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Item 1A. Risk Factors

2023-03-30 compared with 2022-03-01 · 703 added, 1723 removed, 34 unchanged (99% 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 below 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:

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 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.

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.

Risks Related to the Solar Industry

• The solar energy industry is an emerging market which is constantly evolving and may not develop to the size or at the rate that we expect.

• If sufficient additional demand for residential solar energy systems does not develop or takes longer to develop than we anticipate, our opportunities for future growth may decline.

• Disruptions to our solar monitoring systems could negatively impact our revenues and increase our expenses.

• Warranties provided by the manufacturers of equipment for our assets and maintenance obligations may be limited by the ability of a supplier to satisfy its warranty or performance obligations or by the expiration of applicable time or liability limits, which could reduce or void the warranty protections or may be limited in scope or magnitude of liabilities and thus, the warranties and maintenance obligations may be inadequate to protect us.

• The solar energy systems we own or may acquire have a limited operating history and may not perform as we expect.

• Problems with performance of our solar energy systems may cause us to incur expenses, may lower the value of our solar energy systems and may damage our market reputation and adversely affect our business.

• We typically bear the risk of loss and the cost of maintenance, repair and removal on solar energy systems that are owned by Spruce Power and tax equity partnerships.

• The installation and operation of solar energy systems and energy storage systems depends heavily on suitable solar and meteorological conditions, which may be impacted by the effects of climate change.

• Developments in technology or improvements in distributed solar energy generation and related technologies or components may materially adversely affect demand for our offerings.

• A material reduction in the retail price of traditional utility generated electricity or electricity from other sources could harm our business, financial condition, results of operations and prospects.

Risks Related to Our Business Operations

• We may be unable to realize the benefits anticipated by the acquisition of Legacy Spruce Power or it may take longer than anticipated for the combined company to achieve those benefits.

• 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.

• 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, 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 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 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.

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.

• 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.

Our electrified powertrain solutions could face competition from original equipment manufacturers and other providers of electrification solutions that enter the commercial vehicle electrification market.

The performance characteristics of our electrified powertrain solutions, including fuel economy and emissions levels, may vary, including due to factors outside of our control.

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.

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.

If our electrified powertrain solutions fail to perform as expected, our ability to develop, market and sell our electrified powertrain solutions could be harmed.

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

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 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 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.

• We may experience difficulties in integrating strategic acquisitions.

• We may require additional financing to support the development of our business and implementation of our growth strategy.

• We are highly dependent on the services of our Chief Executive Officer, and if we are unable to retain our Chief Executive Officer, attract and retain key employees or hire qualified management and technical personnel, our ability to compete could be harmed.

• Rising interest rates could adversely affect our financial condition.

• Servicing our debt requires a significant amount of cash to comply with certain covenants and satisfy payment obligations, and we may not have sufficient cash flow from our business to pay our substantial debt and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

• Our interest rate swaps could be adversely affected if the financial institutions holding such rate swaps fail.

• Our insurance strategy may not be adequate to protect us from all business risks.

• We are subject to cybersecurity risks to operational systems, security systems, infrastructure, integrated software 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.

• Management has limited experience in operating a public company.

• Global economic conditions and any related ongoing impact of supply chain constraints and the market of our product and service could adversely affect our results of operations.

• 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.

These, and 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.

• 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.

• 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.

• Our business may be adversely affected if we are unable to protect our intellectual property rights from unauthorized use by third parties.

Risks Related to Tax and Accounting Matters

• Changes in tax laws may materially adversely affect our business, prospects, financial condition and operating results.

• If the IRS makes determinations that the fair market value of our solar energy systems is materially lower than what we have claimed, we may have to pay significant amounts to our fund investors, and our business, financial condition, and prospects may be materially and adversely affected.

• We may be required to record an impairment expense on our goodwill or long-lived assets.

• Our ability to use net operating loss carryforwards and other tax attributes may be limited in connection with business combinations or other ownership changes.

• 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.

Risks Related to Regulation

• Our business depends in part on the regulatory treatment of third-party owned solar energy systems.

• We are subject to various environmental laws and regulations that could impose substantial costs upon us.

• Technical and regulatory limitations regarding the interconnection of solar energy systems to the electrical grid may significantly reduce our ability to sell electricity from our solar energy systems in certain markets or delay interconnections and customer in-service dates, harming our growth rate and customer satisfaction.

• We are subject to risks associated with construction, regulatory compliance and other contingencies.

• Compliance with occupational safety and health requirements and best practices can be costly and noncompliance with such requirements may result in potentially significant monetary penalties, operational delays and adverse publicity.

• A failure to comply with laws and regulations relating to interactions by us with residential customers could result in negative publicity, claims, investigations and litigation and adversely affect our financial performance.

• 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.

• Our business is subject to complex and evolving data protection laws.

Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, increased cost of operations or otherwise harm our business.

• Our business is subject to consumer protection laws.

Such laws and regulatory enforcement policies and priorities are subject to change that may negatively impact our business.

• The highly regulated environment in which our capital providers operate could have an adverse effect on our business.

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.

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.

• We have no current plans to declare a dividend in the foreseeable future.

• We are a “smaller reporting company” and will be able to avail ourselves of reduced disclosure requirements applicable to smaller reporting companies, which could make our common stock less attractive to investors.

• We will incur increased costs related to operating as a public company, and Management will devote substantial time to new compliance initiatives.

• If our stock price declines, our Common Stock may be subject to delisting from the New York Stock Exchange.

• The price of our Common Stock may be volatile.

• 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.

• 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.

1 unchanged sentence

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

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

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 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.

• Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.

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

• 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.

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 the Solar Industry

The solar energy industry is an emerging market which is constantly evolving and may not develop to the size or at the rate that we expect.

The solar energy industry is an emerging and constantly evolving market opportunity.

We believe the solar energy industry is still developing and maturing, and we cannot be certain that the market will grow to the size or at the rate we expect.

Any future growth of the solar energy market and the success of our solar service offerings depend on many factors beyond our control, including recognition and acceptance of the solar service market by consumers, the pricing of alternative sources of energy, a favorable regulatory environment, the continuation of expected tax benefits and other incentives, and our ability to provide our solar service offerings cost effectively.

If the markets for solar energy do not develop to the size or at the rate we expect, our business may be adversely affected.

Solar energy has yet to achieve broad market acceptance and depends in part on continued support in the form of rebates, tax credits, and other incentives from federal, state and local governments.

If this support diminishes materially, our ability to obtain external financing on acceptable terms, or at all, could be materially adversely affected.

These types of funding limitations could lead to inadequate financing support for the anticipated growth in our business.

Furthermore, growth in residential solar energy depends in part on macroeconomic conditions, retail prices of electricity and customer preferences, each of which can change quickly.

