other third

parties or significantly add to our own production capacity.

There can be no assurance that in such event we would be able to engage other

third parties or establish or expand our own production capacity to meet our needs on acceptable terms or at all.

The expense and time

required to complete any transition, and to assure that our electrified powertrain solutions produced at facilities of new producers comply

with our quality standards and regulatory requirements, may be greater than anticipated.

Any of the foregoing could adversely affect our

business, prospects, financial condition and operating results.

We may experience significant delays in the design,

production and launch of our electrified powertrain solutions, which could harm our business, prospects, financial condition and

Our ability to sell electrified powertrain

solutions depends on compatibility with various OEM vehicle models and characteristics.

The pace of change of these models and changing

model availability is outside of our control and could create adverse conditions and materially affect our financial results.

We are dependent on our suppliers, some of which are single or limited

source suppliers, and the inability of these suppliers to deliver necessary components of our systems for powertrains at prices and volumes,

performance and specifications acceptable to us could have a material adverse effect on our business, prospects, financial condition and

operating results.

Any delay in the financing,

design, production and launch of our electrified powertrain solutions could materially damage our brand, business, prospects, financial

condition and operating results.

There are often delays in the design, production and commercial release of new products, and to

the extent these delays postpone the launch of our electrified powertrain solutions, our growth prospects could be adversely affected

as we may fail to grow our market share.

We integrate electrified solutions into OEM vehicles, and if the OEM makes unexpected

changes to the function of the vehicle, this could significantly delay the development and therefore launch of our electrified

powertrain solutions.

We will rely on upfitter partners to install our electrified powertrain solutions, and if they are not able

to produce product at scale or meet our specifications, we may need to expand our production capabilities, which would cause us

to incur additional costs.

Furthermore, 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, and to the extent they experience any delays, we may need to seek alternative

If we experience delays by our suppliers, we could experience delays in delivering on our timelines.

If we are unable to successfully produce our electrified

powertrain solutions, our business will be harmed.

There are numerous potential

ways we could be unable to produce our electrified powertrain solutions.

Our suppliers’

production facilities, which are

used to produce components for our electrified powertrain solutions, would be costly to replace and could require substantial lead

time to replace and qualify for use.

Our suppliers’

production facilities may be harmed or rendered inoperable by natural

or man-made disasters, including earthquakes, flooding, fire and power outages, or by health epidemics, such as the recent COVID-19

pandemic, which may render it difficult or impossible for us to produce our electrified powertrain solutions for some period of

The inability to produce our electrified powertrain solutions or the backlog that could develop if our production facilities

and the production facilities of our outsourcing partners and suppliers are inoperable for even a short period of time may result

in the loss of customers or harm our reputation.

Although we maintain insurance for damage to our property and the disruption of

our business, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to

our on acceptable terms, if at all.

We are dependent on vehicle OEMs, upfitters and body

builders to bring our electrified powertrain solutions to market, all of which are subject to risks.

Because we do not manufacture

complete vehicles, we are dependent on vehicle OEMs and body builders to provide vehicle chassis for our electrified powertrain

We rely on upfitters for the installation of our electrified powertrain solutions.

Reliance on OEMs, body builders and

upfitters for the production and installation of our electrified powertrain solutions is subject to risks with respect to operations

that are outside our control.

By way of example, the current global microchip shortage has begun to limit the availability of

chassis from several vehicle OEMs in the current year.

If OEMs or body builders are not able to produce vehicle chassis and provide

them to us or upfitters, or a change in governmental regulations or policies occurs, we would need to develop our own vehicle on

which to install our electrified powertrain solutions.

Either case could have a negative impact on our ability to sell our

electrified powertrain solutions at anticipated prices or margins or in expected timeframes.

Additionally, we may permit returns of

vehicles installed with our electrified powertrain solutions, which may result in significant additional costs to us if we are

required to convert the vehicles back to their original form.

There is risk of potential disputes with our upfitters, and we could

be affected by negative publicity related to our upfitter partners whether or not such publicity is related to their collaboration

Our ability to successfully build a premium brand could also be adversely affected by perceptions about the quality of our

upfitter partners’

In addition, although we are involved in each step of the supply chain, production and

installation processes, because we also rely on our upfitter partners and suppliers to meet our quality standards, there can be no

assurance that the final product will meet expected quality standards.

We may be unable to enter into new agreements

or extend existing agreements with upfitter partners on terms and conditions acceptable to us and therefore may need to contract

with other third parties or significantly add to our own production capacity.

There can be no assurance that in such event we would

be able to engage other third parties or establish or expand our own production capacity to meet our needs on acceptable terms

The expense and time required to complete any transition, and to assure that our electrified powertrain solutions produced

at facilities of new producers comply with our quality standards and regulatory requirements, may be greater than anticipated.

Any of the foregoing could adversely affect our business, prospects, financial condition and operating results.

Our ability to sell electrified

powertrain solutions depends on compatibility with various OEM vehicle models and characteristics.

The pace of change of these

models and changing model availability is outside of our control and could create adverse conditions and materially affect our

financial results.

We are dependent on our suppliers, some of which

are single or limited source suppliers, and the inability of these suppliers to deliver necessary components of our systems for

powertrains at prices and volumes, performance and specifications acceptable to us could have a material adverse effect on our

business, prospects, financial condition and operating results.

We rely on third-party

suppliers for the provision and development of certain key components and materials used in our electrified powertrain solutions.

While we plan to obtain components from multiple sources whenever possible, some of the critical components used in our vehicles

will be purchased by us from a single source or a limited number of sources.

For example, we purchase all of our motors from a

single supplier, Parker Hannifin Corporation.

Our third-party suppliers

may not be able to meet their product specifications and performance characteristics, which would impact our ability to achieve

our product specifications and performance characteristics as well.

Additionally, our third-party suppliers may be unable to obtain

required certifications for their products which we plan to use or provide warranties that are necessary for our solutions.

we are unable to obtain components and materials used in our electrified powertrain solutions from our suppliers or if our suppliers

decide to create or supply a competing product, our business could be adversely affected.

While we believe that we may be able

to establish alternate supply relationships and can obtain or engineer replacement components for our single source components,

we may be unable to do so in the short term (or at all) or at prices or quality levels that are favorable to us, which could have

a material adverse effect on our business, prospects, financial condition and operating results.

Our manufacturing operations are

dependent upon third-party suppliers, including, in certain cases, single-source suppliers, making us vulnerable to supply shortages .

Third-party suppliers provide us with

raw materials, parts and manufactured components (“Third Party Supplies”).

Any delay in receiving Third Party Supplies

could impair our ability to deliver products to our customers and, accordingly, could have an adverse effect on our business,

financial condition, results of operations, and cash flows.

The volatility in the financial markets and uncertainty in the automotive

sector could result in exposure related to the financial viability of certain of our suppliers.

Suppliers may also exit certain

business lines, causing us to find other suppliers for materials or components.

Finding new suppliers could potentially delay

our ability to timely deliver products to customers and such new suppliers may also change the terms on which they are willing

to provide products to us, any of which could adversely affect our financial condition and results of operations.

many of our suppliers have unionized workforces that could be subject to work stoppages as a result of labor relations issues.

The outbreak of COVID-19 resulted in work stoppages at certain suppliers that are part of our supply chain.

The ongoing impact

of the COVID-19 pandemic could result in additional work stoppages at our suppliers in the future.

All manufacturing operations

at our plants are subject to change based on market conditions, component supplier disruptions, government regulations, and the

continued spread and impact of the COVID-19 pandemic.

If work stoppages were to be implemented, there could be resulting supply

shortages that could impact our ability to deliver our products to our customers on schedule and, accordingly, could have an adverse

effect on our business, financial condition, results of operations, and cash flows.

Some of our suppliers are the sole source

for a particular supply item (e.g., the majority of motors, certain batteries, and inverters) and cannot be quickly or inexpensively

re-sourced to another supplier due to long lead times and contractual commitments that might be required by another supplier in

order to provide the component or materials.

Even as production resumes by us and our suppliers, production volumes may be volatile

and we may need to modify our production environment to ensure the health and safety of our workers and customers.

If we are unsuccessful

in managing a re-start of our production, our results of operations may be materially affected.

In addition to the risks described

above regarding interruption of Third Party Supplies, which are exacerbated in the case of single-source suppliers, the exclusive

supplier of a component potentially could exert significant bargaining power over price, quality, warranty claims or other terms

relating to a component.

Additionally, our suppliers may prioritize their resources for any long-term commitments to third parties

or larger customers and to our detriment.

We may not be in a position to find alternate suppliers in a timely manner to continue

to operate consistent with our obligations to or expectations of our customers.

Our future growth is dependent upon the fleet industry’s

willingness to adopt xEVs.

Our growth is highly dependent upon

the adoption of xEVs by the commercial and municipal fleet industry.

If the market for xEVs and our electrified powertrain solutions

does not develop at the rate or in the manner or to the extent that we expect, or if critical assumptions we have made regarding

the efficiency of our electrified powertrain solutions are incorrect or incomplete, our business, prospects, financial condition

and operating results will be harmed.

The fleet market for xEVs is characterized by rapidly changing technologies, price competition,

numerous competitors including OEMs, evolving government regulation and industry standards and uncertain customer demands and behaviors.

Factors that may influence the fleet

market adoption of xEVs vehicles include:

perceptions about xEV quality, safety, design, performance, reliability and cost, especially if adverse events or accidents occur that are linked to the quality or safety of xEVs;

the perceived willingness of vehicle OEMs to honor factory warranties on vehicles equipped with our powertrain

perceptions about vehicle safety in general, including the use of advanced technology, such as vehicle electronics, batteries and regenerative braking systems;

the decline of vehicle efficiency and/or range resulting from deterioration over time in the ability of the battery to hold a charge;

changes or improvements in the fuel economy of internal combustion engines, the vehicle and the vehicle controls or competitors’

electrified systems;

the availability of service, charging and fueling and other associated costs for xEVs;

volatility in the cost of energy, electricity, oil and gasoline could affect buying decisions;

government regulations and economic incentives promoting

fuel efficiency and alternate forms of energy, including new regulations mandating zero tailpipe emissions compared to overall

carbon reduction;

the availability of tax and other governmental incentives to purchase and operate xEVs or future regulation requiring increased use of nonpolluting trucks;

macroeconomic factors.

As an example, the market price of

oil has dropped since January 2020, and it is unknown to what extent any corresponding decreases in the cost of fuel may impact

the market for xEVs.

Moreover, travel restrictions and social distancing efforts in response to the COVID-19 pandemic may negatively

impact the commercial fleet industry, for an unknown, but potentially lengthy, period of time.

Additionally, we may become subject

to regulations that may require us to alter the design of our electrified powertrain solutions, which could negatively impact customer

interest in our products.

We may in the future experience additional competition

in current and potential future markets.

We work closely with traditional vehicle

manufacturers to provide electrification solutions for their standard gas-powered vehicles.

As a result, we have historically considered

our relationship to such companies to be that of a market partner as opposed to a competitor.

But as the vehicle electrification

market continues to expand, traditional vehicle manufacturers may develop and market xEV solutions in larger vehicles or all electric

versions of the same vehicles being deployed with our systems.

In particular, Tesla, Inc.

(“Tesla”), Hyliion, Inc.

(“Hyliion”) and Nikola Corporation (“Nikola”) have announced their plans to bring Class 8 long haul

battery electric vehicles and fuel cell electric vehicles to the market over the coming years.

Cummins Inc., Daimler AG, Dana Incorporated,

Navistar International Corporation, PACCAR Inc., Volvo Group, XOS Trucks and other commercial vehicle manufacturers have also announced

their plans to bring Class 8 battery electric vehicles or fuel cell electric vehicles to the market.

In the event that traditional vehicle

manufacturers develop xEV solutions that compete with vehicles outfitted with our electrification solutions, we will experience

increased industry competition.

Competitors may be able to deploy greater resources to the design, development, manufacturing,

distribution, promotion, sales, marketing and support of their electric vehicles.

Additionally, such competitors may have greater

name recognition, longer operating histories, larger sales forces, broader customer and industry relationships and other resources

We may experience competition with respect to recruiting and retaining qualified research and development, sales, marketing

and management personnel, as well as further competition in acquiring technologies complementary to, or necessary for, our products.

Additional mergers and acquisitions may result in even more resources being concentrated in our competitors.

There are no assurances

that customers will choose our electrified systems or vehicles over those of our competitors, and future competition could have

a material adverse effect on our business, financial condition and results of operations.

We, the OEMs and our suppliers are subject to substantial

regulation, and unfavorable changes to, or failure by us, the OEMs or our suppliers to comply with, these regulations could substantially

harm our business and operating results.

Our electrified powertrain solutions,

and the sale of motor vehicles in general, are subject to substantial regulation under international, federal, state and local

OEMs and our suppliers also are currently, or may in the future, become subject to such regulations.

We rely on third-party suppliers for the

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

While we plan to obtain

components from multiple sources whenever possible, some of the critical components used in our vehicles will be purchased by us from

a single source or a limited number of sources.

For example, we purchase all of our motors from a single supplier, Parker Hannifin Corporation.

Our third-party suppliers may not be

able to meet their product specifications and performance characteristics, which would impact our ability to achieve our product

specifications and performance characteristics as well.

Additionally, our third-party suppliers may be unable to obtain required

certifications for their products which we plan to use or provide warranties that are necessary for our solutions.

If we are unable

to obtain components and materials used in our electrified powertrain solutions from our suppliers or if our suppliers decide to

create or supply a competing product, our business could be adversely affected.

While we believe that we may be able to establish

alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable

to do so in the short term (or at all) or at prices or quality levels that are favorable to us, which could have a material adverse

effect on our business, prospects, financial condition and operating results.

Our manufacturing operations are dependent upon third-party suppliers,

including, in certain cases, single-source suppliers, making us vulnerable to supply shortages.

Third-party suppliers provide us with raw materials,

parts and manufactured components (“Third Party Supplies”).

Any delay in receiving Third Party Supplies could impair our

ability to deliver products to our customers and, accordingly, could have an adverse effect on our business, financial condition, results

of operations, and cash flows.

The volatility in the financial markets and uncertainty in the automotive sector could result in exposure

related to the financial viability of certain of our suppliers.

Suppliers may also exit certain business lines, causing us to find other

suppliers for materials or components.

Finding new suppliers could potentially delay our ability to timely deliver products to customers

and such new suppliers may also change the terms on which they are willing to provide products to us, any of which could adversely affect

our financial condition and results of operations.

In addition, many of our suppliers have unionized workforces that could be subject

to work stoppages as a result of labor relations issues.

The outbreak of COVID-19 resulted in work stoppages at certain suppliers that

are part of our supply chain.

The ongoing impact of the COVID-19 pandemic could result in additional work stoppages at our suppliers

in the future.

All manufacturing operations at our plants are subject to change based on market conditions, component supplier disruptions,

government regulations, and the continued spread and impact of the COVID-19 pandemic.

If work stoppages were to be implemented, there

could be resulting supply shortages that could impact our ability to deliver our products to our customers on schedule and, accordingly,

could have an adverse effect on our business, financial condition, results of operations, and cash flows.

Some of our suppliers are the

sole source for a particular supply item (e.g., the majority of motors, certain batteries, and inverters) and cannot be quickly or inexpensively

re-sourced to another supplier due to long lead times and contractual commitments that might be required by another supplier in order

to provide the component or materials.

Even as production resumes by us and our suppliers, production volumes may be volatile and we

may need to modify our production environment to ensure the health and safety of our workers and customers.

If we are unsuccessful in

managing a re-start of our production, our results of operations may be materially affected.

In addition to the risks described above

regarding interruption of Third Party Supplies, which are exacerbated in the case of single-source suppliers, the exclusive supplier

of a component potentially could exert significant bargaining power over price, quality, warranty claims or other terms relating to a

Additionally, our suppliers may prioritize their resources for any long-term commitments to third parties or larger customers

and to our detriment.

We may not be in a position to find alternate suppliers in a timely manner to continue to operate consistent with

our obligations to or expectations of our customers.

We, the OEMs and our suppliers are subject

to substantial regulation, and unfavorable changes to, or failure by us, the OEMs or our suppliers to comply with, these regulations could

substantially harm our business and operating results.

Our electrified powertrain solutions, and the sale

of motor vehicles in general, are subject to substantial regulation under international, federal, state and local laws.

OEMs and our suppliers

also are currently, or may in the future, become subject to such regulations.

Our energy efficiency and infrastructure business is subject

to regulation and funding for projects can be through rebates and incentives, which evolve over time and are complex.

We continue to evaluate

requirements for licenses, approvals, certificates and governmental authorizations necessary to manufacture, sell or service our

electrified powertrain solutions in the jurisdictions in which we plan to operate and intend to take such actions necessary to

We may experience difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental

authorizations necessary to manufacture, sell or service our electrified powertrain solutions in any of these jurisdictions.

we, OEMs or our suppliers are unable to obtain or comply with any of the licenses, approvals, certifications or other governmental

authorizations necessary to carry out our operations in the jurisdictions in which they currently operate, or those jurisdictions

in which they plan to operate in the future, our business, prospects, financial condition and operating results could be materially

adversely affected.

We expect to incur significant costs in complying with these regulations.

Regulations related to the vehicle

industry are evolving and we face risks associated with changes to these regulations, including but not limited to:

requirements for licenses, approvals, certificates and governmental authorizations necessary to manufacture, sell or service our electrified

powertrain solutions in the jurisdictions in which we plan to operate and intend to take such actions necessary to comply.

We may experience

difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental authorizations necessary

to manufacture, sell or service our electrified powertrain solutions in any of these jurisdictions.

If we, OEMs or our suppliers are unable

to obtain or comply with any of the licenses, approvals, certifications or other governmental authorizations necessary to carry out our

operations in the jurisdictions in which they currently operate, or those jurisdictions in which they plan to operate in the future, our

business, prospects, financial condition and operating results could be materially adversely affected.

We expect to incur significant

costs in complying with these regulations.

Regulations related to the vehicle industry are evolving and we face risks associated with

changes to these regulations, including but not limited to:

increased subsidies for corn and ethanol production, which could reduce the operating cost of vehicles that use ethanol or a combination of ethanol and gasoline;

2 unchanged sentences

To the extent the laws change, our electrified

powertrain solutions and our suppliers’

products may not comply with applicable international, federal, state or local laws,

which would have an adverse effect on our business.

Compliance with changing regulations could be burdensome, time consuming and

To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and

operating results would be adversely affected.

We are exposed to the credit risk of some of our

direct customers, which subjects us to the risk of non-payment for our products.

We distribute our electrified powertrain

solutions through a network of upfitters, OEMs and OEM dealers, some of which may not be well-capitalized and may be of a lower

credit quality.

powertrain solutions and our suppliers’ products may not comply with applicable international, federal, state or local laws, which

would have an adverse effect on our business.