Declining macroeconomic conditions, including in the job markets and residential real

estate markets, could contribute to instability and uncertainty among customers and impact their financial wherewithal, credit scores or interest in entering into long-term contracts, even if such contracts would generate immediate and long-term savings.

Furthermore, market prices of retail electricity generated by utilities or other energy sources could decline for a variety of reasons, as discussed further below.

Any such declines in macroeconomic conditions, changes in retail prices of electricity or changes in customer preferences would adversely impact our business.

If sufficient additional demand for residential solar energy systems does not develop or takes longer to develop than we anticipate, our opportunities for future growth may decline.

The distributed residential solar energy market is at a relatively early stage of development in comparison to fossil fuel-based electricity generation.

If additional demand for distributed residential solar energy systems fails to develop sufficiently or takes longer to develop than we anticipate, we may be unable to grow our business.

In addition, demand for solar energy systems and energy storage systems in our targeted markets may not develop to the extent we anticipate.

As a result, we may be unsuccessful in broadening our customer base through the acquisition of additional residential solar portfolios.

Many factors may affect the demand for solar energy systems, including the following:

• availability, substance and magnitude of solar support programs including government targets, subsidies, incentives, renewable portfolio standards and residential net metering rules;

• the relative pricing of other conventional and non-renewable energy sources, such as natural gas, coal, oil and other fossil fuels, wind, utility-scale solar, nuclear, geothermal and biomass;

• performance, reliability and availability of energy generated by solar energy systems compared to conventional and other non-solar renewable energy sources;

• availability and performance of energy storage technology, the ability to implement such technology for use in conjunction with solar energy systems and the cost competitiveness such technology provides to customers as compared to costs for those customers reliant on the conventional electrical grid;

• general economic conditions and the level of interest rates.

The residential solar energy industry is constantly evolving, which makes it difficult to evaluate our prospects.

We cannot be certain if historical growth rates reflect future opportunities or whether growth anticipated by us will be realized.

The failure of distributed residential solar energy to achieve, or its being significantly delayed in achieving, widespread adoption could have a material adverse effect on our business, financial condition and results of operations.

Disruptions to our solar monitoring systems could negatively impact our revenues and increase our expenses.

Our ability to accurately charge our customers for the energy produced by our solar energy systems primarily depends on the cellular connection for the related monitoring system, which we are responsible for maintaining in a functional state so that we may receive data regarding the solar energy systems' production from their residences.

We could incur significant expenses or disruptions of our operations in connection with failures of our solar monitoring systems, including failures of such connections, that would prevent us from accurately monitoring solar energy production.

In addition, sophisticated hardware and operating system software and applications we procure from third parties may contain defects in design or manufacture, including "bugs" and other problems that could unexpectedly interfere with the operation of our solar energy systems or energy storage systems.

The costs to us to eliminate or alleviate viruses and bugs, or any problems associated with failures of our cellular connections could be significant.

We have in the past experienced periods where some of our cellular connections have been unavailable and, as a result, we have been forced to estimate the production of their solar energy systems.

Such estimates may prove inaccurate relative to actual production from the systems.

We have the ability to true up once we have the actual production data.

Warranties provided by the manufacturers of equipment for our assets and maintenance obligations may be limited by the ability of a supplier to satisfy its warranty or performance obligations or by the expiration of applicable time or liability limits, which could reduce or void the warranty protections or may be limited in scope or magnitude of liabilities and thus, the warranties and maintenance obligations may be inadequate to protect us.

We agree to maintain the solar energy systems and energy storage systems installed on our customers' homes during the length of the term of our Customer Agreements, which are typically 20 years.

We are exposed to any liabilities arising from

the solar energy systems' failure to operate properly and are generally under an obligation to ensure each solar energy system remains in good condition during the term of the Customer Agreement.

We are the beneficiary of the manufacturers' warranty coverage, typically of 20 years.

In the event that such warranty providers file for bankruptcy, cease operations or otherwise become unable or unwilling to fulfill their warranty or maintenance obligations, we may not be adequately protected by such warranties or maintenance obligations.

Even if such warranty or maintenance providers fulfill their obligations, the warranty or maintenance obligations may not be sufficient to protect us against all of our losses.

These warranties are subject to liability and other limits.

If we seek warranty protection and a warranty provider is unable or unwilling to perform its warranty obligations, whether as a result of its financial condition or otherwise, or if the term of the warranty or maintenance obligation has expired or a liability limit has been reached, there may be a reduction or loss of protection for the affected assets, which could have a material adverse effect on our business, financial condition and results of operations.

Our failure to accurately predict future liabilities related to material quality or performance expenses could result in unexpected volatility in our financial condition.

Because of the long estimated useful life of our solar energy systems, we have been required to make assumptions and apply judgments regarding a number of factors, including our anticipated rate of warranty claims and the durability, performance and reliability of our solar energy systems.

We made these assumptions based on the historic performance of similar solar energy systems or on accelerated life cycle testing.

Our assumptions could prove to be materially different from the actual performance of our solar energy systems, causing us to incur substantial expense to repair or replace defective solar energy systems in the future or to compensate customers for solar energy systems that do not meet their performance guarantees.

Equipment defects, serial defects or operational deficiencies also would reduce our revenue from Customer Agreements because the customer payments under such Customer Agreements are dependent on solar energy system production or would require us to make refunds under performance guarantees.

Any widespread product failures or operating deficiencies may damage our market reputation and adversely impact our financial results.

The solar energy systems we may acquire may have a limited operating history and may not perform as we expect.

Some of the solar energy systems we may acquire in the future may have recently commenced operations or otherwise have a limited operating history.

The ability of such systems to perform as we expect will also be subject to risks inherent in newly constructed renewable energy assets, including breakdowns and outages, latent defects, equipment that performs below our expectations, system failures and outages.

As a result, our assumptions and estimates regarding the performance of these solar energy systems are, and will be, made without the benefit of a meaningful operating history, which may impair our ability to accurately assess the potential profitability of the solar energy systems and, in turn, our results of operations, financial condition and cash flows.

Problems with performance of our solar energy systems may cause us to incur expenses, may lower the value of our solar energy systems and may damage our market reputation and adversely affect our business.

In most cases, our Customer Agreements contain a performance guarantee in favor of the customer.

Customer Agreements with performance guarantees require us to provide a bill credit (or in limited cases, refund money) to the customer if the solar energy system fails to generate the minimum amount of electricity, as specified in the Customer Agreement, in a given term, beginning as early as the first anniversary of the execution of the Customer Agreement and annually thereafter.

Product liability claims against us or accidents could result in adverse publicity and potentially significant monetary damages.

It is possible our solar energy systems or energy storage systems could injure our customers or other third parties or our solar energy systems or energy storage systems could cause property damage as a result of product malfunctions, defects, improper installation, fire or other causes.