Compliance with changing regulations could be burdensome, time consuming and expensive.

To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results

would be adversely affected.

We are exposed to the credit risk of some of our direct customers,

which subjects us to the risk of non-payment for our products.

We distribute our electrified powertrain solutions

through a network of upfitters, OEMs and OEM dealers, some of which may not be well-capitalized and may be of a lower credit quality.

This direct customer network subjects us to the risk of non-payment for our electrified powertrain solutions.

addition, during periods of economic downturn in the global economy, our exposure to credit risks from our direct customers may

increase, and our efforts to monitor and mitigate the associated risks may not be effective.

In the event of non-payment by one

or more direct customers, our business, financial condition and results of operations could be materially adversely affected.

We may need to raise additional funds, which may

not be available to us on favorable terms or at all.

If we cannot raise additional funds when we need them, our business, prospects,

financial condition and operating results could be negatively affected.

The design, production, sale and servicing

of our electrified powertrain solutions is capital-intensive.

We currently expect that no additional capital

will be needed to achieve profitability.

However, we may subsequently determine that additional funds are necessary earlier than

This capital may be necessary to fund our ongoing operations, continue research, development and design efforts, acquire companies or technologies and

improve infrastructure.

We may raise additional funds through the issuance of equity, equity related or debt securities or through

obtaining credit from government or financial institutions.

We cannot be certain that additional funds will be available to us on

favorable terms when required, or at all.

If we cannot raise additional funds when we need them, our business, prospects, financial

condition and operating results could be materially adversely affected.

If we are unable to establish and maintain confidence

in our long-term business prospects among customers and analysts and within our industry, or are subject to negative publicity,

then our financial condition, operating results, business prospects and access to capital may suffer materially.

Customers may be less likely to purchase

our electric powertrain solutions if they are not convinced that our business will succeed or that our service and support and

other operations will continue in the long term.

Similarly, suppliers and other third parties will be less likely to invest time

and resources in developing business relationships with us if they are not convinced that our business will succeed.

in order to build and maintain our business, we must maintain confidence among customers, suppliers, analysts, ratings agencies

and other parties in our products, long-term financial viability and business prospects.

Maintaining such confidence may be particularly

complicated by certain factors including those that are largely outside of our control, such as customer unfamiliarity with our

electric powertrain solutions, any delays in scaling production, delivery and service operations to meet demand, competition and

uncertainty regarding the future of hybrid electric vehicles or our other services and our production and sales performance compared

with market expectations.

If we are unable to address the service requirements

of our customers, our business, prospects, financial condition and operating results may be materially and adversely affected.

With further market penetration and

expansion into new markets, we plan to increase our servicing network of our electrified powertrain solutions.

Servicing xEVs is

different than servicing traditional vehicles and requires specialized skills, including high voltage training and servicing techniques.

We partner with upfitters to perform some or all of the servicing on our electrified powertrain solutions, and will need to expand

our service network.

There can be no assurance that we will be able to enter into an acceptable arrangement with any such third-party

Our customers will also depend on our customer support team to resolve technical and operational issues relating to the

integrated software underlying our electrified powertrain solutions.

Our ability to provide effective customer support is largely

dependent on our ability to attract, train and retain qualified personnel with experience in supporting customers on platforms

such as ours.

As we continue to grow, additional pressure may be placed on our customer support team, and we may be unable to respond

quickly enough to accommodate short-term increases in customer demand for technical support.

We also may be unable to modify the

future scope and delivery of our technical support to compete with changes in the technical support provided by our competitors.

Increased customer demand for support, without corresponding revenue, could increase costs and negatively affect our operating

If we are unable to successfully address the service requirements of our customers or establish a market perception that

we do not maintain high-quality support, we may be subject to claims from our customers, including loss of revenue or damages,

and our business, prospects, financial condition and operating results may be materially and adversely affected.

We are highly dependent on the services of Dimitri

Kazarinoff, our Chief Executive Officer, and Thomas (Tod) J.

Hynes III, our President, and if we are unable to retain Mr.

Hynes, attract and retain key employees and hire qualified management, technical and vehicle engineering personnel,

our ability to compete could be harmed.

Our success depends, in part, on our

ability to retain our key personnel.

We are highly dependent on the services of Dimitri N.

Kazarinoff, our Chief Executive Officer,

and Tod Hynes, our President.

Kazarinoff and Mr.

Hynes are the source of many, if not most, of the ideas and execution

driving our company.

Kazarinoff or Mr.

Hynes were to discontinue their service to us due to death, disability

or any other reason, we would be significantly disadvantaged.

The unexpected loss of or failure to retain one or more of our key

employees could adversely affect our business.

Our success also depends, in part, on

our continuing ability to identify, hire, attract, train and develop other highly qualified personnel.

Experienced and highly skilled

employees are in high demand and competition for these employees can be intense, and our ability to hire, attract and retain them

depends on our ability to provide competitive compensation.

We may not be able to attract, assimilate, develop or retain qualified

personnel in the future, and our failure to do so could adversely affect our business, including the execution of our global business

We do not maintain, and we do not expect to maintain in the future, key man life insurance policies with respect to Dimitri

Kazarinoff or Tod Hynes.

Any failure by our management team and our employees to perform as expected may have a material adverse

effect on our business, prospects, financial condition and operating results.

We face significant barriers to enter new markets,

and if we cannot successfully overcome those barriers, our business will be negatively impacted.

The commercial trucking industry has

traditionally been characterized by significant barriers to entry, including the ability to meet performance requirements or industry

specifications, acceptance by OEMs and end users, investment costs of design and production, the need for specialized design and

development expertise, regulatory requirements, establishing a brand name and image and the need to establish sales capabilities.

If we are not able to overcome these barriers, our business, prospects, financial condition and operating results will be negatively

impacted and our ability to grow our business will be harmed.

Future product recalls could materially adversely

affect our business, prospects, financial condition and operating results.

In 2019 we experienced two recalls that

were subsequently remediated.

In the future, we may voluntarily or involuntarily initiate a recall if any of our products (including

the batteries we design, develop and include in our systems) prove to be defective or noncompliant with applicable federal motor

vehicle safety standards.

Such recalls involve significant expense and diversion of management attention and other resources, which

could adversely affect our brand image, as well as our business, prospects, financial condition and operating results.

Increases in costs, disruption of supply or shortage

of our components, particularly battery cells, could harm our business.

In the production of our electrified

powertrain solutions, we have experienced, and in the future may again experience, increases in the cost or a sustained interruption

in the supply or shortage of our components.

Any such increase or supply interruption could materially negatively impact our business,

We sell our energy efficiency

services to both commercial and municipal customers, and in many cases funding is provided under utility provided incentives.

credit risk in collecting from these customers.

In addition, during periods of economic downturn in the global economy, our exposure to

credit risks from our direct customers may increase, and our efforts to monitor and mitigate the associated risks may not be effective.

In the event of non-payment by one or more direct customers, our business, financial condition and results of operations could be materially

adversely affected.

We may need to raise additional funds, which may not be available

to us on favorable terms or at all.

If we cannot raise additional funds when we need them, our business, prospects, financial condition

and operating results could be negatively affected.

The design, production, sale and servicing of our

electrified powertrain solutions and other businesses we may enter into is capital-intensive.

We may raise additional funds through the

issuance of equity, equity related or debt securities or through obtaining credit from government or financial institutions.

be certain that additional funds will be available to us on favorable terms when required, or at all.

If we cannot raise additional funds

when we need them, our business, prospects, financial condition and operating results could be materially adversely affected.

If we are unable to establish and maintain confidence in our long-term

business prospects among customers and analysts and within our industry, or are subject to negative publicity, then our financial condition,

operating results, business prospects and access to capital may suffer materially.

Customers may be less likely to purchase our products

and services if they are not convinced that our business will succeed or that our service and support and other operations will continue

in the long term.

Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business

relationships with us if they are not convinced that our business will succeed.

Accordingly, in order to build and maintain our business,

we must maintain confidence among customers, suppliers, analysts, ratings agencies and other parties in our products, long-term financial

viability and business prospects.

Maintaining such confidence may be particularly complicated by certain factors including those that

are largely outside of our control, such as customer unfamiliarity with our electric powertrain solutions, any delays in scaling production,

delivery and service operations to meet demand, competition and uncertainty regarding the future of our products or our other services

and our production and sales performance compared with market expectations.

If we are unable to address the service requirements of our customers,

our business, prospects, financial condition and operating results may be materially and adversely affected.

With further market penetration and expansion into

new markets, we may increase our servicing network of our electrified powertrain solutions.

Servicing xEVs is different than servicing

traditional vehicles and requires specialized skills, including high voltage training and servicing techniques.

We partner with upfitters

to perform some or all of the servicing on our electrified powertrain solutions, and will need to expand our service network.

be no assurance that we will be able to enter into an acceptable arrangement with any such third-party provider.

Our customers will also

depend on our customer support team to resolve technical and operational issues relating to the integrated software underlying our electrified

powertrain solutions.

Our ability to provide effective customer support is largely dependent on our ability to attract, train and retain

qualified personnel with experience in supporting customers on platforms such as ours.

As we continue to grow, additional pressure may

be placed on our customer support team, and we may be unable to respond quickly enough to accommodate short-term increases in customer

demand for technical support.

We also may be unable to modify the future scope and delivery of our technical support to compete with changes

in the technical support provided by our competitors.

Increased customer demand for support, without corresponding revenue, could increase

costs and negatively affect our operating results.

If we are unable to successfully address the service requirements of our customers

or establish a market perception that we do not maintain high-quality support, we may be subject to claims from our customers, including

loss of revenue or damages, and our business, prospects, financial condition and operating results may be materially and adversely affected.

We are highly dependent on the services of Eric Tech, our Chief

Executive Officer, and if we are unable to retain Mr.

Tech, attract and retain key employees and hire qualified management, technical

and vehicle engineering personnel, our ability to compete could be harmed.

Our success depends, in part, on our ability to retain

our key personnel.

We are highly dependent on the services of Eric Tech, our Chief Executive Officer.

Tech is the source of many of

the ideas and execution driving our company.

Tech were to discontinue his service to us due to death, disability or any other reason,

we would be significantly disadvantaged.

The unexpected loss of or failure to retain one or more of our key employees could adversely

affect our business.

Our success also depends, in part, on our continuing

ability to identify, hire, attract, train and develop other highly qualified personnel.

Experienced and highly skilled employees are

in high demand and competition for these employees can be intense, and our ability to hire, attract and retain them depends on our ability

to provide competitive compensation.

We may not be able to attract, assimilate, develop or retain qualified personnel in the future,

and our failure to do so could adversely affect our business, including the execution of our global business strategy.

We do not maintain,

and we do not expect to maintain in the future, key man life insurance policies with respect to Eric Tech.

Any failure by our management

team and our employees to perform as expected may have a material adverse effect on our business, prospects, financial condition and

operating results.

We face significant barriers to enter new markets, and if we

cannot successfully overcome those barriers, our business will be negatively impacted.

The commercial trucking industry has traditionally

been characterized by significant barriers to entry, including the ability to meet performance requirements or industry specifications,

acceptance by OEMs and end users, investment costs of design and production, the need for specialized design and development expertise,

regulatory requirements, establishing a brand name and image and the need to establish sales capabilities.

If we are not able to overcome

these barriers, our business, prospects, financial condition and operating results will be negatively impacted and our ability to grow

our business will be harmed.

Future product recalls could materially adversely affect our

business, prospects, financial condition and operating results.

In 2019 we experienced two recalls that were

subsequently remediated.

During 2021, we incurred additional warranty claims for our electrified powertrain solutions.

In the future,

we may voluntarily or involuntarily initiate a recall if any of our products (including the batteries we design, develop and include

in our systems) prove to be defective or noncompliant with applicable federal motor vehicle safety standards.

Such recalls involve significant

expense and diversion of management attention and other resources, which could adversely affect our brand image, as well as our business,

prospects, financial condition and operating results.

The prices for our components fluctuate depending on market conditions and

global demand and could adversely affect our business, prospects, financial condition and operating results.

For instance, we are

exposed to multiple risks relating to price fluctuations for battery cells.

Increases in costs, disruption of supply or shortage of our

components, particularly battery cells, could harm our business.

In the production of our electrified powertrain

solutions, we have experienced, and in the future may again experience, increases in the cost or a sustained interruption in the supply

or shortage of our components.

Any such increase or supply interruption could materially negatively impact our business, prospects, financial

condition and operating results.

The prices for our components fluctuate depending on market conditions and global demand and could adversely

affect our business, prospects, financial condition and operating results.

For instance, we are exposed to multiple risks relating to

price fluctuations for battery cells.

These risks include:

the inability or unwillingness of current battery manufacturers to build or operate battery cell production facilities to supply the numbers of battery cells required to support the growth of the electric vehicle industry as demand for such cells increases;

disruption in the supply of cells due to quality issues or recalls by the battery cell manufacturers;

an increase in the cost of raw materials.

Any disruption in the supply of battery

cells could temporarily disrupt production of our electrified powertrain solutions until a different supplier is fully qualified.

Moreover, battery cell manufacturers may refuse to supply electric vehicle manufacturers if they determine that the vehicles are

not sufficiently safe.

Furthermore, fluctuations or shortages in petroleum and other economic conditions have in the past and may

again in the future cause us to experience significant increases in freight charges.

Substantial increases in the prices for raw

materials have in the past and may again in the future increase the cost of our components and consequently, the costs of products.

There can be no assurance that we will be able to recoup increasing costs of our components by increasing prices, which could reduce

Vehicles equipped with our electrified powertrain

solutions will make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.

The battery packs within our electrified

powertrain solutions will make use of lithium-ion cells.

On rare occasions, lithium-ion cells can rapidly release the energy they

contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells.

battery pack is designed to contain any single cell’s release of energy without spreading to neighboring cells, a field or

testing failure of our vehicles or other battery packs that we produce could occur, which could subject us to lawsuits, product

recalls, or redesign efforts, all of which would be time consuming and expensive.

Also, negative public perceptions regarding the

suitability of lithium-ion cells for automotive applications or any future incident involving lithium-ion cells, such as a vehicle

or other fire, even if such incident does not involve our vehicles, could seriously harm our business and reputation.

In addition, we store battery packs

in our facility prior to sending such battery packs to upfitters for installation on vehicles.

Any mishandling of battery cells

may cause disruption to the operation of our facilities.

While we have implemented safety procedures related to the handling of

the cells, a safety issue or fire related to the cells could disrupt our operations.

Such damage or injury could lead to adverse

publicity and potentially a safety recall.

Moreover, any failure of a competitor’s electric vehicle or energy storage product

may cause indirect adverse publicity for us and our products.

Such adverse publicity could negatively affect our brand and harm

our business, prospects, financial condition and operating results.

We have been, and may in the future be, adversely

affected by the global COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict,

which may significantly harm our business, prospects, financial condition and operating results.

There has been a widespread worldwide

impact from the COVID-19 pandemic, and we have been, and may in the future be, adversely affected as a result.

Numerous government

regulations and public advisories, as well as shifting social behaviors, have temporarily limited or closed non-essential transportation,

government functions, business activities and person-to-person interactions, and the duration of such trends is difficult to predict.

Reduced operations and production line shutdowns at vehicle OEMs due to COVID-19, limitations on travel by our personnel and personnel

of our customers, and future delays or shutdowns of vehicle OEMs or our suppliers could impact our ability to meet customer orders.

We also instituted certain temporary cost reduction measures such as reducing or deferring discretionary spending.

Our operations and timelines may also

be affected by global economic markets and levels of consumer comfort and spending, which could impact demand in the worldwide

transportation industries.

Because the impact of current conditions on an ongoing basis is yet largely unknown, is rapidly evolving

and has been varied across geographic regions, this ongoing assessment will be particularly critical to allow us to accurately

project demand and infrastructure requirements globally and deploy our workforce and other resources accordingly.

If current global

market conditions continue or worsen, or if we cannot or do not resume reduced operations at a rate commensurate with such conditions

or resume full operational capacity and are later required to or choose to reduce such operations again, our business, prospects,

financial condition and operating results could be materially harmed.

Our financial condition and results of operations

for fiscal 2021 and future periods may be adversely affected by the recent COVID-19 outbreak or other outbreak of infectious disease

or similar public health threat.

COVID-19 continues to spread globally

and has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions,

quarantines, shelter in place orders, and shutdowns.

These measures have impacted and may continue to impact our workforce and

operations, the operations of our customers, and those of our respective suppliers.

We have experienced some disruptions in supply

from some of our suppliers.

inability or unwillingness of current battery manufacturers to build or operate battery cell

production facilities to supply the numbers of battery cells required to support the growth

of the electric vehicle industry as demand for such cells increases;

in the supply of cells due to quality issues or recalls by the battery cell manufacturers;

increase in the cost of raw materials.

Any disruption in the supply of battery cells

could temporarily disrupt production of our electrified powertrain solutions until a different supplier is fully qualified.

battery cell manufacturers may refuse to supply electric vehicle manufacturers if they determine that the vehicles are not sufficiently

Furthermore, fluctuations or shortages in petroleum and other economic conditions have in the past and may again in the future

cause us to experience significant increases in freight charges.

Substantial increases in the prices for raw materials have in the past

and may again in the future increase the cost of our components and consequently, the costs of products.

There can be no assurance that

we will be able to recoup increasing costs of our components by increasing prices, which could reduce our margins.

Vehicles equipped with our electrified powertrain solutions

make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.

The battery packs within

our electrified powertrain solutions make use of lithium-ion cells.

On rare occasions, lithium-ion cells can rapidly release the

energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells.

While the battery pack is designed to contain any single cell’s release of energy without spreading to neighboring cells, a

field or testing failure of our vehicles or other battery packs that we produce could occur, which could subject us to lawsuits,

product recalls, or redesign efforts, all of which would be time consuming and expensive.

Also, negative public perceptions

regarding the suitability of lithium-ion cells for automotive applications or any future incident involving lithium-ion cells, such

as a vehicle or other fire, even if such incident does not involve our vehicles, could seriously harm our business and

In addition, we store battery packs in our facility

prior to sending such battery packs to upfitters for installation on vehicles.

Any mishandling of battery cells may cause disruption

to the operation of our facilities.

While we have implemented safety procedures related to the handling of the cells, a safety issue

or fire related to the cells could disrupt our operations.

Such damage or injury could lead to adverse publicity and potentially a safety

Moreover, any failure of a competitor’s electric vehicle or energy storage product may cause indirect adverse publicity

for us and our products.

Such adverse publicity could negatively affect our brand and harm our business, prospects, financial condition

and operating results.