Any product liability claim we face could be expensive to defend and may divert Management's attention.

The successful assertion of product liability claims against us could result in potentially significant monetary damages, potential increases in insurance expenses, penalties or fines, subject us to adverse publicity, damage our reputation and competitive position and adversely affect sales of solar energy systems or energy storage systems.

In addition, product liability claims, injuries, defects or other problems experienced by other companies in the residential solar industry could lead to unfavorable market conditions to the industry as a whole and may have an adverse effect on our ability to expand our portfolio of Customer Agreements and related solar energy systems and energy storage systems, thus affecting our business, financial condition and results of operations.

We typically bear the risk of loss and the cost of maintenance, repair and removal on solar energy systems that are owned by our subsidiaries and included in securitization and tax equity vehicles.

We typically bear the risk of loss and are generally obligated to cover the cost of maintenance, repair and removal for any of our solar energy systems.

Under our customer agreements we agree to operate and maintain the solar energy system for

a fixed fee calculated to cover our future expected maintenance costs.

If our solar energy systems require an above-average amount of repairs or if the cost of repairing the solar energy systems were higher than our estimate, we would need to perform such repairs without additional compensation.

If our solar energy systems are damaged as the result of a natural disaster beyond our control, losses could exceed or be excluded from our insurance policy limits and we could incur unforeseen costs that could harm our business and financial condition.

We may also incur significant costs for taking other actions in preparation for, or in reaction to, such events.

We purchase property insurance with industry standard coverage and limits approved by an investor's third-party insurance advisors to hedge against such risk, but such coverage may not cover our losses.

The operation of solar energy systems and energy storage systems depends heavily on suitable solar and meteorological conditions, which may be impacted by the effects of climate change.

The energy produced and the revenue and cash receipts generated by a solar energy system depend on suitable solar, atmospheric and weather conditions, all of which are beyond our control.

Our economic model and projected returns on our solar energy systems require achievement of certain production results from our systems and, in some cases, we guarantee these results to our consumers.

If the solar energy systems underperform for any reason, our business could suffer.

For example, the amount of revenue we recognize in a given period and the amount of our obligations under the performance guarantees of our Customer Agreements are dependent in part on the amount of energy generated by solar energy systems under such Customer Agreements.

Furthermore, climate change could exacerbate the frequency and severity of weather events in all areas where we operate.

Climate change or other factors could also cause prevailing weather patterns to materially change in the future, making it harder to predict the average annual amount of sunlight striking each location where our solar energy systems and energy storage systems are.

Potential negative effects of climate change include, among others, a temporary decrease in solar availability in certain locations, disruptions in transmission grids and delays or reductions in new installations.

These or other effects could make our solar energy systems less economical overall or make individual solar energy systems less economical.

Any of these effects on meteorological conditions could harm our business, financial condition and results of operations.

Developments in technology or improvements in distributed solar energy generation and related technologies or components may materially adversely affect demand for our offerings.

Significant developments in technology, such as advances in distributed solar power generation, energy storage solutions such as batteries, energy storage management systems, the widespread use or adoption of fuel cells for residential or commercial properties or improvements in other forms of distributed or centralized power production may materially and adversely affect demand for our offerings and otherwise affect our business.

Future technological advancements may result in reduced prices to consumers or more efficient solar energy systems than those available today, either of which may result in current customer dissatisfaction.

We may not be able to adopt these new technologies as quickly as our competitors or on a cost-effective basis.

Due to the length of our Customer Agreements, the solar energy system deployed on a customer's residence may be outdated prior to the expiration of the term of the related Customer Agreement, reducing the likelihood of renewal of our Customer Agreement at the end of the applicable term and possibly increasing the occurrence of customers seeking to terminate or cancel their Customer Agreements or defaults.

If current customers become dissatisfied with the price they pay for their solar energy system under our Customer Agreements relative to prices that may be available in the future or if customers become dissatisfied by the output generated by their solar energy systems relative to future solar energy system production capabilities, or both, this may lead to customers seeking to terminate or cancel their Customer Agreements or higher rates of customer default and have an adverse effect on our business, financial condition and results of operations.

Additionally, recent technological advancements may impact our business in ways we do not currently anticipate.

Any failure by us to adopt or have access to new or enhanced technologies or processes, or to react to changes in existing technologies, could result in product obsolescence or the loss of competitiveness of and decreased consumer interest in our solar energy services, which could have a material adverse effect on our business, financial condition and results of operations.

A material reduction in the retail price of traditional utility generated electricity or electricity from other sources could harm our business, financial condition, results of operations and prospects.

We believe that a significant number of our customers decide to buy solar energy because they want to pay less for electricity than what is offered by the traditional utilities.

However, distributed residential solar energy has yet to achieve broad market adoption as evidenced by the fact that distributed solar has penetrated less than 5% of its total addressable market in the U.S.

residential sector.

The customer’s decision to choose solar energy may also be affected by the cost of other renewable energy sources.

Decreases in the retail prices of electricity from the traditional utilities or from other renewable energy sources would harm

our ability to offer competitive pricing and could harm our business.

The price of electricity from traditional utilities could decrease as a result of:

• construction of a significant number of new power generation plants, including plants utilizing natural gas, nuclear, coal, renewable energy or other generation technologies;

• relief of transmission constraints that enable local centers to generate energy less expensively;

• reductions in the price of natural gas;

• utility rate adjustment and customer class cost reallocation;

• energy conservation technologies and public initiatives to reduce electricity consumption;

• development of new or lower-cost energy storage technologies that have the ability to reduce a customer’s average cost of electricity by shifting load to off-peak times;

• development of new energy generation technologies that provide less expensive energy.

A reduction in utility electricity prices would make the purchase or the lease of solar energy systems less economically attractive.

If the retail price of energy available from traditional utilities were to decrease due to any of these reasons, or other reasons, there may be fewer portfolios available for the Company to acquire and our growth would be limited.

Risks Related to Our Business Operations

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 $93.9 million for the year ended December 31, 2022, 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 near future.

We recently completed the acquisition of Legacy Spruce Power and discontinued and disposed of our legacy businesses, and as a result our future net income or loss will depend upon the implementation of our strategy to expand our new solar power business.

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.

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

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 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 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.

• Costs which may be incurred in connection with the implementation of our business strategy;

• Costs related to our general and administrative functions to support our public company obligations;

• Acquisition and integration of other solar energy portfolios or businesses, including the Spruce Power business.

Because we will incur portions of the costs and expenses from these efforts before we receive expected 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.

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.

We have recently changed our business through the acquisition of Legacy Spruce Power and the discontinuation of our Drivetrain and XL Grid businesses.

As a result, our business is now focused on the residential solar business, and we intend to grow our operations in this business.

We expect our future growth to include:

• leveraging the Spruce Power platform to grow revenues by providing subscription-based solutions for rooftop solar, energy storage, EV charging and other energy-related products to homeowners and small businesses;

• acquiring additional residential solar portfolios;

• expanding the Management team;

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• acquiring other businesses.

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 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.

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.

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 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;

low oil prices;

increased support from local, state and federal governments for other alternative fuel systems, such as but not limited to hydrogen, natural gas and bio-fuels, which could have an impact on the acceptance of our electrified powertrain solutions.

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 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.

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.

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:

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.

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 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.

Over the long-term, we intend to continue to hire additional personnel as needed for our current and future business.

Because we operate in an evolving technology field, 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 business model requires further market penetration to drive growth and a failure to acquire additional residential solar portfolios would have a material adverse effect on our operating results and business and could result in substantial liabilities that exceed our resources.

It may be 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 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 Management’s growth strategies (including acquisition of additional residential solar portfolios and the launch of new products and services) 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 may sustain substantial operating expenses without generating sufficient revenues to cover expenditures.

We may be unable to realize the benefits anticipated by the acquisition of Legacy Spruce Power or it may take longer than anticipated for the combined company to achieve those benefits.

Our realization of the benefits anticipated as a result of the acquisition of Legacy Spruce Power will depend in part on the integration of Legacy Spruce Power's business with our organization under a new Management team led by our new President and Chief Executive Officer, Christian Fong.

The dedication of Management resources to this integration could detract attention from our day-to-day business, and we cannot assure shareholders that there will not be substantial costs associated with the transition process or other negative consequences as a result of these integration efforts.

These effects, including, but not limited to, incurring unexpected costs or delays in connection with integration of the Legacy Spruce Power business, or the failure of the Legacy Spruce Power business to perform as expected, could harm our results of operations.

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

Although we discontinued our Drivetrain business and sold some of the assets relating to this business, we retained warranty obligations relating to the historical business.

If our warranty reserves are inadequate to cover future warranty claims, 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 former customers.

There can be no assurances that then-existing warranty reserves will be sufficient to cover all claims.

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 acquisition of residential solar portfolios and servicing the same, 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.

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 to do so.

We may otherwise fail to satisfy the required conditions and otherwise complete a planned acquisition or other strategic transaction on a timely basis or at all.

We may face legal or regulatory proceedings relating to a planned acquisition or other strategic transaction.

Furthermore, acquisitions and the subsequent integration of new assets and businesses into our own require significant attention from 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

(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.

We may experience difficulties in integrating strategic acquisitions.

The integration of acquired companies or portfolios and their operations into our operations involves a number of risks, including:

• the acquisition may experience losses that could adversely affect our profitability;

• unanticipated costs relating to the integration of acquisition may increase our expenses;

• possible failure to accomplish the strategic objectives for an acquisition;

• the loss of key personnel of the acquisition;

• the loss of key customers, vendors and other business partners of an acquisition;

• challenges in integrating the operations, information technology systems, and personnel acquired from acquisition;

• difficulty integrating an acquisition’s accounting, management information and other administrative systems;

• inability to achieve the financial and strategic goals for the acquisition and combined businesses;

• incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our results of operations;

• potential failure of the due diligence processes to identify significant issues with product quality, legal, and financial liabilities, among other things;

• difficulties in achieving planned cost-savings and synergies may increase our expenses or decrease our revenues;

• diversion of Management’s attention could impair their ability to effectively manage our business operations;

• the acquisition may require significant expenditures for product development or regulatory approvals;

• the acquisition may lack adequate internal controls or have other issues with its financial systems;

• there may be regulatory compliance or other issues relating to the business practices of an acquisition;

• we may record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential impairment charges and we may also incur amortization expenses related to intangible assets;

• unanticipated Management or operational problems or liabilities may adversely affect our profitability and financial condition.

Additionally, we may borrow funds or issue equity to finance strategic acquisitions.

Debt leverage resulting from future acquisitions could adversely affect our operating margins and limit our ability to capitalize on future business opportunities.

Such borrowings may also be subject to fluctuations in interest rates.

Equity issuances may dilute our existing shareholders and adversely affect the market price of our shares.

We may require additional financing to support the development of our business and implementation of our growth strategy.

We expect to have sufficient capital for the next 12 months for our operations and strategic initiatives.

However, we may require additional capital investment in the future to fund operations and support strategic initiatives.

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

Additional financing may not be available on terms acceptable to us.

If we are unable to obtain needed financing on acceptable terms, we may not be able to implement our business plan, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we raise additional funds through the sale of equity, convertible debt or other equity-linked securities, our shareholders' ownership will be diluted.

We may issue securities that have rights, preferences and privileges senior to our Common Stock.

We are highly dependent on the services of our Chief Executive Officer, and if we are unable to retain our Chief Executive Officer, attract and retain key employees or hire qualified management and technical 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 Christian Fong, our Chief Executive Officer.

Fong is the source of many of the ideas and execution driving our company.

Fong 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 have no plans to maintain in the future, key man life insurance policies with respect to Christian Fong.

Any failure by Management and our employees to perform as expected may have a material adverse effect on our business, prospects, financial condition and operating results.

Rising interest rates could adversely affect our financial condition.

With the acquisition of Legacy Spruce Power on September 9, 2022, we assumed $542.5 million of long-term debt with $499.8 million outstanding as of December 31, 2022, a majority of which is variable rate debt.

Although we use interest rate swap contracts to mitigate the market risk associated with rising interest rates, significant increases in interest rates may still increase our cost of capital.

Servicing our debt requires a significant amount of cash to comply with certain covenants and satisfy payment obligations, and we may not have sufficient cash flow from our business to pay our substantial debt and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

We have substantial amounts of debt, including $499.8 million of long-term debt outstanding as of December 31, 2022 that was assumed in acquisition of Legacy Spruce Power , as discussed in more detail in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, in

each case, included in this periodic report.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.

Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures to operate our business.

If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive.

Our ability to timely repay or otherwise refinance our indebtedness will depend on the capital markets and our financial condition at such time.

We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations and negatively impact our financial condition and prospects.

Our interest rate swaps could be adversely affected if the financial institutions holding such rate swaps fail.

We use derivative financial instruments, primarily interest rate swaps, to manage our exposure to interest rate risks on our syndicated term loans, which are recognized on the balance sheet at their fair values.

Our interest rate swaps are with third-party financial institutions, including Silicon Valley Bridge Bank, N.A., which is the successor to Silicon Valley Bank.

If Silicon Valley Bridge Bank, or another third-party financial institution that holds the Company’s interest rate swaps, fails to perform under the interest rate swaps, our operating liquidity and financial performance could be materially and adversely affected.

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.

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 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 results.