We have been, and may in the future be, adversely affected by

the global COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, which may significantly

harm our business, prospects, financial condition and operating results.

There has been a widespread

worldwide impact from the COVID-19 pandemic, and we have been, and may in the future be, adversely affected as a result.

government regulations and public advisories, as well as shifting social behaviors, have temporarily limited or closed non-essential

transportation, government functions, business activities and person-to-person interactions, and the duration of such trends is

difficult to predict.

Reduced operations and production line shutdowns at vehicle OEMs due to COVID-19, limitations on travel by our

personnel and personnel of our customers, and future delays or shutdowns of vehicle OEMs or our suppliers could impact our ability

to meet customer orders.

We also instituted certain temporary cost reduction measures such as reducing or deferring discretionary

Our operations and timelines may also be affected

by global economic markets and levels of consumer comfort and spending, which could impact demand in the worldwide transportation industries.

Because the impact of current conditions on an ongoing basis is yet largely unknown, is rapidly evolving and has been varied across geographic

regions, this ongoing assessment will be particularly critical to allow us to accurately project demand and infrastructure requirements

globally and deploy our workforce and other resources accordingly.

If current global market conditions continue or worsen, or if we cannot

or do not resume reduced operations at a rate commensurate with such conditions or resume full operational capacity and are later required

to or choose to reduce such operations again, our business, prospects, financial condition and operating results could be materially

Our financial condition and results of operations for fiscal

2022 and future periods may be adversely affected by the recent COVID-19 outbreak or other outbreak of infectious disease or similar

public health threat.

COVID-19 continues to spread

globally and has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and

restrictions, quarantines, shelter in place orders, and shutdowns.

These measures have impacted and may continue to impact our

workforce and operations, the operations of our customers, and those of our respective suppliers.

We have experienced some

disruptions in supply from some of our suppliers.

Additionally, we have experienced a shift in customer demand.

There is considerable uncertainty regarding

such measures and potential future measures.

Restrictions on access to our support operations or workforce, or similar limitations

for our vendors and suppliers, and restrictions or disruptions of transportation, such as reduced availability of air transport,

port closures, and increased border controls or closures, could limit our capacity to meet customer demand, lead to increased costs

and have a material adverse effect on our financial condition and results of operations.

The outbreak has significantly increased

economic and demand uncertainty.

These uncertainties also make it more difficult for us to assess the quality of our product order

backlog and to estimate future financial results.

The current outbreak of COVID-19 has caused an economic slowdown, and it is increasingly

likely that its continued spread will lead to a global recession, which could have a material adverse effect on demand for our

products and on our financial condition and results of operations.

The spread of COVID-19 has caused us

to modify our business practices and we may take further actions as may be required by government authorities or that we determine

are in the best interests of our employees, customers, partners, and suppliers.

There is no certainty that such measures will be

sufficient to mitigate the risks posed by the virus, and our ability to perform critical functions could be harmed.

in light of concerns about the spread of COVID-19, our workforce has at times been operating at reduced levels at our facilities,

which may continue to have an adverse impact on our ability to timely meet future customer orders.

The duration of the business disruption

and related financial impact cannot be reasonably estimated at this time.

However, it may materially affect our ability to obtain

materials, deliver products in a timely manner, and it also may impair our ability to meet customer demand for products, result

in lost sales, additional costs, or penalties, or damage our reputation.

The extent to which COVID-19 or any other health epidemic

will further impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including

new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among

Additionally, we have experienced and may continue to experience demand

uncertainty as a result of COVID-19.

This demand uncertainty has continued into fiscal year 2021, with delays in the government response

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

In addition, we believe that the

impact of the global microchip shortage that the entire industry is currently experiencing will adversely impact our operating costs in

fiscal year 2021.

Given the uncertainty related to vaccination speed and rates and potential impacts of new variants of COVID-19, there

continues to be pandemic related risk to our results.

The extent to which these impacts on demand may continue, and the effect they may

have on our business and operating results, will depend upon future developments that are highly uncertain and cannot be accurately predicted.

Our insurance strategy may not be adequate to protect

us from all business risks.

considerable uncertainty regarding such measures and potential future measures.

Restrictions on access to our support operations or

workforce, or similar limitations for our vendors and suppliers, and restrictions or disruptions of transportation, such as reduced

availability of air transport, port closures, and increased border controls or closures, could limit our capacity to meet customer

demand, lead to increased costs and have a material adverse effect on our financial condition and results of operations.

The outbreak has significantly increased economic

and demand uncertainty.

These uncertainties also make it more difficult for us to assess the quality of our product order backlog and

to estimate future financial results.

The current outbreak of COVID-19 has caused an economic slowdown, and it is increasingly likely

that its continued spread will lead to a global recession, which could have a material adverse effect on demand for our products and

on our financial condition and results of operations.

The spread of COVID-19 has caused us to modify

our business practices and we may take further actions as may be required by government authorities or that we determine are in the best

interests of our employees, customers, partners, and suppliers.

There is no certainty that such measures will be sufficient to mitigate

the risks posed by the virus, and our ability to perform critical functions could be harmed.

In addition, in light of concerns about

the spread of COVID-19, our workforce has at times been operating at reduced levels at our facilities, which may continue to have an

adverse impact on our ability to timely meet future customer orders.

The duration of the business disruption and related

financial impact cannot be reasonably estimated at this time.

However, it may materially affect our ability to obtain materials, deliver

products in a timely manner, and it also may impair our ability to meet customer demand for products, result in lost sales, additional

costs, or penalties, or damage our reputation.

The extent to which COVID-19 or any other health epidemic will further impact our results

will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning

the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.

Additionally, we have experienced

and may continue to experience demand uncertainty as a result of COVID-19.

This demand uncertainty is expected to continue into fiscal

year 2022, with delays in the government response and postponements and reductions of orders of our products by both commercial and municipal

In addition, we believe that the impact of the global microchip shortage that the entire industry is currently experiencing

will adversely impact our operating results in fiscal year 2021.

Given the uncertainty related to vaccination speed and rates and potential

impacts of new variants of COVID- 19, there continues to be pandemic related risk to our results.

The extent to which these impacts on

demand may continue, and the effect they may have on our business and operating results, will depend upon future developments that are

highly uncertain and cannot be accurately predicted.

Our insurance strategy may not be adequate to protect us from

all business risks.

In the ordinary course of business,

we may be subject to losses resulting from products liability, accidents, acts of God and other claims against us, for which we

may have no insurance coverage.

While we currently carry commercial general liability, commercial automobile liability, excess

liability and workers’

compensation policies, we may not maintain sufficient insurance coverage, and in some cases, we may

not maintain any at all.

Additionally, the policies that we do have may include significant deductibles, and we cannot be certain

that our insurance coverage will be sufficient to cover all future claims against us.

A loss that is uninsured or exceeds policy

limits may require us to pay substantial amounts, which could materially adversely affect our financial condition and operating

We are or may be subject to risks associated with

strategic alliances or acquisitions and may not be able to identify adequate strategic relationship opportunities, or form strategic

relationships, in the future.

We have entered into strategic alliances,

and may in the future enter into additional strategic alliances or joint ventures or minority equity investments, in each case

with various third parties for the production of our electrified powertrain solutions as well as with other collaborators with

capabilities on data and analytics, engineering and installation channels.

These alliances subject us to a number of risks, including

risks associated with sharing proprietary information, non-performance by the third party and increased expenses in establishing

new strategic alliances, any of which may materially and adversely affect our business.

We may have limited ability to monitor

or control the actions of these third parties and, to the extent any of these strategic third parties suffers negative publicity

or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation

by virtue of our association with any such third party.

Strategic business relationships will

be an important factor in the growth and success of our business.

However, there are no assurances that we will be able to continue

to identify or secure suitable business relationship opportunities in the future or our competitors may capitalize on such opportunities

before we do.

Moreover, identifying such opportunities could require substantial management time and resources, and negotiating

and financing relationships involves significant costs and uncertainties.

If we are unable to successfully source and execute on

strategic relationship opportunities in the future, our overall growth could be impaired, and our business, prospects, financial

condition and operating results could be materially adversely affected.

When appropriate opportunities arise,

we may acquire additional assets, products, technologies or businesses that are complementary to our existing business.

to possible stockholder approval, we may need approvals and licenses from relevant government authorities for the acquisitions

and to comply with any applicable laws and regulations, which could result in increased delay and costs, and may disrupt our business

strategy if we fail to do so.

Furthermore, acquisitions and the subsequent integration of new assets and businesses into our own

require significant attention from our management and could result in a diversion of resources from our existing business, which

in turn could have an adverse effect on our operations.

Acquired assets or businesses may not generate the financial results we

expect and, given prevailing investment interest in the vehicle electrification sector, may command inflated purchase

consideration, excessive growth investment and/or generate significant near term operating losses.

Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities,

the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential

unknown liabilities of the acquired business.

we may be subject to losses resulting from products liability, accidents, acts of God and other claims against us, for which we may have

no insurance coverage.

While we currently carry commercial general liability, commercial automobile liability, excess liability and workers’

compensation policies, we may not maintain sufficient insurance coverage, and in some cases, we may not maintain any at all.

Additionally,

the policies that we do have may include significant deductibles, and we cannot be certain that our insurance coverage will be sufficient

to cover all future claims against us.

A loss that is uninsured or exceeds policy limits may require us to pay substantial amounts, which

could materially adversely affect our financial condition and operating results.

We are or may be subject to risks associated with strategic

alliances or acquisitions and may not be able to identify adequate strategic relationship opportunities, or form strategic relationships,

in the future.

We have entered into strategic alliances, and

may in the future enter into additional strategic alliances or joint ventures or minority equity investments, in each case with various

third parties for the production of our electrified powertrain solutions as well as with other collaborators with capabilities on data

and analytics, engineering and installation channels.

These alliances subject us to a number of risks, including risks associated with

sharing proprietary information, non-performance by the third party and increased expenses in establishing new strategic alliances, any

of which may materially and adversely affect our business.

We may have limited ability to monitor or control the actions of these third

parties and, to the extent any of these strategic third parties suffers negative publicity or harm to their reputation from events relating

to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.

Strategic business relationships will be an important

factor in the growth and success of our business.

However, there are no assurances that we will be able to continue to identify or secure

suitable business relationship opportunities in the future or our competitors may capitalize on such opportunities before we do.

identifying such opportunities could require substantial management time and resources, and negotiating and financing relationships involves

significant costs and uncertainties.

If we are unable to successfully source and execute on strategic relationship opportunities in the

future, our overall growth could be impaired, and our business, prospects, financial condition and operating results could be materially

adversely affected.

When appropriate opportunities arise, we may

acquire additional assets, products, technologies or businesses that are complementary to our existing business.

In addition to possible

stockholder approval, we may need approvals and licenses from relevant government authorities for the acquisitions and to comply with

any applicable laws and regulations, which could result in increased delay and costs, and may disrupt our business strategy if we fail

Furthermore, acquisitions and the subsequent integration of new assets and businesses into our own require significant attention

from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect

on our operations.

Acquired assets or businesses may not generate the financial results we expect and, given prevailing investment interest

in the vehicle electrification sector, may command inflated purchase consideration, excessive growth investment and/or generate significant

near term operating losses.

Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity

securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure

to potential unknown liabilities of the acquired business.

Moreover, the costs of identifying and consummating acquisitions may be significant.

We are subject to cybersecurity risks to operational

systems, security systems, infrastructure, integrated software in our electrified powertrain solutions and customer data processed

by our or third-party vendors or suppliers and any material failure, weakness, interruption, cyber event, incident or breach of

security could prevent us from effectively operating our business.

We are at risk for interruptions, outages

and breaches of:

(a) operational systems, including business, financial, accounting, product development, data processing

or production processes, owned by us or our third-party vendors or suppliers;

(b) facility security systems, owned by us or

our third-party vendors or suppliers;

third-party vendors or suppliers;

We are subject to cybersecurity risks to operational systems,

security systems, infrastructure, integrated software in our electrified powertrain solutions and customer data processed by our or third-party

vendors or suppliers and any material failure, weakness, interruption, cyber event, incident or breach of security could prevent us from

effectively operating our business.

We are at risk for interruptions, outages and

(a) operational systems, including business, financial, accounting, product development, data processing or production

processes, owned by us or our third-party vendors or suppliers;

(b) facility security systems, owned by us or our third-party vendors

or suppliers;

(d) the integrated software in our electrified powertrain solutions;

or (e) customer

or driver data that our processes or our third-party vendors or suppliers process on our behalf.

or (e) customer or driver data that our processes or our

third-party vendors or suppliers process on our behalf.

Such cyber incidents could:

disrupt operational systems;

result in loss of trade secrets or other proprietary or competitively sensitive information;

certain information of customers, employees, suppliers, drivers or others;

materially disrupt operational systems;

loss of trade secrets or other proprietary or competitively sensitive information;

compromise certain information of customers, employees,

suppliers, drivers or others;

jeopardize the security of our facilities;

the performance of transmission control modules or other in-product technology and the integrated software in our electrified powertrain

A cyber incident could be caused by disasters, insiders (through inadvertence or with malicious intent) or malicious

third parties (including nation-states or nation-state supported actors) using sophisticated, targeted methods to circumvent firewalls,

encryption and other security defenses, including hacking, fraud, trickery or other forms of deception.

The techniques used by

cyber attackers change frequently and may be difficult to detect for long periods of time.

Although we maintain information technology

measures designed to protect ourselves against intellectual property theft, data breaches and other cyber incidents, such measures

will require updates and improvements, and we cannot guarantee that such measures will be adequate to detect, prevent or mitigate

cyber incidents.

The implementation, maintenance, segregation and improvement of these systems requires significant management

time, support and cost.

Moreover, there are inherent risks associated with developing, improving, expanding and updating current

systems, including the disruption of our data management, procurement, production execution, finance, supply chain and sales and

service processes.

These risks may affect our ability to manage our data and inventory, procure parts or supplies or produce, sell,

deliver and service our electric powertrain solutions, adequately protect our intellectual property or achieve and maintain compliance

with, or realize available benefits under, applicable laws, regulations and contracts.

We cannot be sure that these systems upon

which we rely, including those of our third-party vendors or suppliers, will be effectively implemented, maintained or expanded

or affect the performance of transmission control modules or

other in-product technology and the integrated software in our electrified powertrain solutions.

A cyber incident could be caused by

disasters, insiders (through inadvertence or with malicious intent) or malicious third parties (including nation-states or nation-state

supported actors) using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses, including hacking,

fraud, trickery or other forms of deception.

The techniques used by cyber attackers change frequently and may be difficult to detect

for long periods of time.

Although we maintain information technology measures designed to protect ourselves against intellectual property

theft, data breaches and other cyber incidents, such measures will require updates and improvements, and we cannot guarantee that such

measures will be adequate to detect, prevent or mitigate cyber incidents.

The implementation, maintenance, segregation and improvement

of these systems requires significant management time, support and cost.

Moreover, there are inherent risks associated with developing,

improving, expanding and updating current systems, including the disruption of our data management, procurement, production execution,

finance, supply chain and sales and service processes.

These risks may affect our ability to manage our data and inventory, procure parts

or supplies or produce, sell, deliver and service our electric powertrain solutions, adequately protect our intellectual property or

achieve and maintain compliance with, or realize available benefits under, applicable laws, regulations and contracts.

We cannot be sure

that these systems upon which we rely, including those of our third-party vendors or suppliers, will be effectively implemented, maintained

or expanded as planned.

If we do not successfully implement, maintain or expand these systems as planned, our operations may be disrupted,

our ability to accurately and timely report our financial results could be impaired, and deficiencies may arise in our internal

control over financial reporting, which may impact our ability to certify our financial results.

Moreover, our proprietary information

or intellectual property could be compromised or misappropriated and our reputation may be adversely affected.

If these systems

do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative

sources for performing these functions.

A significant cyber incident could impact

production capability, harm our reputation, cause us to breach our contracts with other parties or subject us to regulatory actions

or litigation, any of which could materially affect our business, prospects, financial condition and operating results.

our insurance coverage for cyberattacks may not be sufficient to cover all the losses we may experience as a result of a cyber-incident.

We also collect, store, transmit and

otherwise process customer, driver and employee and others’

data as part of our business and operations, which may include

personal data or confidential or proprietary information.

We also work with partners and third-party service providers or vendors

that collect, store and process such data on our behalf and in connection with our products and services.

There can be no assurance

that any security measures that we or our third-party service providers or vendors have implemented will be effective against current

or future security threats.

While we have developed systems and processes designed to protect the availability, integrity, confidentiality

and security of our and our customers’, drivers’, employees’

and others’

data, our security measures or

those of our third-party service providers or vendors could fail and result in unauthorized access to or disclosure, acquisition,

encryption, modification, misuse, loss, destruction or other compromise of such data.

If a compromise of such data were to occur,

we may become liable under our contracts with other parties and under applicable law for damages and incur penalties and other

costs to respond to, investigate and remedy such an incident.

Laws in all 50 states require us to provide notice to customers,

regulators, credit reporting agencies and others when certain sensitive information has been compromised as a result of a security

Such laws are inconsistent and compliance in the event of a widespread data breach could be costly.

Depending on the facts

and circumstances of such an incident, these damages, penalties, fines and costs could be significant.

Such an event could harm

our reputation and result in litigation against us.

Any of these results could materially adversely affect our business, prospects,

financial condition and operating results.

our ability to accurately and timely report our financial results could be impaired, and deficiencies may arise in our internal control

over financial reporting, which may impact our ability to certify our financial results.

Moreover, our proprietary information or intellectual

property could be compromised or misappropriated and our reputation may be adversely affected.

If these systems do not operate as we

expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these

A significant cyber incident could impact production

capability, harm our reputation, cause us to breach our contracts with other parties or subject us to regulatory actions or litigation,

any of which could materially affect our business, prospects, financial condition and operating results.

In addition, our insurance coverage

for cyberattacks may not be sufficient to cover all the losses we may experience as a result of a cyber-incident.

We also collect, store, transmit and otherwise

process customer, driver and employee and others’ data as part of our business and operations, which may include personal data

or confidential or proprietary information.

We also work with partners and third-party service providers or vendors that collect, store

and process such data on our behalf and in connection with our products and services.

There can be no assurance that any security measures

that we or our third-party service providers or vendors have implemented will be effective against current or future security threats.

While we have developed systems and processes designed to protect the availability, integrity, confidentiality and security of our and

our customers’, drivers’, employees’ and others’ data, our security measures or those of our third-party service

providers or vendors could fail and result in unauthorized access to or disclosure, acquisition, encryption, modification, misuse, loss,

destruction or other compromise of such data.

If a compromise of such data were to occur, we may become liable under our contracts with

other parties and under applicable law for damages and incur penalties and other costs to respond to, investigate and remedy such an

Laws in all 50 states require us to provide notice to customers, regulators, credit reporting agencies and others when certain

sensitive information has been compromised as a result of a security breach.

Such laws are inconsistent and compliance in the event of

a widespread data breach could be costly.

Depending on the facts and circumstances of such an incident, these damages, penalties, fines

and costs could be significant.

Such an event could harm our reputation and result in litigation against us.

Any of these results could

materially adversely affect our business, prospects, financial condition and operating results.

Any unauthorized control or manipulation of the information

technology systems in our electrified powertrain solutions could result in loss of confidence in us and our electrified powertrain

solutions and harm our business.

Our electrified powertrain solutions

contain complex information technology systems and built-in data connectivity to accept and install periodic remote updates to

improve or update functionality.

We have designed, implemented and tested security measures intended to prevent unauthorized access

to our information technology networks, our electrified powertrain solutions and related systems.

However, hackers may attempt

to gain unauthorized access to modify, alter and use such networks and systems to gain control of or to change our electrified

powertrain solutions’

functionality, user interface and performance characteristics, or to gain access to data stored in

or generated by the vehicles.

Future vulnerabilities could be identified and our efforts to remediate such vulnerabilities may

not be successful.

Any unauthorized access to or control of our electrified powertrain solutions, or any loss of customer data,

could result in legal claims or proceedings and remediation of such problems could result in significant, unplanned capital expenditures.

In addition, regardless of their veracity, reports of unauthorized access to our electrified powertrain solutions or data, as well

as other factors that may result in the perception that our electrified powertrain solutions or data are capable of being “hacked,”

could negatively affect our brand and harm our business, prospects, financial condition and operating results.

We are subject to evolving laws, regulations, standards

and contractual obligations related to data privacy and security, and our actual or perceived failure to comply with such obligations

could harm our reputation, subject us to significant fines and liability or adversely affect our business.

We intend to use our in-vehicle services

and functionality to log information about each vehicle’s use in order to aid our in-vehicle diagnostics and servicing.

customers or their drivers may object to the use of this data, which may increase our vehicle maintenance costs and harm our business

Collection of our customers’, employees’

and others’

information in conducting our business may subject

us to various legislative and regulatory burdens related to data privacy and security that could require notification of data breaches,

restrict our use of such information and hinder our ability to acquire new customers or market to existing customers.

The regulatory

framework for data privacy and security is rapidly evolving, and we may not be able to monitor and react to all developments in

a timely manner.

For example, California requires connected devices to maintain minimum information security requirements.

As legislation

continues to develop, we will likely be required to expend significant additional resources to continue to modify or enhance our

protective measures and internal processes to comply with such legislation.

In addition, non-compliance with these laws or a significant

breach of our third-party service providers’

or vendors’

or our own network security and systems could have serious

negative consequences for our business and future prospects, including possible fines, penalties and damages, reduced customer

demand for our vehicles and harm to our reputation and brand.

We are subject to various environmental laws and

regulations that could impose substantial costs upon us and cause delays in building our production facilities.

Our operations are and will be subject

to international, federal, state and local environmental laws and regulations, including laws relating to the use, handling, storage,

disposal of and human exposure to hazardous materials.

Environmental and health and safety laws and regulations can be complex,

and we have limited experience complying with them.

Moreover, we expect that we will be affected by future amendments to such laws

or other new environmental and health and safety laws and regulations which may require us to change our operations, potentially

resulting in a material adverse effect on our business, prospects, financial condition and operating results.

These laws can give

rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury, fines and penalties.

and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in

substantial fines and penalties, third-party damages, suspension of production or a cessation of our operations.

Contamination at properties we own or

operate, properties we formerly owned or operated or to which hazardous substances were sent by us, may result in liability for

us under environmental laws and regulations, including, but not limited to, the Comprehensive Environmental Response, Compensation

and Liability Act, which can impose liability for the full amount of remediation-related costs without regard to fault, for the

investigation and cleanup of contaminated soil and ground water, for building contamination and impacts to human health and for

damages to natural resources.

The costs of complying with environmental laws and regulations and any claims concerning noncompliance,

or liability with respect to contamination in the future, could have a material adverse effect on our financial condition or operating

We may face unexpected delays in obtaining required permits and approvals that could require significant time and financial

resources and delay our ability to operate these facilities, which would adversely impact our business, prospects, financial condition

and operating results.

Our electrified powertrain solutions could face competition

from original equipment manufacturers and other providers of electrification solutions that enter the commercial vehicle electrification

The vehicle electrification market has

expanded significantly since we were founded in 2009.

While we currently face limited direct competition in the commercial vehicle

electrification market, which includes companies such as Hyliion, Workhorse Group Inc.

(“Workhorse”), Nikola and Lordstown,

because we source all of our components from third party suppliers, some of which under non-exclusive contracts, it is possible

that competitors may enter the market in the future.

In addition, OEMs that have traditionally focused on the consumer market may

expand into the commercial markets.

If these companies or other OEMs or providers of electrification solutions expand into the

commercial markets, we will face increased direct competition, which could have a material adverse effect on our product prices,

market share, revenue and profitability.

The performance characteristics of our electrified

powertrain solutions, including fuel economy and emissions levels, may vary, including due to factors outside of our control.

The performance characteristics of our electrified powertrain solutions

may vary due to factors outside of our control.

For instance, the estimated fuel savings and fuel economy of vehicles installed with our

electrified powertrain solutions may vary depending on factors including, but not limited to, drive cycle, speed, terrain, hardware efficiency,

payload, vehicle and weather conditions.

In addition, GHG emissions of vehicles installed with our electrified powertrain solutions may

also vary due to external factors, including the type of fuel, drive cycle, the efficiency and certification of the engine and where the

engine is being operated.

Additionally, the total emissions generated is subject to how the electricity used to charge our plug in products

is generated, which is also outside of our control.

These external factors, as well as any operation of our electrified powertrain solutions

other than as intended, may result in emissions levels that are greater than we expect.

technology systems in our electrified powertrain solutions could result in loss of confidence in us and our electrified powertrain solutions

and harm our business.

Our electrified powertrain solutions contain

complex information technology systems and built-in data connectivity to accept and install periodic remote updates to improve or update

functionality.

We have designed, implemented and tested security measures intended to prevent unauthorized access to our information

technology networks, our electrified powertrain solutions and related systems.

However, hackers may attempt to gain unauthorized access

to modify, alter and use such networks and systems to gain control of or to change our electrified powertrain solutions’ functionality,

user interface and performance characteristics, or to gain access to data stored in or generated by the vehicles.

Future vulnerabilities

could be identified and our efforts to remediate such vulnerabilities may not be successful.

Any unauthorized access to or control of

our electrified powertrain solutions, or any loss of customer data, could result in legal claims or proceedings and remediation of such

problems could result in significant, unplanned capital expenditures.

In addition, regardless of their veracity, reports of unauthorized

access to our electrified powertrain solutions or data, as well as other factors that may result in the perception that our electrified

powertrain solutions or data are capable of being “hacked,” could negatively affect our brand and harm our business, prospects,

financial condition and operating results.

We are subject to evolving laws, regulations, standards and

contractual obligations related to data privacy and security, and our actual or perceived failure to comply with such obligations could

harm our reputation, subject us to significant fines and liability or adversely affect our business.

We intend to use our in-vehicle services and

functionality to log information about each vehicle’s use in order to aid our in-vehicle diagnostics and servicing.

Our customers

or their drivers may object to the use of this data, which may increase our vehicle maintenance costs and harm our business prospects.

Collection of our customers’, employees’ and others’ information in conducting our business may subject us to various

legislative and regulatory burdens related to data privacy and security that could require notification of data breaches, restrict our

use of such information and hinder our ability to acquire new customers or market to existing customers.

The regulatory framework for

data privacy and security is rapidly evolving, and we may not be able to monitor and react to all developments in a timely manner.

example, California requires connected devices to maintain minimum information security requirements.

As legislation continues to develop,

we will likely be required to expend significant additional resources to continue to modify or enhance our protective measures and internal

processes to comply with such legislation.

In addition, non-compliance with these laws or a significant breach of our third-party service

providers’ or vendors’ or our own network security and systems could have serious negative consequences for our business

and future prospects, including possible fines, penalties and damages, reduced customer demand for our vehicles and harm to our reputation

We are subject to various environmental laws and regulations

that could impose substantial costs upon us and cause delays in building our production facilities.

Our operations are and will be subject to international,

federal, state and local environmental laws and regulations, including laws relating to the use, handling, storage, disposal of and human

exposure to hazardous materials.

Environmental and health and safety laws and regulations can be complex, and we have limited experience

complying with them.

Moreover, we expect that we will be affected by future amendments to such laws or other new environmental and health

and safety laws and regulations which may require us to change our operations, potentially resulting in a material adverse effect on

our business, prospects, financial condition and operating results.

These laws can give rise to liability for administrative oversight

costs, cleanup costs, property damage, bodily injury, fines and penalties.

Capital and operating expenses needed to comply with environmental

laws and regulations can be significant, and violations may result in substantial fines and penalties, third-party damages, suspension

of production or a cessation of our operations.

Contamination at properties we own or operate,

properties we formerly owned or operated or to which hazardous substances were sent by us, may result in liability for us under environmental

laws and regulations, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, which

can impose liability for the full amount of remediation-related costs without regard to fault, for the investigation and cleanup of contaminated

soil and ground water, for building contamination and impacts to human health and for damages to natural resources.

The costs of complying

with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future,

could have a material adverse effect on our financial condition or operating results.

We may face unexpected delays in obtaining required

permits and approvals that could require significant time and financial resources and delay our ability to operate these facilities,

which would adversely impact our business, prospects, financial condition and operating results.

Our electrified powertrain solutions are facing

competition from original equipment manufacturers and other providers of electrification solutions that have entered the commercial vehicle

electrification market.

The vehicle electrification market

has expanded significantly since we were founded in 2009.

We are facing increasing competition in the commercial vehicle electrification

market from leading OEMs in addition to companies such as Hyliion, Workhorse Group Inc.

(“Workhorse”), Nikola and Lordstown.

Because we source all of our components from third party suppliers, some of which under non-exclusive contracts, it is possible that competitors

may enter the market in the future.

If these companies or other OEMs or providers of electrification solutions continue to expand into

the commercial markets, we will face increased direct competition, which could have a material adverse effect on our product prices, market

share, revenue and profitability.

The performance characteristics of our electrified powertrain

solutions, including fuel economy and emissions levels, may vary, including due to factors outside of our control.

performance characteristics of our electrified powertrain solutions may vary due to factors outside of our control.

For instance, the

estimated fuel savings and fuel economy of vehicles installed with our electrified powertrain solutions may vary depending on factors

including, but not limited to, drive cycle, speed, terrain, hardware efficiency, payload, vehicle and weather conditions.

greenhouse gas (“GHG”) emissions of vehicles installed with our electrified powertrain solutions may also vary due to external

factors, including the type of fuel, drive cycle, the efficiency and certification of the engine and where the engine is being operated.

Additionally, the total emissions generated is subject to how the electricity used to charge our plug in products is generated, which

is also outside of our control.

These external factors, as well as any operation of our electrified powertrain solutions other than as

intended, may result in emissions levels or fuel consumption that are greater than we expect.

Due to these factors, there can be no guarantee

1 unchanged sentence

GHG emission reductions.

Our suppliers may rely on complex machinery for our

component production, which involves a significant degree of risk and uncertainty in terms of operational performance and costs.

Our suppliers may rely on complex machinery

for the production and assembly of components used in our electrified powertrain solutions, which will involve a significant degree

of uncertainty and risk in terms of operational performance and costs.

Some of our suppliers’

production facilities consist

of large-scale machinery combining many components.

These components may suffer unexpected malfunctions from time to time and will

depend on repairs and spare parts to resume operations, which may not be available when needed.

Unexpected malfunctions of these

components may significantly affect the intended operational efficiency.

Operational performance and costs can be difficult to

predict and are often influenced by factors outside of our control, such as, but not limited to, scarcity of natural resources,

environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty

or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, seismic activity

and natural disasters.

Should operational risks materialize, they may result in the personal injury to or death of workers, the

loss of production equipment, damage to production facilities, monetary losses, delays and unanticipated fluctuations in production,

environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material

adverse effect on our business, prospects, financial condition or operating results.

We have identified material weaknesses in our internal

control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements

and have other adverse consequences.

As a private company, we had not been

required to document and test our internal controls over financial reporting nor had management been required to certify the effectiveness

of our internal controls and our auditors had not been required to opine on the effectiveness of our internal control over financial

Similarly, we had not been subject to the SEC’s internal control reporting requirements.

Following the Business

Combination, we became subject to these requirements.

In the course of preparing the financial

statements for the year ended December 31, 2019 and 2020, we identified material weaknesses in internal control over financial

reporting, which relate to insufficient technical accounting resources and lack of segregation of duties.

A material weakness is

a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility

that a material misstatement of our financial statements would not be prevented or detected on a timely basis.

These deficiencies

could result in misstatements to our financial statements that would be material and would not be prevented or detected on a timely

Our management has concluded that these

material weaknesses in our internal control over financial reporting are due to the fact that, prior to the Business Combination,

we were a private company with limited resources.

We did not have the necessary business processes and related internal controls,

or the appropriate resources or level of experience and technical expertise, that would be required to oversee financial reporting

processes or to address the accounting and financial reporting requirements.

Our management is in the process of developing a remediation

The material weaknesses will not be considered remediated until management designs and implements effective controls that

operate for a sufficient period of time and management has concluded, through testing, that these controls are effective.

We have identified material weaknesses in our internal control

over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements and have other

adverse consequences.

Prior to becoming a public company, we had not been required to document

and test our internal controls over financial reporting nor had management been required to certify the effectiveness of our internal

controls and our auditors had not been required to opine on the effectiveness of our internal control over financial reporting.

we had not been subject to the SEC’s internal control reporting requirements.

Following the Business Combination in December 2020,

we became subject to these requirements.

As of December 31, 2020, we had identified material weaknesses in internal control over financial

These material weaknesses related to the accounting for equity instruments, insufficient technical accounting resources and

lack of segregation of duties.

During 2021, we took steps to remediate these weaknesses through, among other things, (1) the hiring of

a Chief Financial Officer;

(2) the hiring of a Certified Public Accountant as the controller who had experience with public company reporting

and technical accounting;

(3) the hiring of a Senior Director of SOX Compliance with experience in internal control environments and design;

(4) hiring third party professionals to perform a comprehensive assessment of the Company’s internal controls, including design

and gap assessments;

and (5) the hiring of additional finance personnel to enable processes with appropriate segregation of duties.

In the course of preparing the financial statements for the year ended

December 31, 2021, we identified material weaknesses in internal control over financial reporting, which relate to the ineffective design

and implementation of Information Technology General Controls (“ITGC”) as well as the lack of properly designed management

review controls to compensate for these deficiencies.

The Company’s ITGC deficiencies included improperly designed controls pertaining

to user access rights and segregation of duties over systems that are critical to the Company’s system of financial reporting.

Company’s management review controls include the review and approval of journal entries, account reconciliations, accounting estimates,

and other technical accounting matters.

The Company did not maintain sufficient evidence of these review control activities.

deficiencies, combined with a lack of properly designed and implemented management review controls to compensate for these deficiencies,

represent material weaknesses in the Company’s internal control over financial reporting as there is a reasonable possibility that

a material misstatement with respect to the Company’s significant accounts and disclosures will not be prevented or detected on

a timely basis.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that

there is a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely

These deficiencies could result in misstatements to our financial statements that would be material and would not be prevented

or detected on a timely basis.

Our management is in the process of developing

a remediation plan.

The material weaknesses will not be considered remediated until management designs and implements effective controls

that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective.

Our management

will monitor the effectiveness of our remediation plans and will make changes management determines to be appropriate.

If not remediated, these material weaknesses

could result in further material misstatements to our annual or interim financial statements that would not be prevented or detected

on a timely basis, or in delayed filing of required periodic reports.

If we are unable to assert that our internal control over

financial reporting is effective, or when required in the future, if our independent registered public accounting firm is unable

to express an unqualified opinion as to the effectiveness of the internal control over financial reporting, investors may lose

confidence in the accuracy and completeness of our financial reports, the market price of our Common Stock could be adversely affected

and we could become subject to litigation or investigations by the NYSE, the SEC or other regulatory authorities, which could require

additional financial and management resources.

Insufficient warranty reserves to cover future warranty

claims could materially adversely affect our business, prospects, financial condition and operating results.

As our business expands the sale of

our electrified powertrain solutions, we will need to increase warranty reserves to cover warranty-related claims.

If our warranty

reserves are inadequate to cover future warranty claims on our vehicles, our business, prospects, financial condition and operating

results could be materially and adversely affected.

We may become subject to significant and unexpected warranty expenses as well

as claims from our customers, including loss of revenue or damages.

There can be no assurances that then-existing warranty reserves

will be sufficient to cover all claims.

Inability to leverage vehicle and customer data could

impact our software algorithms and impact research and development operations.

We rely on data collected from the use

of fleet vehicles outfitted with our products, including vehicle data and data related to battery usage statistics.

data in connection with our software algorithms and the research, development and analysis of our products.

Our inability to obtain

this data or the necessary rights to use this data could result in delays or otherwise negatively impact our research and development

If not remediated, these material weaknesses could

result in material misstatements to our annual or interim financial statements that would not be prevented or detected on a timely basis,

or in delayed filing of required periodic reports.

If we are unable to assert that our internal control over financial reporting is effective,

or when required in the future, if our independent registered public accounting firm is unable to express an unqualified opinion as to

the effectiveness of the internal control over financial reporting, investors may lose confidence in the accuracy and completeness of

our financial reports, the market price of our Common Stock could be adversely affected and we could become subject to litigation or investigations

by the NYSE, the SEC or other regulatory authorities, which could require additional financial and management resources.

Increased warranty claims could materially adversely affect

our business, prospects, financial condition and operating results.

As our business expands the sale of our electrified

powertrain solutions, we will need to increase warranty reserves to cover warranty-related claims.

If our warranty reserves are inadequate

to cover future warranty claims on our vehicles, our business, prospects, financial condition and operating results could be materially

and adversely affected.

We may become subject to significant and unexpected warranty expenses as well as claims from our customers, including

loss of revenue or damages.

There can be no assurances that then-existing warranty reserves will be sufficient to cover all claims.

Inability to leverage vehicle and customer data could impact

our software algorithms and impact research and development operations.

We rely on data collected from the use of fleet

vehicles outfitted with our products, including vehicle data and data related to battery usage statistics.

We use this data in connection

with our software algorithms and the research, development and analysis of our products.