We are subject to cybersecurity risks to operational systems, security systems, infrastructure, integrated software 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:

• operational systems, including business, financial, accounting, product development, data processing or production processes, owned by us or our third-party vendors or suppliers;

• facility security systems, owned by us or our third-party vendors or suppliers;

• solar monitoring technology owned by us or our third-party vendors or suppliers;

• integrated software;

• customer data that our processes or our third-party vendors or suppliers process on our behalf.

Such cyber incidents could:

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;

result in loss of trade secrets or other proprietary or competitively sensitive information;

compromise certain information of customers, employees, suppliers or others;

jeopardize the security of our facilities;

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

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.

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 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, 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’, 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 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.

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

that the operators of vehicles using our electrified powertrain solutions will realize the expected fuel savings and fuel economy and

GHG emission reductions.

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 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.

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.

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.

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.

Any of these results could materially adversely affect our business, prospects, financial condition and operating results.

Management has limited experience in operating a public company.

Our executive officers have limited experience in the management of a publicly traded company.

Management may not successfully or effectively manage a public company that is 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 in the U.S.

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 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.

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

We are subject to 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 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.

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.

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.

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.

Global economic conditions and any related ongoing impact of supply chain constraints and the market of our product and service could adversely affect our results of operations.

The uncertain condition of the global economy as well as the current conflict between Russia and Ukraine, including the retaliatory economic measures taken by Unites States, European, and others continue impacting businesses around the world.

The deterioration of the economic conditions or financial uncertainty to provide our services could reduce customers’ confidence and affect negatively our sales and results of operations.

Also, the recent inflationary pressures have increased the cost of energy, raw materials, and other indirect costs used in our business could adversely influence customer purchasing decisions.

We cannot predict whether or when such circumstances may change, improve or worsen in the near future.

Unfavorable publicity, or a failure to respond effectively to adverse publicity, could harm our reputation and adversely affect our business.

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 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.

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.

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.

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

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

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

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

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 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 price.

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 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.

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 residential solar and other products and services, 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:

• 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 of an applicable product or service.

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 results.

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:

• any patent 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.

Further, policing the unauthorized use of our intellectual property in foreign jurisdictions may be difficult.

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.

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.

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.

Risks Related to Tax and Accounting Matters

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, 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.

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.

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 provide our solar service systems to customers on an economically viable basis depends in part on our ability to finance these systems with fund investors who seek particular tax and other benefits.

Our solar service systems have been eligible for federal investment tax credits, U.S.

Treasury grants, and other tax benefits.

We have relied on, and will continue to rely on, tax equity investment funds, which are financing structures that monetize a substantial portion of those benefits, in order to finance our solar service offerings.

If, for any reason, we are unable to continue to monetize those benefits through these arrangements, we may be unable to provide and maintain our solar service offerings for customers on an economically viable basis.

The availability of this tax-advantaged financing depends upon many factors, including:

• our ability to compete with other solar energy companies for the limited number of potential fund investors, each of which has limited funds and limited appetite for the tax benefits associated with these financings;

• the state of financial and credit markets;

• changes in the legal or tax risks associated with these financings;

• legislative or regulatory changes or decreases to these incentives including the anticipated step-down of the Commercial ITC (described below).

The federal government currently offers an investment tax credit (“Commercial ITC”) under Section 48(a) of the Internal Revenue Code of 1986, as amended (the “Code”), for the installation of certain solar power facilities owned for business purposes.

If construction on the facility began before January 1, 2020, the amount of the Commercial ITC available is 30%, if construction began during 2020, 2021, or 2022, the amount of the Commercial ITC available is 26%, and if construction begins during 2023, the amount of the Commercial ITC available is 22%.

The Commercial ITC steps down to 10% if construction of the facility begins after December 31, 2023 or if the facility is not placed in service before January 1, 2026.

The depreciable basis of a solar facility is also reduced by 50% of the amount of any Commercial ITC claimed.

The Internal Revenue Service (the “IRS”) provided taxpayers guidance in Notice 2018-59 for determining when construction has begun on a solar facility.

This guidance is relevant for any facilities which we seek to deploy in future years but take advantage of a higher tax credit rate available for an earlier year.

For example, we have sought to avail ourselves of the methods set forth in the guidance to retain the 30% Commercial ITC that was available prior to January 1, 2020 by incurring certain costs and taking title to equipment in 2019 or early 2020 and/or by performing physical work on components that will be installed in solar facilities.

Prior to 2023, we may seek to avail ourselves of the 26% credit rate by using these methods to establish the beginning of construction in 2022 and we may plan to similarly further utilize the program in future years if the Commercial ITC step down continues.

While we have attempted to ensure that these transactions will comply with the guidance issued by the IRS, this guidance is relatively limited and potentially subject to change.

Either the IRS or our financing partners could challenge whether a facility is properly qualified for the relevant tax credit rate under the guidance, which could either result in lower tax equity advances or trigger indemnification obligations to our tax equity investors.

It is also possible that we will not be able to use all of the equipment purchased or manufactured to satisfy the beginning of construction rules set forth in the guidance.

The federal government also currently offers a personal income tax credit under Section 25D of the Code (“Residential Energy Efficiency Tax Credit”), for the installation of certain solar power facilities owned by residential taxpayers, which is applicable to customers who purchase a solar energy system outright as opposed to entering into a Customer Agreement.

The Residential Energy Efficiency Tax Credit is currently 26% if the facility is placed in service during 2020, 2021, or 2022, and 22% if placed in service during 2023.

The Residential Energy Efficiency Tax Credit is not available for property placed in service after December 31, 2023.

Future reductions in the Commercial ITC and any further legislative reductions or changes to the Commercial ITC may impact the attractiveness of solar energy to certain tax equity investors and could potentially harm our business.

Obtaining tax equity funding (and tax equity funding on advantageous terms) also may become more challenging.

Additionally, the benefits of the Commercial ITC have historically enhanced our ability to provide competitive pricing for customers.

Further reductions in, eliminations of, or expirations of, governmental incentives such as the Residential Energy Efficiency Tax Credit could reduce the number of customers who choose to purchase our solar energy systems.

Additionally, potential investors must remain satisfied that the structures that we offer make the tax benefits associated with solar energy systems available to these investors, which depends on the investors’ assessment of the tax law, the absence of any unfavorable interpretations of that law and the continued application of existing tax law and interpretations to our funding structures.

Changes in existing law or interpretations of existing law by the IRS and/or the courts could reduce the willingness of investors to invest in funds associated with these solar energy systems.

Moreover, reductions to the corporate tax rate may have reduced the appetite for tax benefits overall, which could reduce the pool of available funds.

Accordingly, we cannot assure you that this type of financing will continue to be available to us.

New investment fund structures or other financing mechanisms may become available, but if we are unable to take advantage of these fund structures and financing mechanisms, we may be at a competitive disadvantage.