Our inability to obtain this data or the necessary

rights to use this data could result in delays or otherwise negatively impact our research and development efforts.

Interruption or failure of our information technology

and communications systems could impact our ability to effectively provide our services.

We plan to include in-vehicle services

and functionality that utilize data connectivity to monitor performance and timely capture opportunities to enhance over-the-road

performance for cost-saving preventative maintenance.

The availability and effectiveness of our services depend on the continued

operation of information technology and communications systems.

Our systems will be vulnerable to damage or interruption from,

among others, physical theft, fire, terrorist attacks, natural disasters, power loss, war, telecommunications failures, viruses,

denial or degradation of service attacks, ransomware, social engineering schemes, insider theft or misuse or other attempts to

harm our systems.

We utilize reputable third-party service providers or vendors for all of our data other than our source code,

and these providers could also be vulnerable to harms similar to those that could damage our systems, including sabotage and intentional

acts of vandalism causing potential disruptions.

Some of our systems will not be fully redundant, and our disaster recovery planning

cannot account for all eventualities.

Any problems with our third-party cloud hosting providers could result in lengthy interruptions

in our data services.

In addition, our in-vehicle services and functionality are highly technical and complex technology which

may contain errors or vulnerabilities that could result in interruptions in our business or the failure of our systems.

Our electrified powertrain solutions rely on software

and hardware that is highly technical, and if these systems contain errors, bugs or vulnerabilities, or if we are unsuccessful

in addressing or mitigating technical limitations in our systems, our business could be adversely affected.

Our electrified powertrain solutions

rely on software and hardware, including software and hardware developed or maintained internally or by third parties, that is

highly technical and complex and will require modification and updates over the life of the vehicle.

In addition, our electrified

powertrain solutions depend on the ability of such software and hardware to store, retrieve, process and manage immense amounts

We plan to include in-vehicle services and functionality

that utilize data connectivity to monitor performance and timely capture opportunities to enhance over-the-road performance for cost-saving

preventative maintenance.

The availability and effectiveness of our services depend on the continued operation of information technology

and communications systems.

Our systems will be vulnerable to damage or interruption from, among others, physical theft, fire, terrorist

attacks, natural disasters, power loss, war, telecommunications failures, viruses, denial or degradation of service attacks, ransomware,

social engineering schemes, insider theft or misuse or other attempts to harm our systems.

We utilize reputable third-party service providers

or vendors for all of our data other than our source code, and these providers could also be vulnerable to harms similar to those that

could damage our systems, including sabotage and intentional acts of vandalism causing potential disruptions.

Some of our systems will

not be fully redundant, and our disaster recovery planning cannot account for all eventualities.

Any problems with our third-party cloud

hosting providers could result in lengthy interruptions in our data services.

In addition, our in-vehicle services and functionality

are highly technical and complex technology which may contain errors or vulnerabilities that could result in interruptions in our business

or the failure of our systems.

Our electrified powertrain solutions rely on software and hardware

that is highly technical, and if these systems contain errors, bugs or vulnerabilities, or if we are unsuccessful in addressing or mitigating

technical limitations in our systems, our business could be adversely affected.

electrified powertrain solutions rely on software and hardware, including software and hardware developed or maintained internally or

by third parties, that is highly technical and complex and will require modification and updates over the life of the vehicle.

our electrified powertrain solutions depend on the ability of such software and hardware to store, retrieve, process and manage immense

amounts of data.

Our software and hardware may contain errors, bugs, vulnerabilities, design defects or technical limitations, and our

systems are subject to certain technical limitations that may compromise our ability to meet our objectives.

Some errors, bugs

or vulnerabilities within our software or hardware may be difficult to detect and may only be discovered after the code has been

released for external or internal use.

Although we attempt to remedy any issues we observe in our products as effectively and rapidly

as possible, such efforts may not be timely, may hamper production or may not resolve issues to the satisfaction of our customers.

Additionally, even if we are able to deploy updates to the software addressing any issues, our over-the-air update procedures may

fail to properly update the software.

In such an instance, affected vehicles would need to be brought to an upfitter or to one

of our service team members for updates to be installed, and the software would remain subject to vulnerabilities until such time

as the updates are installed.

If we are unable to prevent or effectively remedy errors, bugs, vulnerabilities or defects in our

software and hardware, we may suffer damage to our reputation, loss of customers, loss of revenue or liability for damages, any

of which could adversely affect our business and financial results.

If our electrified powertrain solutions fail to perform

as expected, our ability to develop, market and sell our electrified powertrain solutions could be harmed.

Our electrified powertrain solutions

may contain defects in design and production that may cause them not to perform as expected or may require repair.

no assurance that we will be able to detect and fix any defects in our electrified powertrain solutions.

We may experience recalls

in the future, which could adversely affect our brand and could adversely affect our business, prospects, financial condition and

operating results.

Our electrified powertrain solutions may not perform consistent with customers’

expectations or consistent

with other vehicles which may become available.

Any product defects or any other failure of our electrified powertrain solutions

and software to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery delays, product

recalls, negative publicity, product liability claims and significant warranty and other expenses and could have a material adverse

impact on our business, prospects, financial condition and operating results.

Additionally, problems and defects experienced by

other electrified powertrain fleet solutions could by association have a negative impact on perception and customer demand for

our electrified powertrain solutions.

Developments in alternative technology or improvements

in the internal combustion engine may adversely affect the demand for our electrified powertrain solutions.

Significant developments in alternative

technologies, such as battery cell technology, advanced diesel, ethanol or natural gas, or improvements in the fuel economy of

the internal combustion engine, may materially and adversely affect our business, prospects, financial condition and operating

results in ways we do not currently anticipate.

Existing and other battery cell technologies, fuels or sources of energy may emerge

as customers’

preferred alternative to our electrified powertrain solutions.

Any failure by us to develop new or enhanced

technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction

of new electrified powertrain solutions, which could result in the loss of competitiveness, decreased revenue and a loss of market

share to competitors.

Our research and development efforts may not be sufficient to adapt to changes in alternate technology.

technologies change, we plan to upgrade or adapt our electrified powertrain solutions with the latest technology, in particular

battery cell technology.

However, our electrified powertrain solutions may not compete effectively with alternative systems if

we are not able to source and integrate the latest technology into our electrified powertrain solutions.

Our beliefs regarding the ability of our electrified

powertrain solutions to limit carbon intensity and reduce GHG emissions and contribute to global decarbonization may be based on

materially inaccurate assumptions.

We believe that our electrified powertrain solutions, to the extent

adopted, may have the ability to limit carbon intensity and reduce GHG emissions from fleet operations;

however, these beliefs are based

on certain assumptions, including, but not limited to, our projections of the fuel types used, drive cycle and our electrified powertrain

solutions’

efficiencies and performance.

To the extent our assumptions are materially incorrect or incomplete, it could adversely

impact our business, prospects, financial condition and operating results.

In addition, if our assumptions regarding the ability of our

solutions to limit carbon intensity and reduce GHG emissions from trucking operations are materially incorrect or incomplete, or if our

beliefs regarding the availability of our products are materially incorrect or incomplete, it is possible that our competitors’

technology may be better at limiting carbon intensity and reducing GHG emissions in certain circumstances and in certain markets.

We will incur increased costs as a result of operating

as a public company, and our management will devote substantial time to new compliance initiatives.

As a public company, we will incur significant

legal, accounting and other expenses that we did not incur as a private company, and these expenses may increase even more after

we are no longer an emerging growth company, as defined in Section 2(a) of the Securities Act.

As a public company, we are

subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer

Protection Act, as well as rules adopted, and to be adopted, by the SEC and the NYSE.

Our management and other personnel will need

to devote a substantial amount of time to these compliance initiatives.

Some errors, bugs or vulnerabilities

within our software or hardware may be difficult to detect and may only be discovered after the code has been released for external or

internal use.

Although we attempt to remedy any issues we observe in our products as effectively and rapidly as possible, such efforts

may not be timely, may hamper production or may not resolve issues to the satisfaction of our customers.

Additionally, even if we are

able to deploy updates to the software addressing any issues, our over-the-air update procedures may fail to properly update the software.

In such an instance, affected vehicles would need to be brought to an upfitter or to one of our service team members for updates to be

installed, and the software would remain subject to vulnerabilities until such time as the updates are installed.

If we are unable to

prevent or effectively remedy errors, bugs, vulnerabilities or defects in our software and hardware, we may suffer damage to our reputation,

loss of customers, loss of revenue or liability for damages, any of which could adversely affect our business and financial results.

If our electrified powertrain solutions fail to perform as expected,

our ability to develop, market and sell our electrified powertrain solutions could be harmed.

Our electrified powertrain solutions may contain

defects in design and production that may cause them not to perform as expected or may require repair.

There can be no assurance that

we will be able to detect and fix any defects in our electrified powertrain solutions.

We may experience recalls in the future, which

could adversely affect our brand and could adversely affect our business, prospects, financial condition and operating results.

Our electrified

powertrain solutions may not perform consistent with customers’ expectations or consistent with other vehicles which may become

available or are consistent with other vehicles which may become available.

Any product defects or any other failure of our electrified

powertrain solutions and software to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery

delays, product recalls, negative publicity, product liability claims and significant warranty and other expenses and could have a material

adverse impact on our business, prospects, financial condition and operating results.

Additionally, problems and defects experienced

by other electrified powertrain fleet solutions could by association have a negative impact on perception and customer demand for our

electrified powertrain solutions.

Developments in alternative technology or improvements in the

internal combustion engine may adversely affect the demand for our electrified powertrain solutions.

Significant developments in alternative technologies,

such as battery cell technology, advanced diesel, ethanol or natural gas, or improvements in the fuel economy of the internal combustion

engine, may materially and adversely affect our business, prospects, financial condition and operating results in ways we do not currently

Existing and other battery cell technologies, fuels or sources of energy may emerge as customers’ preferred alternative

to our electrified powertrain solutions.

Any failure by us to develop new or enhanced technologies or processes, or to react to changes

in existing technologies, could materially delay our development and introduction of new electrified powertrain solutions, which could

result in the loss of competitiveness, decreased revenue and a loss of market share to competitors.

Our research and development efforts

may not be sufficient to adapt to changes in alternate technology.

As technologies change, we plan to upgrade or adapt our electrified

powertrain solutions with the latest technology, in particular battery cell technology.

However, our electrified powertrain solutions

may not compete effectively with alternative systems if we are not able to source and integrate the latest technology into our electrified

powertrain solutions.

Our assumptions regarding the ability of our electrified powertrain

solutions to limit carbon intensity and reduce GHG emissions and contribute to global decarbonization may be inaccurate.

We believe that our electrified powertrain solutions,

to the extent adopted, may have the ability to limit carbon intensity and reduce GHG emissions from fleet operations;

however, these

beliefs are based on certain assumptions, including, but not limited to, our projections of the fuel types used, drive cycle and our

electrified powertrain solutions’ efficiencies and performance.

To the extent our assumptions are materially incorrect or incomplete,

it could adversely impact our business, prospects, financial condition and operating results.

In addition, if our assumptions regarding

the ability of our solutions to limit carbon intensity and reduce GHG emissions from trucking operations are materially incorrect or

incomplete, or if our beliefs regarding the availability of our products are materially incorrect or incomplete, it is possible that

our competitors’ technology may be better at limiting carbon intensity and reducing GHG emissions in certain circumstances and

in certain markets.

We will incur increased costs as a result of operating as a

public company, and our management will devote substantial time to new compliance initiatives.

As a public company, we are incurring

and expect to continue to incur significant legal, accounting and other expenses that we did not incur as a private company, and these

expenses may increase even more after we are no longer an emerging growth company, as defined in Section 2(a) of the Securities Act.

a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street

Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and the NYSE.

Our management and other personnel

will need to devote a substantial amount of time to these compliance initiatives.

Moreover, we expect these rules and regulations to substantially

increase our legal and financial compliance costs and to make some activities more time-consuming and costly.

The increased costs

will increase our net loss.

For example, we expect these rules and regulations to make it more difficult and more expensive for

us to obtain director and officer liability insurance and we may be forced to accept reduced policy limits or incur substantially

higher costs to maintain the same or similar coverage.

We cannot predict or estimate the amount or timing of additional costs we

may incur to respond to these requirements.

The impact of these requirements could also make it more difficult for us to attract

and retain qualified persons to serve on our board of directors, our board advisors or as executive officers.

Our management has limited experience in operating

a public company.

Our executive officers have limited

experience in the management of a publicly traded company.

Our management team may not successfully or effectively manage our transition

to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities

Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant

disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result

in less time being devoted to the management and growth of the post-combination company.

We may not have adequate personnel with

the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial

reporting required of public companies in the U.S.

We are in the process of upgrading our finance and accounting systems to an

enterprise system suitable for a public company, and a delay could impact our ability or prevent we from timely reporting our operating

results, timely filing required reports with the SEC and complying with Section 404 of the Sarbanes-Oxley Act.

The development

and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public

company in the U.S.

The increased costs will

increase our net loss.

We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements.

The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board

of directors, our board advisors or as executive officers.

Our management has limited experience in operating a public

Our executive officers have limited experience

in the management of a publicly traded company.

Our management team may not successfully or effectively manage our transition to a public

company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws.

Their limited

experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it

is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to

the management and growth of the post-combination company.

We may not have adequate personnel with the appropriate level of knowledge,

experience and training in the accounting policies, practices or internal control over financial reporting required of public companies

The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards

required of a public company in the U.S.

may require costs greater than expected.

It is possible that we will be required to expand our employee base

and hire additional employees to support our operations as a public company, which will increase our operating costs in future

It is possible that we will be required to expand our

employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in

future periods.

Changes in U.S.

trade policy, including the imposition

of tariffs and the resulting consequences, could adversely affect our business, prospects, financial condition and operating results.

government has adopted a new

approach to trade policy and in some cases has attempted to renegotiate or terminate certain existing bilateral or multi-lateral

trade agreements.

It has also imposed tariffs on certain foreign goods, including steel and certain commercial vehicle parts, which

have begun to result in increased costs for goods imported into the U.S.

In response to these tariffs, a number of U.S.

partners have imposed retaliatory tariffs on a wide range of U.S.

products, which makes it more costly for us to export our products

to those countries.

If we are unable to pass price increases on to our customer base or otherwise mitigate the costs, or if demand

for our exported products decreases due to the higher cost, our operating results could be materially adversely affected.

further tariffs have been proposed by the U.S.

and our trading partners and additional trade restrictions could be implemented

on a broader range of products or raw materials.

The resulting environment of retaliatory trade or other practices could have a

material adverse effect on our business, prospects, financial condition, operating results, customers, suppliers and the global

We intend in the future to expand internationally

and will face risks associated with our international operations, including unfavorable regulatory, political, tax and labor conditions,

which could harm our business.

We will face risks associated with our

future international operations, including possible unfavorable regulatory, political, tax and labor conditions, which could harm

our business.

We anticipate having international operations which would subject us to the legal, political, regulatory and social

requirements and economic conditions in any future jurisdictions.

Additionally, as part of our growth strategy, we intend to expand

our sales and servicing programs internationally.

However, we have no experience to date selling and servicing our electrified

powertrain solutions internationally except for in Canada, and such expansion would require us to make significant expenditures,

including the hiring of local employees and establishing facilities, in advance of generating any revenue.

We are subject to a

number of risks associated with international business activities that may increase our costs, impact our ability to sell our electrified

powertrain solutions and require significant management attention.

These risks include:

conforming our electrified powertrain solutions to various international regulatory requirements where our electrified powertrain solutions are sold, or homologation;

difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental authorizations necessary to manufacture, sell or service our electrified powertrain solutions in any of these jurisdictions;

difficulty in staffing and managing foreign operations;

difficulties attracting customers in new jurisdictions;

foreign government taxes, regulations and permit requirements, including foreign taxes that we may not be able to offset against taxes imposed upon our in the U.S., and foreign tax and other laws limiting our ability to repatriate funds to the U.S.;

fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate swap or other hedging activities our undertakes;

and foreign government trade restrictions, tariffs and price or exchange controls;

foreign labor laws, regulations and restrictions;

changes in diplomatic and trade relationships;

political instability, natural disasters, global health concerns, including health pandemics such as the COVID-19 pandemic, war or events of terrorism;

the strength of international economies.

If we fail to successfully address these risks,

our business, prospects, financial condition and operating results could be materially harmed.

trade policy, including the imposition of tariffs

and the resulting consequences, could adversely affect our business, prospects, financial condition and operating results.

government has adopted a new approach

to trade policy and in some cases has attempted to renegotiate or terminate certain existing bilateral or multi-lateral trade agreements.

It has also imposed tariffs on certain foreign goods, including steel and certain commercial vehicle parts, which have begun to result

in increased costs for goods imported into the U.S.

If we are unable to pass price increases on to our customer base or otherwise mitigate

the costs, or if demand for our exported products decreases due to the higher cost, our operating results could be materially adversely

In addition, further tariffs have been proposed by the U.S.

and our trading partners and additional trade restrictions could

be implemented on a broader range of products or raw materials.

The resulting environment of retaliatory trade or other practices could

have a material adverse effect on our business, prospects, financial condition, operating results, customers, suppliers and the global

We are subject to U.S.

and foreign anti-corruption

and anti-money laundering laws and regulations.

We could face criminal liability and other serious consequences for violations,

which could harm our business.

and foreign anti-corruption and anti-money

laundering laws and regulations.

We could face criminal liability and other serious consequences for violations, which could harm our

We are subject to the U.S.

Foreign Corrupt

Practices Act of 1977, as amended, the U.S.

Foreign Corrupt Practices

Act of 1977, as amended, the U.S.

domestic bribery statute contained in 18 U.S.C.

§ 201, the U.S.

Travel Act, the

USA PATRIOT Act and possibly other anti-bribery and anti-money laundering laws in countries in which we conduct or will conduct

Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors and other

collaborators from authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of

value to recipients in the public or private sector.

We can be held liable for the corrupt or other illegal activities of our employees,

agents, contractors and other collaborators, even if we do not explicitly authorize or have actual knowledge of such activities.

Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment,

the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm

and other consequences.

We are subject to governmental export and import

control laws and regulations.

Our failure to comply with these laws and regulations could have an adverse effect on our business,

prospects, financial condition and operating results.

Our products and solutions are subject

to export control and import laws and regulations, including the U.S.

Export Administration Regulations, U.S.

Customs regulations

and various economic and trade sanctions regulations administered by the U.S.

Treasury Department’s Office of Foreign Assets

export control laws and regulations and economic sanctions prohibit the shipment of certain products and services

embargoed or sanctioned countries, governments and persons.

In addition, complying with export control and sanctions regulations

for a particular sale may be time-consuming and result in the delay or loss of sales opportunities.