If, for any reason, we are unable to finance our solar service offerings through tax-advantaged structures or if we are unable to realize or monetize Commercial ITCs or other tax benefits, we may no longer be able to provide our solar service offerings to new customers on an economically viable basis, which would have a material adverse effect on our business, financial condition, and results of operations.

If the IRS makes determinations that the fair market value of our solar energy systems is materially lower than what we have claimed, we may have to pay significant amounts to our fund investors, and our business, financial condition, and prospects may be materially and adversely affected.

We and our fund investors claim the Commercial ITC or the U.S.

Treasury grant in amounts based on the fair market value of our solar energy systems.

We have obtained independent appraisals to determine the fair market values we report for claiming Commercial ITCs and U.S.

Treasury grants.

With respect to U.S.

Treasury grants, the U.S.

Treasury Department reviews the reported fair market value in determining the amount initially awarded, and the IRS may also subsequently audit the fair market value and determine that amounts previously awarded constitute taxable income for U.S.

federal income tax purposes.

With respect to Commercial ITCs, the IRS may review the fair market value on audit and determine that the tax credits previously claimed must be reduced.

If the fair market value is determined in these circumstances to be less than what we or our tax equity investment funds reported, we may owe our fund investors an amount equal to this difference (including any interest and penalties), plus any costs and expenses associated with a challenge to that valuation.

We could also be subject to tax liabilities, including interest and penalties.

If the IRS further disagrees now or in the future with the amounts we or our tax equity investment funds reported regarding the fair market value of our solar energy systems, it could have a material adverse effect on our business, financial condition, and prospects.

We may be required to record an impairment expense on our goodwill or long-lived assets.

We are required under generally accepted accounting principles to test goodwill for impairment at least annually or when events or changes in circumstances indicate that the carrying amount may be impaired, and to review our long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

Factors that can lead to impairment of goodwill and long-lived assets include significant adverse changes in the business climate and actual or projected operating results, declines in the financial condition of our business and sustained decrease in our stock price.

If we identify any factors that could indicate an impairment, including a sustained decrease in our stock price, we may be required to record charges to earnings if our goodwill becomes impaired.

Our ability to use net operating loss carryforwards and other tax attributes may be limited in connection with the acquisition of Legacy Spruce Power 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.

As of December 31, 2022, we had U.S.

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.

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.

federal and state net operating loss carryforwards of approximately $279.8 million and $206.7 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.

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 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

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 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.

Risks Related to Regulation

Our business depends in part on the regulatory treatment of third-party owned solar energy systems.

Retail sales of electricity by third parties such as us face regulatory challenges in some states and jurisdictions, including states and jurisdictions we intend to enter where the laws and regulatory policies have not historically embraced competition to the service provided by the vertically integrated centralized electric utility.

Some of the principal challenges pertain to whether third-party owned solar energy systems qualify for the same levels of rebates or other non-tax incentives available for customer‑owned solar energy systems, whether third-party owned solar energy systems are eligible at all for these incentives and whether third-party owned solar energy systems are eligible for net metering and the associated significant cost savings.

Furthermore, in some states and utility territories third parties are limited in the way they may deliver solar to their customers.

These regulatory constraints may, for example, give rise to various property tax issues.

Changes in law and reductions in, eliminations of or additional requirements for, benefits such as rebates, tax incentives and favorable net metering policies decrease the attractiveness of new solar energy systems to distributed residential solar power companies and the attractiveness of solar energy systems to customers, which could reduce our acquisition opportunities.

Such a loss or reduction could also adversely impact our access to capital and reduce our willingness to pursue solar energy systems due to higher operating costs or lower revenues.

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.

Technical and regulatory limitations regarding the interconnection of solar energy systems to the electrical grid may significantly reduce our ability to sell electricity from our solar energy systems in certain markets or delay interconnections and customer in-service dates, harming our growth rate and customer satisfaction.

Technical and regulatory limitations regarding the interconnection of solar energy systems to the electrical grid may curb or slow our growth in key markets.

Utilitie s throughout the country follow different rules and regulations regarding interconnection and regulators or utilities have or could cap or limit the amount of solar energy that can be interconnected to the grid.

Our solar energy systems generally do not provide power to homeowners until they are interconnected to the grid.

With regard to interconnection limits, the Federal Energy Regulatory Commission , in promulgating the first form of small generator interconnection procedures, recommended limiting customer-sited intermittent generation resources, such as our solar energy systems, to a certain percentage of peak load on a given electrical feeder circuit.

Similar limits have been adopted by many states as a de facto standard and could constrain our ability to market to customers in certain geographic areas where the concentration of solar installations exceeds this limit.

Furthermore, in certain areas, we benefit from policies that allow for expedited or simplified procedures related to connecting solar energy systems and energy storage systems to the electrical grid.

We also are required to obtain interconnection permission for each solar energy system from the local utility.

In many states and territories, by statute, regulations or administrative order, there are standardized procedures for interconnecting distributed residential solar energy systems and related energy storage systems to the electric utility's local distribution system.

However, approval from the local utility could be delayed as a result of a backlog of requests for interconnection or the local utility could seek to limit the number of customer interconnections or the amount of solar energy on the grid.

In some states, such as New Jersey and Massachusetts, certain utilities such as municipal utilities or electric cooperatives are exempt from certain interconnection requirements.

If expedited or simplified interconnection procedures are changed or cease to be available, if interconnection approvals from the local utility are delayed or if the local utility seeks to limit interconnections, this could decrease the attractiveness of new solar energy systems and energy storage systems to distributed residential solar power companies, including us, and the attractiveness of solar energy systems and energy storage systems to customers.

Delays in interconnections could also harm our growth rate and customer satisfaction scores.

Such limitations or delays could also adversely impact our access to capital and reduce our willingness to pursue solar energy systems and energy storage systems due to higher operating costs or lower revenues from Customer Agreements.

Such limitations would negatively impact our business, results of operations, future growth and cash flows.

As adoption of solar distributed generation rises, along with the increased operation of utility-scale solar generation, the amount of solar energy being contributed to the electrical grid may surpass the capacity anticipated to be needed to meet aggregate demand.

If solar generation resources reach a level capable of producing an over-generation situation, some existing solar generation resources may have to be curtailed to maintain operation of the electrical grid.

In the event such an over-generation situation were to occur, this could also result in a prohibition on the addition of new solar generation resources.

The adverse effects of such a curtailment or prohibition without compensation could adversely impact our business, results of operations, future growth and cash flows.

We are subject to risks associated with construction, regulatory compliance and other contingencies.

The marketing and installation of solar energy systems and energy storage systems is subject to oversight and regulation in accordance with national, state and local laws and ordinances relating to consumer protection, building, fire and electrical codes, professional codes, safety, environmental protection, utility interconnection, metering and related matters.

We also rely on certain third-party contractors to obtain and maintain permits and professional licenses, including as contractors, and other authorizations from various regulatory authorities and abide by their respective conditions and requirements in many of the jurisdictions in which we operate.

A failure by us to obtain necessary permits or encounter delays in obtaining or renewing such permits or to use properly licensed third-party contractors could adversely affect our operations in those jurisdictions.

Furthermore, we may become subject to similar regulatory requirements in some jurisdictions in which we operate.

It is difficult and costly to track the requirements of every authority with jurisdiction over our operations and our solar energy systems.

Separately, we are subject to regulations and potential liability under the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation, and Liability Act related to the disposal of wastes generated in connection with our operations.

Regulatory authorities may impose new government regulations or utility policies, change existing government regulations or utility policies, may seek expansive interpretations of existing regulations or policies pertaining to our services or solar energy systems and energy storage systems or may initiate associated investigations or enforcement actions or impose penalties or reject solar energy systems and energy storage systems.

Any of these factors may result in regulatory and/or civil litigation, significant additional expenses to us or our customers, or cause other harm to our business.

As a result, this could cause a significant reduction in demand for our services and solar energy systems and energy storage systems or otherwise adversely affect our business, financial condition and results of operations.

Compliance with occupational safety and health requirements and best practices can be costly and noncompliance with such requirements may result in potentially significant monetary penalties, operational delays and adverse publicity.

The ongoing operations and maintenance of solar energy systems and energy storage systems requires individuals hired by us or third-party contractors, potentially including our employees, to work at heights with complicated and potentially dangerous electrical systems.

There is substantial risk of serious injury or death if proper safety procedures are not followed.

Our operations are subject to regulation under Occupational Safety and Health Administration ("OSHA"), the U.S.

Department of Transportation ("DOT") regulations and equivalent state and local laws.

Changes to OSHA or DOT requirements, or stricter interpretation or enforcement of existing laws or regulations, could result in increased costs.

If we fail to comply with applicable OSHA or DOT regulations, even if no work-related serious injury or death occurs, we may be subject to civil or criminal enforcement and be required to pay substantial penalties, incur significant capital expenditures or suspend or limit operations.

Because individuals hired by us or on our behalf to perform ongoing operations and maintenance of our solar energy systems and energy storage systems, including third-party contractors, are compensated on a per project basis, they are incentivized to work more quickly than servicers compensated on an hourly basis.

While we have not experienced a high level of injuries to date, this incentive structure may result in higher injury rates than others in the industry and could accordingly expose us to increased liability.

Individuals hired by or on behalf of us may have workplace accidents and receive citations from OSHA regulators for alleged safety violations, resulting in fines.

Any such accidents, citations, violations, injuries or failure to comply with industry best practices may subject us to adverse publicity, damage our reputation and competitive position and adversely affect our business.

A failure to comply with laws and regulations relating to interactions by us with current or prospective residential customers could result in negative publicity, claims, investigations and litigation and adversely affect our financial performance.

Our business substantially focuses on Customer Agreements and transactions with residential customers.

We offer leases, loans and other products and services to consumers by contractors in our networks, who utilize sales people employed by or engaged as third-party service providers of such contractors.

We must comply with numerous federal, state and local laws and regulations that govern matters relating to interactions with residential consumers, including those pertaining to consumer protection, marketing and sales, privacy and data security, consumer financial and credit transactions, mortgages and refinancings, home improvement contracts, warranties and various means of customer solicitation.

These laws and regulations are dynamic and subject to potentially differing interpretations and various federal, state and local legislative

and regulatory bodies may initiate investigations, expand current laws or regulations, or enact new laws and regulations regarding these matters.

Changes in these laws or regulations or their interpretation could dramatically affect how we do business, acquire customers and manage and use information collected from and about current and prospective customers and the costs associated therewith.

We strive to comply with all applicable laws and regulations relating to interactions with residential customers.

It is possible, however, these requirements may be interpreted and applied in a manner inconsistent from one jurisdiction to another and may conflict with other rules or our practices.

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.

We are subject to 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 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.

Our business is subject to complex and evolving data protection laws.

Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, increased cost of operations or otherwise harm our business.

Consumer personal privacy and data security have become significant issues and the subject of rapidly evolving regulation in the U.S.

Furthermore, federal, state and local government bodies or agencies have in the past adopted, and may in the future adopt, more laws and regulations affecting data privacy.

For example, the state of California enacted the California Consumer Privacy Act of 2018 ("CCPA") and California voters recently approved the California Privacy Rights Act ("CPRA").

The CCPA creates individual privacy rights for consumers and places increased privacy and security obligations on entities handling the personal data of consumers or households.

The CCPA went into effect in January 2020 and it requires covered companies to provide new disclosures to California consumers, provides such consumers, business-to-business contacts and employees new ways to opt-out of certain sales of personal information, and allows for a new private right of action for data breaches.

The CPRA modifies the CCPA and imposes additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data.

While the CPRA will not take full effect until January 2023, it establishes a new California privacy regulator before that date.

The CCPA and the CPRA may significantly impact our business activities and require substantial compliance costs that adversely affect our business, operating results, prospects and financial condition.

To date, we have not experienced substantial compliance costs in connection with fulfilling the requirements under the CCPA or CPRA.

However, we cannot be certain that compliance costs will not increase in the future with respect to the CCPA and CPRA or any other recently passed consumer privacy regulation.

Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, regulations and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business.

Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to our business may limit the use and adoption of, and reduce the overall demand for, our solutions.

If we are not able to adjust to changing laws, regulations and standards related to privacy or security, our business may be harmed.

Our business is subject to consumer protection laws.

Such laws and regulatory enforcement policies and priorities are subject to change that may negatively impact our business.

We must comply with various federal, state, and local regulatory regimes, including those applicable to consumer credit transactions, leases, and marketing activities.

These laws and regulations, including those applicable to consumer loans and their origination, are subject to change and modification by statute, administrative rules and orders, and judicial interpretation.

As a result of infrequent or sparse interpretations, ambiguities in these laws and regulations may create uncertainty with respect to what type of conduct is permitted or restricted under such laws and regulations.

Regulators, such as the Federal Trade Commission and the Consumer Financial Protection Board, as well as state attorney generals and agencies, also can initiate inquiries into market participants, which can lead to investigations and, ultimately, enforcement actions.

As a result, we are subject to a constantly evolving consumer protection and consumer finance regulatory environment that is difficult to predict and which may affect our business.

The laws to which we may be subject to include federal and state laws that prohibit unfair, deceptive or abusive business acts or practices (such as the Federal Trade Commission Act and the Dodd-Frank Act), regulate lease and loan disclosures and terms and conditions (such as the Truth-in-Lending Act and the Consumer Leasing Act), prohibit discrimination (such as the Equal Credit Opportunity Act), and provide additional protections for certain customers in the military (such as Servicemembers Civil Relief Act) that provides additional protections for certain customers in the military.