Exports of our products and

technology must be made in compliance with these laws and regulations.

If we fail to comply with these laws and regulations, we

and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export

or import privileges, fines, which may be imposed on our and responsible employees or managers and, in extreme cases, the incarceration

of responsible employees or managers.

In addition, changes in our products

or solutions or changes in applicable export or import laws and regulations may create delays in the introduction and sale of our

products and solutions in international markets, increase costs due to changes in import and export duties and taxes, prevent our

customers from deploying our products and solutions or, in some cases, prevent the export or import of our products and solutions

to certain countries, governments or persons altogether.

Any change in export or import laws and regulations, shift in the enforcement

or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws

and regulations, could also result in decreased use of our products and solutions or in our decreased ability to export or sell

our products and solutions to customers.

Any decreased use of our products and solutions or limitation on our ability to export

or sell our products and solutions would likely adversely affect our business, prospects, financial condition and operating results.

Regulatory requirements may have a negative effect

upon our business.

Travel Act, the USA PATRIOT Act

and possibly other anti-bribery and anti-money laundering laws in countries in which we conduct or will conduct activities.

Anti-corruption

laws are interpreted broadly and prohibit companies and their employees, agents, contractors and other collaborators from authorizing,

promising, offering or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or

private sector.

We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors and other collaborators,

even if we do not explicitly authorize or have actual knowledge of such activities.

Any violations of the laws and regulations described

above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment,

tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.

Regulatory requirements may have a negative effect upon our

All vehicles sold must comply with international,

federal, and state motor vehicle safety standards.

In the United States, vehicles that meet or exceed all federally mandated safety

standards are certified under the federal regulations.

Rigorous testing and the use of approved materials and equipment are among

the requirements for achieving federal certification.

Our products may be subject to substantial regulation under federal, state,

and local laws and standards.

In the United States, vehicles that meet or exceed all federally mandated safety standards

are certified under the federal regulations.

Rigorous testing and the use of approved materials and equipment are among the requirements

for achieving federal certification.

Our products may be subject to substantial regulation under federal, state, and local laws and standards.

These regulations include those promulgated by the U.S.

EPA, the National Highway Traffic Safety

Administration, Pipeline and Hazardous Materials Safety Administration and various state boards, and compliance certification is

required for each new model year.

These laws and standards are subject to change from time to time and we could become subject

to these regulations in the future.

In addition, federal, state, and local laws and industrial standards for electric vehicles

are still developing.

Compliance with these regulations could be challenging, burdensome, time consuming, and expensive.

If compliance

results in delays or substantial expenses, our business could be materially adversely affected.

Unfavorable publicity, or a failure to respond effectively

to adverse publicity, could harm our reputation and adversely affect our business.

As an early stage company, maintaining

and enhancing our brand and reputation is critical to our ability to attract and retain employees, partners, customers and investors,

and to mitigate legislative or regulatory scrutiny, litigation and government investigations.

Recent significant negative publicity

has adversely affected our brand and reputation and our stock price.

Negative publicity may result from allegations of fraud, improper

business practices, employee misconduct or any other matters that could give rise to litigation and/or governmental investigations.

Unfavorable publicity relating to us or those affiliated with us has and may in the future adversely affect public perception of

the entire company.

Adverse publicity and its effect on overall public perceptions of our brand, or our failure to respond effectively

to adverse publicity, could have a material adverse effect on our business.

In March 2021, an entity published an

article containing certain allegations against us.

This article and the public response to such article, as well as other negative

publicity, have adversely affected our brand and reputation as well as our stock price, which makes it difficult for us to attract

and retain employees, partners and customers, reduces confidence in our products and services, harms investor confidence and the

market price of our securities, invites legislative and regulatory scrutiny and has resulted in shareholder derivative suits.

a result, customers, potential customers, partners and potential partners may in the future fail to award us additional business

or cancel or seek to cancel existing contracts or otherwise, direct future business to our competitors, and investors may invest

in our competitors instead.

We have been named a defendant in stockholder derivative

This, and potential similar or related lawsuits, could result in substantial damages and may divert management’s

time and attention from our business.

On March 8, 2021, the Suh Complaint

was filed in federal district court for the Southern District of New York against us and certain of our current officers and directors.

On March 12, 2021, the Kumar Complaint was filed in federal district court for the Southern District of New York against us and

certain of our current officers and directors.

Both 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.

This lawsuit and any other similar or

related lawsuits are subject to inherent uncertainties, and the actual costs to be incurred relating to the lawsuit will depend

upon many unknown factors.

The outcome of this lawsuit is necessarily uncertain, and we could be forced to expend significant resources

in the defense of this lawsuits, and we may not prevail.

Monitoring and defending against legal actions is time-consuming for our

management and detracts from our ability to fully focus our internal resources on our business activities, which could result in

delays of our testing or our development and commercialization efforts.

In addition, we may incur substantial legal fees and costs

in connection with these lawsuits.

We are also generally obligated, to the extent permitted by law, to indemnify our current and

former directors and officers who are named as defendants in these and similar lawsuits.

We are not currently able to estimate

the possible cost to us from this matter, as this lawsuit is currently at an early stage and we cannot be certain how long it may

take to resolve this matter or the possible amount of any damages that we may be required to pay.

It is possible that we could,

in the future, incur judgments or enter into settlements of claims for monetary damages.

Decisions adverse to our interests in

this lawsuits could result in the payment of substantial damages, or possibly fines, and could have a material adverse effect on

our cash flow, results of operations and financial position.

In addition, the uncertainty of the currently pending litigation could

lead to increased volatility in our stock price

We may need to defend ourselves

against patent, copyright or trademark infringement claims or trade secret misappropriation claims, which may be time-consuming

and cause us to incur substantial costs.

Companies, organizations or individuals,

including our competitors, may own or obtain patents, trademarks or other proprietary rights that would prevent or limit our ability

to make, use, develop or sell our electrified powertrain solutions, which could make it more difficult for us to operate our business.

We may receive inquiries from patent, copyright or trademark owners inquiring whether we infringe upon their proprietary rights.

We may also be the subject of allegations that we have misappropriated their trade secrets or other proprietary rights.

owning patents or other intellectual property rights relating to battery packs, electric motors, or electronic power management

systems may allege infringement or misappropriation of such rights.

In response to a determination that we have infringed upon

or misappropriated a third party’s intellectual property rights, we may be required to do one or more of the following:

cease development, sales or use of our products that incorporate the asserted intellectual property;

pay substantial damages;

obtain a license from the owner of the asserted intellectual property right, which license may not be available on reasonable terms or at all;

redesign one or more aspects or systems of our electrified powertrain solutions.

A successful claim of infringement or

misappropriation against us could materially adversely affect our business, prospects, financial condition and operating results.

Any litigation or claims, whether valid or invalid, could result in substantial costs and diversion of resources.

Our business may be adversely affected if we are

unable to protect our intellectual property rights from unauthorized use by third parties.

EPA, the National Highway Traffic Safety Administration, Pipeline and Hazardous

Materials Safety Administration and various state boards, and compliance certification is required for each new model year.

and standards are subject to change from time to time and we could become subject to these regulations in the future.

In addition, federal,

state, and local laws and industrial standards for electric vehicles are still developing.

Compliance with these regulations could be

challenging, burdensome, time consuming, and expensive.

If compliance results in delays or substantial expenses, our business could be

materially adversely affected.

Unfavorable publicity, or a failure to respond effectively to

adverse publicity, could harm our reputation and adversely affect our business.

As an early stage company, maintaining and enhancing

our brand and reputation is critical to our ability to attract and retain employees, partners, customers and investors, and to mitigate

legislative or regulatory scrutiny, litigation and government investigations.

Recent significant negative publicity has adversely

affected our brand and reputation and our stock price.

Negative publicity may result from allegations of fraud, improper business practices,

employee misconduct or any other matters that could give rise to litigation and/or governmental investigations.

Unfavorable publicity

relating to us or those affiliated with us has and may in the future adversely affect public perception of the entire company.

publicity and its effect on overall public perceptions of our brand, or our failure to respond effectively to adverse publicity, could

have a material adverse effect on our business.

In March 2021, an entity published an article

containing certain allegations against us.

This article and the public response to such article, as well as other negative publicity,

have adversely affected our brand and reputation as well as our stock price, which makes it difficult for us to attract and retain employees,

partners and customers, reduces confidence in our products and services, harms investor confidence and the market price of our securities,

invites legislative and regulatory scrutiny and has resulted in various legal proceedings.

As a result, customers, potential customers,

partners and potential partners may in the future fail to award us additional business or cancel or seek to cancel existing contracts

or otherwise, direct future business to our competitors, and investors may invest in our competitors instead.

We have been named a defendant in stockholder class

actions, and the Securities and Exchange Commission has sent us requests for information, including a subpoena for documents.

potential similar or related lawsuits or investigations, could result in substantial legal fees, fines, penalties or damages and may divert

management’s time and attention from our business.

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.

We believe that

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

no assurance, however, that we will be successful.

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

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

class action complaints were filed in the Delaware Court of Chancery against certain of our current officers and directors, and the company’s

sponsor, Pivotal Investment Holdings II LLC.

The actions were consolidated and a consolidated amended complaint was filed on January 31,

2022, alleging 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.

We believe that the allegations asserted in the action are without

merit, and we intend 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.

These legal proceedings and any other

similar or related legal proceedings or investigations are subject to inherent uncertainties, and the actual costs to be incurred relating

to these matters will depend upon many unknown factors.

The outcome of these legal proceedings is uncertain, and we could be forced to

expend significant resources in the defense of these actions, and we may not prevail.

Monitoring and defending against legal actions is

time-consuming for our management and detracts from our ability to fully focus our internal resources on our business activities, which

could result in delays of our testing or our development and commercialization efforts.

In addition, we may incur substantial legal fees

and costs in connection with these matters.

We are also generally obligated, to the extent permitted by law, to indemnify our current

and former directors and officers who are named as defendants in these and similar actions.

We are not currently able to estimate the

possible cost to us from these matters, as these actions are currently at an early stage and we cannot be certain how long it may take

to resolve these matters or the possible amount of any damages that we may be required to pay.

It is possible that we could, in the future,

incur judgments or enter into settlements of claims for monetary damages.

Decisions adverse to our interests in these actions could result

in the payment of substantial damages, or possibly fines, and could have a material adverse effect on our cash flow, results of operations

and financial position.

In addition, the uncertainty of the currently pending litigation could lead to increased volatility in our stock

We may need to defend ourselves against patent, copyright or

trademark infringement claims or trade secret misappropriation claims, which may be time-consuming and cause us to incur substantial

Companies, organizations or individuals, including

our competitors, may own or obtain patents, trademarks or other proprietary rights that would prevent or limit our ability to make, use,

develop or sell our electrified powertrain solutions, which could make it more difficult for us to operate our business.

We may receive

inquiries from patent, copyright or trademark owners inquiring whether we infringe upon their proprietary rights.

We may also be the

subject of allegations that we have misappropriated their trade secrets or other proprietary rights.

Companies owning patents or other

intellectual property rights relating to battery packs, electric motors, or electronic power management systems may allege infringement

or misappropriation of such rights.

In response to a determination that we have infringed upon or misappropriated a third party’s

intellectual property rights, we may be required to do one or more of the following:

development, sales or use of our products that incorporate the asserted intellectual property;

substantial damages;

a license from the owner of the asserted intellectual property right, which license may not

be available on reasonable terms or at all;

one or more aspects or systems of our electrified powertrain solutions.

A successful claim of infringement or misappropriation

against us could materially adversely affect our business, prospects, financial condition and operating results.

Any litigation or claims,

whether valid or invalid, could result in substantial costs and diversion of resources.

Our business may be adversely affected if we are unable to protect

our intellectual property rights from unauthorized use by third parties.

Failure to adequately protect our intellectual

property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive

advantage and a decrease in our revenue, which would adversely affect our business, prospects, financial condition and operating

For example, we purchase many of the components for our hybrid systems from third party manufacturers and may not be able

to prevent competitors from using these third party components.

Our success depends, at least in part, on our ability to protect

our core technology and intellectual property.

To accomplish this, we will rely on a combination of patents, trade secrets (including

know-how), employee and third-party nondisclosure agreements, copyrights, trademarks, intellectual property licenses and other

contractual rights to establish and protect our rights in our technology.

The protection of our intellectual property

rights will be important to our future business opportunities.

However, the measures we take to protect our intellectual property

from unauthorized use by others may not be effective for various reasons, including the following:

applications that we submit may not result in the issuance of patents;

the scope of our issued patents, including our patent claims, may not be broad enough to protect our proprietary rights;

our issued patents may be challenged or invalidated by our competitors;

our employees or business partners may breach their confidentiality, non-disclosure and non-use obligations to us;

third-parties may independently develop technologies that are the same or similar to ours;

the costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make enforcement impracticable;

current and future competitors may circumvent our intellectual property.

Patent, trademark, copyright and trade

secret laws vary throughout the world.

Some foreign countries do not protect intellectual property rights to the same extent as

do the laws of the U.S.

advantage and a decrease in our revenue, which would adversely affect our business, prospects, financial condition and operating results.

For example, we purchase many of the components for our hybrid systems from third party manufacturers and may not be able to prevent

competitors from using these third party components.

Our success depends, at least in part, on our ability to protect our core technology

and intellectual property.

To accomplish this, we will rely on a combination of patents, trade secrets (including know-how), employee

and third-party nondisclosure agreements, copyrights, trademarks, intellectual property licenses and other contractual rights to establish

and protect our rights in our technology.

The protection of our intellectual property rights

will be important to our future business opportunities.

However, the measures we take to protect our intellectual property from unauthorized

use by others may not be effective for various reasons, including the following:

patent applications that we submit may not result in the issuance of patents;

scope of our issued patents, including our patent claims, may not be broad enough to protect

our proprietary rights;

issued patents may be challenged or invalidated by our competitors;

employees or business partners may breach their confidentiality, non-disclosure and non-use

obligations to us;

● third-parties

may independently develop technologies that are the same or similar to ours;

costs associated with enforcing patents, confidentiality and invention agreements or other

intellectual property rights may make enforcement impracticable;

and future competitors may circumvent our intellectual property.

Patent, trademark, copyright and trade secret

laws vary throughout the world.

Some foreign countries do not protect intellectual property rights to the same extent as do the laws

Further, policing the unauthorized use of our intellectual property in foreign jurisdictions may be difficult.

Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the U.S.

Also, while we have registered trademarks

in an effort to protect our investment in our brand and goodwill with customers, competitors may challenge the validity of those

trademarks and other brand names in which we have invested.

Such challenges can be expensive and may adversely affect our ability

to maintain the goodwill gained in connection with a particular trademark.

Our intellectual property applications for registration

may not issue or be registered, which may have a material adverse effect on our ability to prevent others from commercially exploiting

products similar to ours.

We cannot be certain that we are the

first inventor of the subject matter to which we have filed a particular patent application, or if we are the first party to file

such a patent application.

If another party has filed a patent application to the same subject matter as we have, we may not be

entitled to the protection sought by the patent application.

We also cannot be certain whether the claims included in a patent

application will ultimately be allowed in the applicable issued patent.

Further, the scope of protection of issued patent claims

is often difficult to determine.

As a result, we cannot be certain that the patent applications that we file will issue, or that

issued patents will afford protection against competitors with similar technology.

In addition, our competitors may design around

issued patents, which may adversely affect our business, prospects, financial condition and operating results.

Changes in tax laws may materially adversely affect

our business, prospects, financial condition and operating results.

New income, sales, use or other tax

laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business,

our intellectual property rights may not be as strong or as easily enforced outside of the U.S.

Also, while we have registered trademarks in

an effort to protect our investment in our brand and goodwill with customers, competitors may challenge the validity of those trademarks

and other brand names in which we have invested.

Such challenges can be expensive and may adversely affect our ability to maintain the

goodwill gained in connection with a particular trademark.

Our intellectual property applications for registration may

not issue or be registered, which may have a material adverse effect on our ability to prevent others from commercially exploiting products

similar to ours.

We cannot be certain that we are the first inventor

of the subject matter to which we have filed a particular patent application, or if we are the first party to file such a patent application.

If another party has filed a patent application to the same subject matter as we have, we may not be entitled to the protection sought

by the patent application.

We also cannot be certain whether the claims included in a patent application will ultimately be allowed in

the applicable issued patent.

Further, the scope of protection of issued patent claims is often difficult to determine.

we cannot be certain that the patent applications that we file will issue, or that issued patents will afford protection against competitors

with similar technology.

In addition, our competitors may design around issued patents, which may adversely affect our business, prospects,

financial condition and operating results.

Changes in tax laws may materially adversely affect our business,

prospects, financial condition and operating results.

Further, existing tax laws, statutes, rules, regulations or ordinances could

be interpreted, changed, modified or applied adversely to us.

income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely

affect our business, prospects, financial condition and operating results.

Further, existing tax laws, statutes, rules, regulations or

ordinances could be interpreted, changed, modified or applied adversely to us.

For example, U.S.

federal tax legislation enacted in 2017, informally

titled the Tax Cuts and Jobs Act (the “Tax Act”), enacted many significant changes to the U.S.

Future guidance

from the Internal Revenue Service (the “IRS”) with respect to the Tax Act may affect our, and certain aspects of the

Tax Act could be repealed or modified in future legislation.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES

Act”) has already modified certain provisions of the Tax Act.

In addition, we are uncertain if and to what extent various

states will conform to the Tax Act, the CARES Act or any newly enacted federal tax legislation.

Our ability to use net operating loss carryforwards

and other tax attributes may be limited in connection with the Business Combination or other ownership changes.

We have incurred losses during our history

and do not expect to become profitable in the near future, and may never achieve profitability.

To the extent that we continue

to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses

expire, if at all.

federal tax legislation enacted in 2017,

informally titled the Tax Cuts and Jobs Act (the “Tax Act”), enacted many significant changes to the U.S.

guidance from the Internal Revenue Service (the “IRS”) with respect to the Tax Act may affect our, and certain aspects of

the Tax Act could be repealed or modified in future legislation.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES

Act”) has already modified certain provisions of the Tax Act.

In addition, we are uncertain if and to what extent various states

will conform to the Tax Act, the CARES Act or any newly enacted federal tax legislation.

Our ability to use net operating loss carryforwards and other

tax attributes may be limited in connection with the Business Combination or other ownership changes.

have incurred losses during our history and do not expect to become profitable in the near future, and may never achieve profitability.

To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any,

until such unused losses expire, if at all.

As of December 31, 2021, we had U.S.

federal and state net operating loss carryforwards of approximately

$80.6 million and $27.5 million, respectively.

Under the Tax Act, as modified

by the CARES Act, U.S.

federal net operating loss carryforwards generated in taxable periods beginning after December 31,

2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning

after December 31, 2020, is limited to 80% of taxable income.

federal and state net operating loss carryforwards of

approximately $128.2 million and $75.0 million, respectively.

the Tax Act, as modified by the CARES Act, U.S.

federal net operating loss carryforwards generated in taxable periods beginning after

December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years

beginning after December 31, 2020, is limited to 80% of taxable income.

It is uncertain if and to what extent various states will conform

to the Tax Act or the CARES Act.

In addition, our net operating loss

carryforwards are subject to review and possible adjustment by the IRS and state tax authorities.

Under Sections 382 and 383 of

the Internal Revenue Code of 1986, as amended (the “Code”), our federal net operating loss carryforwards and other

tax attributes may become subject to an annual limitation in the event of certain cumulative changes in the ownership of the Company.

An “ownership change”

pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups

of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over

their lowest ownership percentage within a rolling three-year period.

Our ability to utilize our net operating loss carryforwards

and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including

potential changes in connection with the reverse recapitalization or other transactions.

Similar rules may apply under state tax

We have not yet determined the amount of the cumulative change in our ownership resulting from the reverse recapitalization

or other transactions, or any resulting limitations on our ability to utilize our net operating loss carryforwards and other tax

If we earn taxable income, such limitations could result in increased future income tax liability to us and our future

cash flows could be adversely affected.

We have recorded a full valuation allowance related to our net operating loss carryforwards

and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.

We may not be able to obtain or agree on acceptable

terms and conditions for all or a significant portion of the government grants, loans and other incentives for which we may apply.

As a result, our business, prospects, financial condition and operating results may be adversely affected.

We have previously applied and may again

in the future apply for federal and state grants, loans and tax incentives under government programs designed to stimulate the

economy and support the production of alternative fuel and electric vehicles and related technologies.

We anticipate that in the

future there will be new opportunities for us to apply for grants, loans and other incentives from federal, state and foreign governments.

Our ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government

programs and approval of our applications to participate in such programs.

The application process for these funds and other incentives

will likely be highly competitive.

We cannot assure you that we will be successful in obtaining any of these additional grants,

loans and other incentives.

addition, our net operating loss carryforwards are subject to review and possible adjustment by the IRS and state tax authorities.

Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), our federal net operating loss carryforwards

and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in the ownership of the

An “ownership change” pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups

of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their

lowest ownership percentage within a rolling three-year period.

Our ability to utilize our net operating loss carryforwards and other

tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including potential

changes in connection with the reverse recapitalization or other transactions.

Similar rules may apply under state tax laws.

not yet determined the amount of the cumulative change in our ownership resulting from the reverse recapitalization or other transactions,

or any resulting limitations on our ability to utilize our net operating loss carryforwards and other tax attributes.

If we earn taxable

income, such limitations could result in increased future income tax liability to us and our future cash flows could be adversely affected.

We have recorded a full valuation allowance related to our net operating loss carryforwards and other deferred tax assets due to the

uncertainty of the ultimate realization of the future benefits of those assets.

We may not be able to obtain or agree on acceptable terms and

conditions for all or a significant portion of the government grants, loans and other incentives for which we may apply.

our business, prospects, financial condition and operating results may be adversely affected.

We have previously applied and may again in the

future apply for federal and state grants, loans and tax incentives under government programs designed to stimulate the economy and support

the production of alternative fuel and electric vehicles and related technologies.

We anticipate that in the future there will be new

opportunities for us to apply for grants, loans and other incentives from federal, state and foreign governments.

Our ability to obtain

funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval

of our applications to participate in such programs.

The application process for these funds and other incentives will likely be highly

We cannot assure you that we will be successful in obtaining any of these additional grants, loans and other incentives.

Our product development efforts are subject to counterparty

We often develop products as part of co-development

agreements where our counterparty bears some of the product development and engineering costs and, among other obligations, may be responsible

for supplying critical components or designs, providing access to key customers or technologies, or developing the more fulsome product

or platform (a chassis or vehicle, for example) that incorporates or makes use of our products.

In some instances, we’ve made investments

in those counterparties to provide them with additional working capital and provide us with greater returns upon the expected commercial

success of the integrated product offering.

Among other initiatives, we are currently developing an electric drivetrain for use in Curbtender

medium duty refuse vehicles.

Our reliance on these and other counterparties subjects our product development efforts, the expected commercial

success of those products, and any investment we’ve made in those counterparties to the risks facing those businesses, including

their own financial wellbeing and liquidity, the effectiveness of their salesforce, the quality of their customer relationships, the

stability of their workforce, the capability of their engineering teams, the adequacy of their own technology and manufacturing ability,

and other risks that may be unforeseeable from the perspective of a co-developer.

Should these businesses and/or product offerings fail

to achieve the commercial success we anticipate, our own revenues may be impacted and our investments may be impaired.

Our XL Grid business depends in part on support from gas and

electric utilities for energy efficiency, and a decline in such support could harm our business.

Our XL Grid energy efficiency services business

depends in large part on government legislation and policies that support energy efficiency projects and that enhance the economic feasibility

of our energy efficiency services for customers.

Several of the states in which we operate support our customers’ investments in

energy efficiency through legislation and regulations that provide financial incentives for customers to procure our energy efficiency

Our customers frequently depend on these programs

to help justify the costs associated with, and to finance energy efficiency projects.

If any of these incentives are adversely amended,

eliminated or not extended beyond their current expiration dates, or if funding for these incentives is reduced, it could adversely affect

our ability to complete projects for our existing customers and obtain project commitments from new customers.

Failure of our subcontractors to properly perform their services

in a timely manner could cause delays in the delivery of our XL Gird energy efficiency projects which could damage our reputation, have

a negative impact on our relationships with our customers and adversely affect our growth.

Our success depends on our ability to provide

quality, reliable energy efficiency services in a timely manner, which in part requires the proper removal and installation of lighting,

mechanical and electrical systems by our subcontractors upon which we depend.

Substantially all of our energy efficiency solutions are

installed by subcontractors.

Any delays, malfunctions, inefficiencies or interruptions in our energy efficiency services caused by improper

installation by our subcontractors could cause us to have difficulty retaining current customers and attracting new customers.

could also result in additional costs that could affect the profit margin of our projects.

In addition, our brand, reputation and growth

could be negatively impacted.

XL Grid energy efficiency activities and operations are subject to numerous health and safety laws and regulations, and if we violate

such regulations, we could face penalties and fines .

We are subject to numerous health and safety

laws and regulations in each of the jurisdictions in which we operate.

These laws and regulations require us to obtain and maintain permits

and approvals and implement health and safety programs and procedures to control risks associated with our energy efficiency projects.

If our compliance programs are not successful, we could be subject to penalties or to revocation of our permits, which may require us

to curtail or cease operations of the affected projects.

Violations of laws, regulations and permit requirements may also result in criminal

sanctions or injunctions.

Our costs of complying with current and future

health and safety laws, regulations and permit requirements, and any liabilities, fines or other sanctions resulting from violations

of them, could adversely affect our business, financial condition and operating results.

Our XL Grid energy efficiency retrofitting process often involves

responsibility for the removal and disposal of components containing hazardous materials and at times requires that our subcontractors

work in hazardous conditions, either of which could give rise to a claim against us.

When we retrofit a customer’s facility,

we typically assume responsibility for removing and disposing of its existing lighting fixtures.

Certain components of these fixtures

contain trace amounts of mercury and other hazardous materials.

Older components may also contain trace amounts of polychlorinated biphenyls,

We utilize licensed and insured hazardous wastes disposal companies to remove and/or dispose of such components.

properly handle, remove or dispose of the components containing these hazardous materials in a safe, effective and lawful manner could

give rise to liability for us, or could expose our workers or other persons to these hazardous materials, which could result in claims

A successful personal injury claim against us that is not covered by insurance or is in excess of our available insurance

limits could require us to make significant payments of damages and could materially adversely affect our results of operations and financial

Risks Related to Ownership of Our Securities

Concentration of ownership among our existing executive

officers, directors and their respective affiliates may prevent new investors from influencing significant corporate decisions.

Our executive officers, directors and

their respective affiliates as a group beneficially own approximately 14.3% of our outstanding Common Stock.

As a result, these

stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including

the election of directors, amendment of our certificate of incorporation (“Certificate of Incorporation”) and approval

of significant corporate transactions.

This control could have the effect of delaying or preventing a change of control of our

or changes in management and will make the approval of certain transactions difficult or impossible without the support of these

stockholders.

We do not expect to declare any dividends in the

foreseeable future.

We do not anticipate declaring any cash

dividends to holders of our Common Stock in the foreseeable future.

Consequently, investors may need to rely on sales of their

shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Concentration of ownership among our existing executive officers,

directors and their respective affiliates may prevent new investors from influencing significant corporate decisions.

Our executive officers, directors and their respective

affiliates as a group beneficially own approximately 13.2% of our outstanding Common Stock.

As a result, these stockholders will be able

to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment

of our certificate of incorporation (“Certificate of Incorporation”) and approval of significant corporate transactions.

control could have the effect of delaying or preventing a change of control of our or changes in management and will make the approval

of certain transactions difficult or impossible without the support of these stockholders.

We do not expect to declare any dividends in the foreseeable

We do not anticipate declaring any cash dividends

to holders of our Common Stock in the foreseeable future.

Consequently, investors may need to rely on sales of their shares after price

appreciation, which may never occur, as the only way to realize any future gains on their investment.

The price of our Common Stock may be volatile.

The price of our Common Stock may fluctuate

due to a variety of factors, including:

actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in industry;

mergers and strategic alliances in the industry in which we operate;

market prices and conditions in the industry in which we operate;

changes in government regulation;

potential or actual military conflicts or acts of terrorism;

announcements concerning us or our competitors;

the general state of the securities markets;

threatened or actual lawsuits, investigations or other legal proceedings;

short-selling activity related to our Common Stock.

These market and industry factors may

materially reduce the market price of our Common Stock, regardless of our operating performance.

In addition, we believe there

has been and may continue to be substantial trading in derivatives of our Common Stock, including short selling activity or related

similar activities, which are beyond our control and which may be beyond the full control of the SEC and Financial Institutions

Regulatory Authority or “FINRA”.

While the SEC and FINRA rules prohibit some forms of short selling and other activities

that may result in stock price manipulation, such activity may nonetheless occur without detection or enforcement.

no assurance that should there be any illegal manipulation in the trading of our stock, it will be detected, prosecuted or successfully

Significant short selling market manipulation could cause our Common Stock trading price to decline, to become more

volatile, or both.

Reports published by analysts, including projections

in those reports that differ from our actual results, could adversely affect the price and trading volume of our Common Stock.

We expect that securities research analysts

will establish and publish their own periodic projections for our business.

These projections may vary widely and may not accurately

predict the results we actually achieve.

Our stock price may decline if our actual results do not match the projections of these

securities research analysts.

Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes

inaccurate or unfavorable research about our business, our stock price could decline.

For example, in March 2021, an entity published

an article containing certain allegations against us that we believe has negatively impacted the trading price of our Common Stock.

If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our stock price or trading

volume could decline.

While we expect research analyst coverage, if no analysts commence coverage of us, the trading price and

volume for our Common Stock could be adversely affected.

If securities or industry analysts

do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations

regarding our Common Stock adversely, the price and trading volume of our Common Stock could decline.

The trading market for our Common Stock

will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market

or our competitors.

If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide

more favorable relative recommendations about our competitors, the price of our Common Stock would likely decline.

If any analyst

who may cover us were to cease their coverage or fail to regularly publish reports on us, we could lose visibility in the financial

markets, which could cause our stock price or trading volume to decline.

We may issue additional Common Stock or preferred

stock, including under our equity incentive plan.

Any such issuances would dilute the interest of our stockholders and likely present

We may issue a substantial number of

additional shares of common or preferred stock, including under our equity incentive plan.

Any such issuances of additional shares

of common or preferred stock:

may significantly dilute the equity interests of our investors;

may subordinate the rights of holders of Common Stock if preferred stock is issued with rights senior to those afforded our Common Stock;

could cause a change in control if a substantial number of shares of our Common Stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;

may adversely affect prevailing market prices for our Common Stock.

We may issue additional shares of Common Stock or

other equity securities without stockholder approval, which will dilute existing stockholders’

interests and may depress

the market price of our Common Stock.

We have options and warrants outstanding

to purchase up to an aggregate of 23,124,339 shares of our Common Stock, including, Private Placement Warrants to purchase 4,233,333

shares and options and warrants to purchase up to 11,224,339 shares.

We also have the ability to initially issue up to 12,800,000

shares of Common Stock under the XL Fleet Corp.

2020 Equity Incentive Plan (the “2020 Plan”).

Pursuant to the 2020

Plan, the number of shares available for issuance automatically increases annually on the first day of each fiscal year during

the period beginning with the fiscal year immediately following the fiscal year during which the 2020 Plan is first approved by

the our stockholders, and ending on the second day of fiscal year 2030, in an amount equal to the lesser of:

(a) 5% of the number

of outstanding shares of Common Stock on such date;

The price of our Common Stock may fluctuate due

to a variety of factors, including:

or anticipated fluctuations in our quarterly and annual results and those of other public

companies in industry;

and strategic alliances in the industry in which we operate;

market prices and conditions

in the industry in which we operate;

changes in government

potential or actual military

conflicts or acts of terrorism;

announcements concerning

us or our competitors;

the general state of the

securities markets;

threatened or actual lawsuits,

investigations or other legal proceedings;

short-selling activity

related to our Common Stock.

These market and industry factors may materially

reduce the market price of our Common Stock, regardless of our operating performance.

In addition, we believe there has been and may

continue to be substantial trading in derivatives of our Common Stock, including short selling activity or related similar activities,

which are beyond our control and which may be beyond the full control of the SEC and Financial Institutions Regulatory Authority or “FINRA”.

While the SEC and FINRA rules prohibit some forms of short selling and other activities that may result in stock price manipulation,

such activity may nonetheless occur without detection or enforcement.

There can be no assurance that should there be any illegal manipulation

in the trading of our stock, it will be detected, prosecuted or successfully eradicated.

Significant short selling market manipulation

could cause our Common Stock trading price to decline, to become more volatile, or both.

Reports published by analysts, including projections in those

reports that differ from our actual results, could adversely affect the price and trading volume of our Common Stock.

We expect that securities research analysts will

establish and publish their own periodic projections for our business.

These projections may vary widely and may not accurately predict

the results we actually achieve.

Our stock price may decline if our actual results do not match the projections of these securities research

Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable

research about our business, our stock price could decline.

If one or more of these analysts ceases coverage of us or fails to publish

reports on us regularly, our stock price or trading volume could decline.

If securities or industry analysts do not

publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding

our Common Stock adversely, the price and trading volume of our Common Stock could decline.

The trading market for our Common Stock will

be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our

If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable

relative recommendations about our competitors, the price of our Common Stock would likely decline.

If any analyst who may cover us were

to cease their coverage or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause

our stock price or trading volume to decline.

We may issue additional Common Stock or preferred stock, including

under our equity incentive plan.

Any such issuances would dilute the interest of our stockholders and likely present other risks.

We may issue a substantial number of additional

shares of common or preferred stock, including under our equity incentive plan.

Any such issuances of additional shares of common or

preferred stock:

may significantly dilute

the equity interests of our investors;

may subordinate the rights

of holders of Common Stock if preferred stock is issued with rights senior to those afforded our Common Stock;

could cause a change in

control if a substantial number of shares of our Common Stock are issued, which may affect, among other things, our ability to use

our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;

may adversely affect prevailing

market prices for our Common Stock.

We may issue additional shares of Common Stock or other equity

securities without stockholder approval, which will dilute existing stockholders’ interests and may depress the market price of

our Common Stock.

As of December 31, 2021, we have options, RSUs

and warrants outstanding to purchase up to an aggregate of 14,583,380 shares of our Common Stock, including, Private Placement Warrants

to purchase 4,233,333 shares and options, RSUs and warrants to purchase up to 10,350,047 shares.

We also had the ability to initially

issue up to 11,003,180 shares of Common Stock under the XL Fleet Corp.

2020 Equity Incentive Plan (the “2020 Plan”).

to the 2020 Plan, the number of shares available for issuance automatically increases annually on the first day of each fiscal year during

the period beginning with the fiscal year immediately following the fiscal year during which the 2020 Plan is first approved by the our

stockholders, and ending on the second day of fiscal year 2030, in an amount equal to the lesser of:

(a) 5% of the number of outstanding

shares of Common Stock on such date;

and (b) an amount determined by the plan administrator.

We may issue additional

shares of Common Stock or other equity securities of equal or senior rank in the future in connection with, among other things,

future acquisitions or repayment of outstanding indebtedness, without stockholder approval, in a number of circumstances.

Our issuance of additional shares of

Common Stock or other equity securities of equal or senior rank would have the following effects:

our existing stockholders’

We may issue additional shares of Common

Stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions or

repayment of outstanding indebtedness, without stockholder approval, in a number of circumstances.

Our issuance of additional shares of Common Stock

or other equity securities of equal or senior rank would have the following effects:

our existing stockholders’

proportionate ownership interest in our will decrease;

the amount of cash available per share, including for payment of dividends (if any) in the future, may decrease;

the relative voting strength of each previously outstanding share of Common Stock may be diminished;

the market price of our shares of Common Stock may decline.

the amount of cash available

per share, including for payment of dividends (if any) in the future, may decrease;

the relative voting strength

of each previously outstanding share of Common Stock may be diminished;

the market price of our

shares of Common Stock may decline.

General Risk Factors

Our charter contains anti-takeover provisions that

could adversely affect the rights of our stockholders.

Our Certificate of Incorporation contains

provisions to limit the ability of others to acquire control of our or cause us to engage in change-of-control transactions, including,

among other things:

provisions that authorize our board of directors, without action by our stockholders, to issue additional shares of Common Stock and preferred stock with preferential rights determined by our board of directors;

provisions that permit only a majority of our board of directors to call stockholder meetings and therefore do not permit stockholders to call stockholder meetings;

provisions that impose advance notice requirements, minimum shareholding periods and ownership thresholds, and other requirements and limitations on the ability of stockholders to propose matters for consideration at stockholder meetings;

provisions limiting stockholders’

Recent management changes could disrupt our operations and impair

our ability to attract and retain key personnel.

We have experienced recent changes

to our senior management team, including the announced departure of Dimitri Kazarinoff effective December 1, 2021 and appointment of Eric

Tech as our Chief Executive Officer effective as of December 1, 2021.

In addition, the Company’s Chief Financial Officer, Cielo

Hernandez, resigned as of January 31, 2022.

Changes in our senior management and uncertainty regarding pending changes may disrupt our

operations, impact partner relationships, and impair our ability to recruit and retain other needed personnel.