Our business is or may also be subject to federal and state laws that regulate consumer credit report information, data privacy, debt collection, electronic fund transfers, home improvement contracting and marketing activities (such as telemarketing, door-to-door sales, and e-mails).

While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance is given that our compliance policies and procedures will be effective.

Failure to comply with these laws and with regulatory requirements applicable to our business could subject us to damages, revocation of licenses, class action lawsuits, administrative enforcement actions, civil and criminal liability, settlements, limits on offering certain products and services, changes in business practices, increased compliance costs, indemnification obligations to our capital providers, loan repurchase obligations and reputational damage which may harm our business, results of operations and financial condition.

The highly regulated environment in which our capital providers operate could have an adverse effect on our business.

We and our capital providers are subject to federal and state supervision and regulation.

Federal and state regulation of the banking industry, credit unions and other types of capital providers, along with tax and accounting laws, regulations, rules and standards, may limit their operations significantly and control the methods by which they conduct business and when and how they are able to deploy their capital.

These requirements may constrain our ability to enter funding program agreements with new capital providers or the ability of our existing capital providers to continue originating loans through our platform.

In choosing whether and how to conduct business with us, current and prospective capital providers can be expected to take into account the legal, regulatory and supervisory regimes that apply to them, including potential changes in the application or interpretation of regulatory standards, licensing requirements or supervisory expectations.

Regulators may elect to alter standards or the interpretation of the standards used to measure regulatory compliance or to determine the adequacy of liquidity, certain risk management or other operational practices for financial services companies in a manner that impacts capital providers' ability to originate loans through our platform.

An inability for an individual or type of capital provider to originate loans through our platform could have an adverse effect on our business, financial condition and cash flows.

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 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.

We have no current plans to declare a dividend in the foreseeable future.

We have no current plans to declare 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.

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 may fluctuate with the pace at which we continue to execute on our strategic initiatives.

As a result, 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 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.

In connection with our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2022, we concluded that there were material weaknesses in our internal control over financial reporting.

Controls and Procedures, included in Part II, for additional information regarding these matters.

We may identify other material weaknesses in our internal control over financial reporting in the future.

The existence of internal control material weaknesses could harm our business, the market price of our Common Stock and our ability to retain the Company’s current, or obtain new, lenders, suppliers, key employees, alliance and strategic partners or require the implementation of certain undertakings with the SEC.

In addition, the existence of material weaknesses in our internal

control over financial reporting may affect our ability to timely file periodic reports under the Exchange Act.

The inability to timely file periodic reports could result in the SEC revoking the registration of our Common Stock, which would negatively impact our ability to remain listed on the NYSE.

Pursuant to Section 404 of the Sarbanes-Oxley Act, Management is required annually to deliver a report that assesses the effectiveness of our internal control over financial reporting.

However, for as long as we remain a “non-accelerated filer” under the rules of the SEC, our independent registered public accounting firm is not required to deliver an annual attestation report on the effectiveness of our internal control over financial reporting.

We will cease to be a non-accelerated filer if (a) the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day of our most recently completed second fiscal quarter is $75 million or more and we reported annual net revenues of greater than $100 million for our most recently completed fiscal year or (b) the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day of our most recently completed second fiscal quarter is $700 million or more, regardless of annual net revenues.

If we cease to be a non-accelerated filer, we would again be subject to the requirement for an annual attestation report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.

If we are unable to maintain effective internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act, we may not be able to produce accurate financial statements, and investors may therefore lose confidence in our operating results, our stock price could decline and we may be subject to litigation or regulatory enforcement actions.

We are a “smaller reporting company” and will be able to avail ourselves of reduced disclosure requirements applicable to smaller reporting companies, which could make our common stock less attractive to investors.

We are a “smaller reporting company,” as defined in the Securities Exchange Act of 1934, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “smaller reporting companies,” including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We may take advantage of these reporting exemptions until we are no longer a “smaller reporting company.” We will remain a “smaller reporting company” until (a) the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day of our most recently completed second fiscal quarter is $75 million or more and we reported annual net revenues as of our most recently completed fiscal year is $100 million or more, or (b) the aggregate market value of our outstanding common stock held by non-affiliates as of the last business day of our most recently completed second fiscal quarter is $700 million or more, regardless of annual revenue.

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

As a public company, we are incurring and expect to continue to incur significant legal, accounting and other expenses, and these expenses may increase even more in the future.

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.

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 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.

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.

If our stock price declines, our Common Stock may be subject to delisting from the New York Stock Exchange.

If the average closing price of our Common Stock is less than $1.00 per share for 30 consecutive trading days, we may receive a letter from the staff of the New York Stock Exchange stating that our Common Stock will be delisted unless we are able to regain compliance with the New York Stock Exchange listing criteria requiring that we maintain an average closing price for our Common Stock of at least $1.00 per share.

The average closing price of our Common Stock was below $1.00 per share for 30 consecutive trading days in 2022, and we received a notice of non-compliance from the New York Stock Exchange on October 20, 2022.

Although we were able to regain compliance because the average closing price for our Common Stock was subsequently at least $1.00 per share for 30 consecutive trading days, we cannot guarantee that our stock price will continue to trade above $1.00 per share or otherwise meet the New York Stock Exchange listing requirements and therefore our Common Stock may in the future be subject to delisting.

If our Common Stock is delisted, this would, among other things, substantially impair our ability to raise additional funds and could result in a loss of institutional investor interest and fewer development opportunities for us.

The price of our Common Stock may be volatile.

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.

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 our industry;

• our failure to meet market expectations for our performance;

• mergers and strategic alliances in the industry in which we operate;

• market prices and conditions in the industry in which we operate;

• changes in laws or government regulations applicable to our business;

• substantial sales of our Common Stock;

• issuance of new or updated research reports from securities analysts;

• announcement or expectation of additional equity or debt financing efforts;

• 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 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.

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 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 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;

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, 2022, we have options, RSUs and warrants outstanding to purchase up to an aggregate of 20,163,428 shares of our Common Stock.

We also have the ability to initially issue up to 1,695,979 shares of Common Stock under our 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;

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’

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.

General Risk Factors

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

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, 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

Lastly, Ford’s recent cancellation of the eQVM program industry wide is adversely impacting upfitter partners’

ability and willingness to install ours systems.

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,

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.

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.

Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.

GAAP Accounting Standards provides that our 4,233,333 private placement warrants are classified as derivative liabilities and requires 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.

The 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 Certificate of Incorporation 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’ 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 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.

Unresolved Staff Comments

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

What changed 10-K

Item 1A. Risk Factors