Any such disruption or

impairment could have an adverse effect on our business.

Our warrants are accounted for as liabilities and the changes

in value of our warrants could have a material effect on our financial results.

On April 12, 2021, the Acting Director of the Division

of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations

for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations

for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”).

Specifically,

the SEC Statement focused on certain settlement terms and provisions related to certain tender offers, which terms are similar to those

contained in the warrant agreement governing our warrants.

As a result of the SEC Statement, we reevaluated the accounting treatment

of our 7,666,667 public warrants and 4,233,333 private placement warrants, and determined to classify the warrants as derivative liabilities

measured at fair value, with changes in fair value each period reported in earnings.

As a result, included on our consolidated balance

sheet as of December 31, 2021 contained elsewhere in this Annual Report are derivative liabilities related to embedded features contained

within our private warrants.

There are no public warrants outstanding as of December 31, 2021.

Accounting Standards Codification 815,

Derivatives and Hedging (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each balance

sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement

of operations.

As a result of the recurring fair value measurement, our consolidated financial statements and results of operations may

fluctuate quarterly, based on factors which are outside of our control.

Due to the recurring fair value measurement, we expect that we

will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.

As discussed under “Risks Related to Owning

Our Securities – The Price of our Common Stock may be volatile ,” the price of our Common Stock may fluctuate.

volatility of the Common Stock directly impacts the fair value of the Warrants;

hence, continued volatility in the price of our Common

Stock could result in a corresponding volatility in the fair value of the liability associated with the Warrants.

Our charter contains anti-takeover provisions that could adversely

affect the rights of our stockholders.

Our Certificate of Incorporation contains provisions

to limit the ability of others to acquire control of our or cause us to engage in change-of-control transactions, including, among other

that authorize our board of directors, without action by our stockholders, to issue additional

shares of Common Stock and preferred stock with preferential rights determined by our board

of directors;

provisions that permit

only a majority of our board of directors to call stockholder meetings and therefore do not permit stockholders to call stockholder

provisions that impose

advance notice requirements, minimum shareholding periods and ownership thresholds, and other requirements and limitations on the

ability of stockholders to propose matters for consideration at stockholder meetings;

provisions limiting stockholders’

ability to act by written consent;

a staggered board whereby our directors are divided into three classes, with each class subject to retirement and re-election once every three years on a rotating basis.

These provisions could have the effect

of depriving our stockholders of an opportunity to sell their Common Stock at a premium over prevailing market prices by discouraging

third parties from seeking to obtain control of our company in a tender offer or similar transaction.

With our staggered board

of directors, at least two annual or special meetings of stockholders will generally be required in order to effect a change in

a majority of our directors.

Our staggered board of directors can discourage proxy contests for the election of our directors and

purchases of substantial blocks of our shares by making it more difficult for a potential acquirer to gain control of our board

of directors in a relatively short period of time.

Our Certificate of Incorporation provides, subject

to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder

litigation matters, which could limit our stockholders’

ability to obtain a favorable judicial forum for disputes with us

or our directors, officers, employees or stockholders.

Our Certificate of Incorporation requires

us, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and

employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware

and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on

such stockholder’s counsel except any action (A) as to which the Court of Chancery in the State of Delaware determines

that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does

not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which

is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery

does not have subject matter jurisdiction, or (D) any action arising under the Securities Act, as to which the Court of Chancery

and the federal district court for the District of Delaware shall have concurrent jurisdiction.

Any person or entity purchasing

or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum

provisions in the Certificate of Incorporation.

This choice of forum provision may limit

a stockholder’s ability to bring a claim in a judicial forum that we find favorable for disputes with our or any of our directors,

officers, other employees or stockholders, which may discourage lawsuits with respect to such claims.

We cannot be certain that

a court will decide that this provision is either applicable or enforceable, and if a court were to find the choice of forum provision

contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, our may incur additional costs

associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

Our Certificate of Incorporation will

provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law.

Notwithstanding

the foregoing, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any

duty or liability created by the Exchange Act or the rules and regulations thereunder.

As a result, the exclusive forum provision

will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal

courts have exclusive jurisdiction.

A significant portion of our total outstanding shares

of our Common Stock are restricted from immediate resale, but may be resold into the market in the near future.

This could cause

the market price of our Common Stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares

of our Common Stock in the public market could occur at any time.

These sales, or the perception in the market that the holders

of a large number of shares intend to sell shares, could reduce the market price of our Common Stock.

In connection with the consummation

of the Business Combination, certain of Legacy XL’s stockholders and each initial stockholder of Pivotal entered into lockup

agreements with us which provides that the Common Stock issued to such holders in connection with the Business Combination is subject

to a 12-month lock-up period during which the holders have agreed, subject to certain restrictions, not to, directly or indirectly,

sell, transfer or otherwise dispose of their shares, which period may be earlier terminated if the reported closing sale price

of our Common Stock equals or exceeds $15.00 per share (subject to adjustment for stock splits, stock dividends, reorganizations,

recapitalizations or other similar transactions) for a period of 20 trading days during any 30-trading day period commencing at

least 150 days following the consummation of the Business Combination, subject to certain exceptions.

Furthermore, under a registration rights

agreement and the Subscription Agreements, we filed a registration statement after the Closing to register the resale of any shares

of Common Stock issued to the Sponsor, the Subscribers pursuant to the Subscription Agreements and certain of the stockholder

We may become involved in legal proceedings and other

matters that, if adversely adjudicated or settled, could adversely affect our financial results.

From time to time, we may be named in

lawsuits or other legal proceedings relating to our business.

In particular, the nature of our business subjects us to the risk

of lawsuits filed by customers, stockholders, competitors, business partners and others in the ordinary course of business.

a staggered board whereby

our directors are divided into three classes, with each class subject to retirement and re-election once every three years on a rotating

These provisions could have the effect of depriving

our stockholders of an opportunity to sell their Common Stock at a premium over prevailing market prices by discouraging third parties

from seeking to obtain control of our company in a tender offer or similar transaction.

With our staggered board of directors, at least

two annual or special meetings of stockholders will generally be required in order to effect a change in a majority of our directors.

Our staggered board of directors can discourage proxy contests for the election of our directors and purchases of substantial blocks

of our shares by making it more difficult for a potential acquirer to gain control of our board of directors in a relatively short period

Our Certificate of Incorporation provides, subject to limited

exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation

matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors,

officers, employees or stockholders.

Our Certificate of Incorporation provides, to

the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for

breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought

outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s

counsel except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable

party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction

of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court

or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any

action arising under the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware

shall have concurrent jurisdiction.

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock

shall be deemed to have notice of and consented to the forum provisions in the Certificate of Incorporation.

This choice of forum provision may limit a stockholder’s

ability to bring a claim in a judicial forum that we find favorable for disputes with our or any of our directors, officers, other employees

or stockholders, which may discourage lawsuits with respect to such claims.

We cannot be certain that a court will decide that this provision

is either applicable or enforceable, and if a court were to find the choice of forum provision contained in our Certificate of Incorporation

to be inapplicable or unenforceable in an action, our may incur additional costs associated with resolving such action in other jurisdictions,

which could harm our business, operating results and financial condition.

Our Certificate of Incorporation provides that

the exclusive forum provision will be applicable to the fullest extent permitted by applicable law.

Notwithstanding the foregoing, Section 27

of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange

Act or the rules and regulations thereunder.

As a result, the exclusive forum provision will not apply to suits brought to enforce any

duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

We may become involved in legal proceedings and other matters

that, if adversely adjudicated or settled, could adversely affect our financial results.

From time to time, we may be named in lawsuits

or other legal proceedings relating to our business.

In particular, the nature of our business subjects us to the risk of lawsuits filed

by customers, stockholders, competitors, business partners and others in the ordinary course of business.

As with all legal proceedings, no assurances

can be given as to the outcome of these matters.

Moreover, legal proceedings can be expensive and time consuming, and we may not

be successful in defending or prosecuting these lawsuits, which could result in settlements or damages that could adversely affect

our business, financial condition and results of operations.

Our employees and independent contractors may engage

in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have

an adverse effect on our business, prospects, financial condition and operating results.

We are exposed to the risk that our

employees and independent contractors may engage in misconduct or other illegal activity.

Misconduct by these parties could include

intentional, reckless or negligent conduct or other activities that violate laws and regulations, including production standards,

federal and state fraud, abuse, data privacy and security laws, other similar non-U.S.

laws or laws that require the true,

complete and accurate reporting of financial information or data.

It is not always possible to identify and deter misconduct by

employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling

unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming

from a failure to be in compliance with such laws or regulations.

In addition, we are subject to the risk that a person or government

could allege such fraud or other misconduct, even if none occurred.

If any such actions are instituted against us, and we are not

successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, prospects,

financial condition and operating results, including, without limitation, the imposition of significant civil, criminal and administrative

penalties, damages, monetary fines, disgorgement, integrity oversight and reporting obligations to resolve allegations of non-compliance,

imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of

our operations, any of which could adversely affect our business, prospects, financial condition and operating results.

Our failure to timely and effectively implement controls

and procedures required by Section 404(a) of the Sarbanes-Oxley Act could have a material adverse effect on our business.

As a public company, we will be required

to provide management’s attestation on internal controls.

The standards required for a public company under Section 404(a)

of the Sarbanes-Oxley Act are significantly more stringent than those that were required of us as a private company.

to continue to implement additional finance, accounting, and business operating systems, procedures, and controls as we grow our

business and organization and to satisfy existing reporting requirements.

If we fail to maintain or implement adequate controls,

if we are unable to complete the required Section 404 assessment as to the adequacy of our internal control over financial reporting

in future Form 10-K filings, or if our independent registered public accounting firm is unable to provide us with an unqualified

report as to the effectiveness of our internal control over financial reporting in future Form 10-K filings, the market price of

our stock could decline and we could be subject to sanctions or investigations by the SEC, the Nasdaq or other regulatory authorities,

which could require additional financial and management resources.

Industry disruptions and

changes in practice could impact our operating results.

A work stoppage or slowdown, including due to the

COVID-19 pandemic, at one or more of our or our outsourcing partners’, suppliers and vehicle OEMs has in the past due to

the COVID-19 pandemic and could again in the future have a material adverse effect on our business.

Moreover, legal proceedings can be expensive and time consuming, and we may not be successful

in defending or prosecuting these lawsuits, which could result in settlements or damages that could adversely affect our business, financial

condition and results of operations.

Our employees and independent contractors may engage in misconduct

or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect

on our business, prospects, financial condition and operating results.

We are exposed to the risk that our employees

and independent contractors may engage in misconduct or other illegal activity.

Misconduct by these parties could include intentional,

reckless or negligent conduct or other activities that violate laws and regulations, including production standards, U.S.

state fraud, abuse, data privacy and security laws, other similar non-U.S.

laws or laws that require the true, complete and accurate

reporting of financial information or data.

It is not always possible to identify and deter misconduct by employees and other third parties,

and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses

or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such

laws or regulations.

In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct,

even if none occurred.

If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our

rights, those actions could have a significant impact on our business, prospects, financial condition and operating results, including,

without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement,

integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, other sanctions, contractual damages,

reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our

business, prospects, financial condition and operating results.

Our failure to timely and effectively implement controls and

procedures required by Section 404(a) of the Sarbanes-Oxley Act could have a material adverse effect on our business.

As a public company, we are required to comply

with Section 404 of the Sarbanes Oxley Act of 2002 (“SOX”), which requires, among other things, that companies maintain disclosure

controls and procedures to ensure timely disclosure of material information, and that management review the effectiveness of those controls

on a quarterly basis.

Because we ceased to be an “emerging growth company” as defined in the Jumpstart Our Business Startups

Act of 2012 (the “JOBS Act”) with our transition to large accelerated filer status as of December 31, 2021, we are also now

subject to Section 404(b) of SOX, which requires that our independent registered public accounting firm provide an attestation report

on the effectiveness of our internal control over financial reporting for the first time in this Annual Report on Form 10-K, among other

additional requirements.

Effective internal controls are necessary for us to provide reliable financial reports and to help prevent fraud,

and our management and other personnel devote a substantial amount of time to these compliance requirements.

These rules and regulations

also increase our legal and financial compliance costs and make some activities more time-consuming and costly.

Industry disruptions and changes in practice could impact our

operating results.

A work stoppage or slowdown, including due to

the COVID-19 pandemic, at one or more of our or our outsourcing partners’, suppliers and vehicle OEMs has occurred in the past

due to the COVID-19 pandemic and could again in the future have a material adverse effect on our business.

The Company expects to continue

to experience production line shutdowns / slowdowns at vehicle OEMs, and some of our customers will not purchase our electric propulsion systems without OEM vehicle chassis on which

to install those systems.

Also, a significant disruption in the supply of a

key component due to a work stoppage at one of our suppliers could have a material adverse effect on our business.

We also believe

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

results in fiscal year 2021.

Lastly, Ford’s recent cancellation of the eQVM program industry wide is adversely impacting

upfitter partners’

to experience production line shutdowns / slowdowns at vehicle OEMs, and some of our customers will not purchase our electric propulsion

systems without OEM vehicle chassis on which to install those systems.

Also, a significant disruption in the supply of a key component

due to a work stoppage at one of our suppliers could have a material adverse effect on our business.

We also believe that the impact

of the global microchip shortage that the entire industry is currently experiencing will adversely impact our operating results in fiscal

Lastly, Ford’s recent cancellation of the eQVM program industry wide is adversely impacting upfitter partners’

ability and willingness to install ours systems.

This could have an adverse impact on our operating results

in fiscal year 2021.

Our business and operations could be negatively affected

if we become subject to any securities litigation or shareholder activism, which could cause us to incur significant expense, hinder

execution of business and growth strategy and impact the price of our Common Stock.

Shareholder activism, which could take

many forms or arise in a variety of situations, has been increasing recently.

Volatility in the price of our Common Stock or other

reasons may in the future cause us to become the target of securities litigation or shareholder activism.

Securities litigation

and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s and

our board of director’s attention and resources from our business.

Additionally, such securities litigation and shareholder

activism could give rise to perceived uncertainties as to our future, adversely affect its relationships with service providers

and make it more difficult to attract and retain qualified personnel.

Also, we may be required to incur significant legal fees

and other expenses related to any securities litigation and activist shareholder matters.

Further, the price of our Common Stock

and could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any

This will continue to have an adverse impact on our operating results in fiscal year

Our business and operations could be negatively affected if

we become subject to any securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution

of business and growth strategy and impact the price of our Common Stock.

Shareholder activism, which could take many forms

or arise in a variety of situations, has been increasing recently.

Volatility in the price of our Common Stock or other reasons may in

the future cause us to become the target of securities litigation or shareholder activism.

Securities litigation and shareholder activism,

Our financial results may

vary significantly from period to period due to fluctuations in our operating costs and other factors.

We expect our period-to-period financial

results to vary based on our operating costs, which we anticipate will fluctuate with the pace at which we continue to design,

develop and produce new products and increase production capacity.

Additionally, our revenues from period to period may fluctuate

as we introduce existing products to new markets for the first time and as we develop and introduce new products.

As a result of

these factors, we believe that quarter-to-quarter comparisons of our financial results, especially in the short term, are not necessarily

meaningful and that these comparisons cannot be relied upon as indicators of future performance.

Moreover, our financial results

may not meet the expectations of equity research analysts, ratings agencies or investors, who may be focused only on quarterly

financial results.

If any of this occurs, the trading price of our Common Stock could fall substantially, either suddenly or over

including potential proxy contests, could result in substantial costs and divert management’s and our board of director’s

attention and resources from our business.

Additionally, such securities litigation and shareholder activism could give rise to perceived

uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain

qualified personnel.

Also, we may be required to incur significant legal fees and other expenses related to any securities litigation

and shareholder activism.

Further, the price of our Common Stock could be subject to significant fluctuation or otherwise be adversely

affected by the events, risks and uncertainties of any securities litigation and shareholder activism.

Our financial results may vary significantly from period to

period due to fluctuations in our operating costs and other factors.

We expect our period-to-period financial results

to vary based on our operating costs, which we anticipate will fluctuate with the pace at which we continue to design, develop and produce

new products and increase production capacity.

Additionally, our revenues from period to period may fluctuate as we introduce existing

products to new markets for the first time and as we develop and introduce new products.

As a result of these factors, we believe that

quarter-to-quarter comparisons of our financial results, especially in the short term, are not necessarily meaningful and that these

comparisons cannot be relied upon as indicators of future performance.

Moreover, our financial results may not meet the expectations

of equity research analysts, ratings agencies or investors, who may be focused only on quarterly financial results.

If any of this occurs,

the trading price of our Common Stock could fall substantially, either suddenly or over time.

We intend to pursue acquisitions, investments, joint ventures

and dispositions, which could adversely affect our results of operations.

Our growth strategy includes the acquisition

of, and investment in, businesses that offer complementary products, services and technologies, augment our market coverage, or enhance

our technological capabilities, such as our recent acquisition of World Energy Efficiency Services, LLC, or World Energy.

enter into strategic alliances or joint ventures to achieve these goals.

We may not be able to identify suitable acquisition, investment,

alliance, or joint venture opportunities, or to consummate any such transactions.

In addition, our original estimates and assumptions

used in assessing any transaction may be inaccurate and we may not realize the expected financial or strategic benefits of any such transaction,

including our recent acquisition of World Energy.

Any future growth through acquisitions will depend

in part upon the continued availability of suitable acquisition candidates at attractive prices, terms and conditions, as well as sufficient

liquidity and credit to fund these acquisitions.

We may incur significant additional debt from time to time to finance any such acquisitions,

which could increase the risks associated with our leverage, including our ability to service our debt.

Acquisitions involve risks that

business judgments made concerning the value, strengths and weaknesses of businesses acquired may prove to be incorrect.

Future acquisitions

and any necessary related financings also may involve significant transaction-related expenses, which could include severance, lease

termination, transaction and deferred financing costs, among others.

We may experience, challenges in integrating

operations and information technology systems acquired from other companies.

This could result in the diversion of management’s

attention from other business concerns and the potential loss of our key employees or clients or those of the acquired operations.

integration process itself may be costly and may adversely impact our business and the acquired company’s business as it requires

coordination of geographically diverse organizations and implementation of accounting and information technology systems.

We complete acquisitions with the expectation

that they will result in various benefits, but the anticipated benefits of these acquisitions are subject to a number of uncertainties,

including the ability to timely realize accretive benefits, the level of attrition from professionals licensed or associated with the

acquired companies and whether we can successfully integrate the acquired business.

Failure to achieve these anticipated benefits could

result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could

in turn materially and adversely affect our overall business, financial condition and operating results.

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