As
filed with the Securities and Exchange Commission on July 8, 2021
Registration No. 333-249649
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM
S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Hyliion Holdings Corp.
(Exact Name of Registrant
as Specified in its Charter)
Delaware
|
|
3713
|
|
83-2538002
|
(State
or Other Jurisdiction of
Incorporation or Organization)
|
|
(Primary
Standard Industrial
Classification Code No.)
|
|
(I.R.S.
Employer
Identification No.)
|
1202
BMC Drive, Suite 100
Cedar
Park, Texas 78613
Tel:
(833) 495-4466
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Thomas
Healy
Chief
Executive Officer
Hyliion
Holdings Corp.
1202
BMC Drive, Suite 100
Cedar
Park, Texas 78613
Tel:
(833) 495-4466
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies
to:
Brenda
K. Lenahan
Vinson
& Elkins L.L.P.
1114
6th Avenue, 32nd Floor
New
York, New York 10036
Tel:
(212) 237-0000
Approximate
date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box. ☒
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 under the Securities Exchange Act of
1934:
Large accelerated filer ☐
|
Accelerated filer ☐
|
Non-accelerated filer ☒
|
Smaller reporting company ☒
|
|
|
|
Emerging growth company ☒
|
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY
NOTE
On
October 23, 2020, Hyliion Holdings Corp (the “Company”) filed a registration statement with the Securities and Exchange Commission
(the “SEC”) on Form S-1 (File No. 333-249649) (the “Registration Statement”). The Registration Statement, as
amended, was initially declared effective by the SEC on November 27, 2020 and initially registered the issuance by the Company of up
to an aggregate of up to 19,185,637 shares of common stock, $0.0001 par value per share (“Common Stock”), which consisted
of (i) up to 6,660,183 shares of Common Stock issuable upon the exercise of 6,660,183 warrants (the “Private Placement Warrants”)
originally issued in a private placement in connection with the initial public offering of Tortoise Acquisition Corp. (“TortoiseCorp”)
by the holders thereof, (ii) up to 875,000 shares of Common Stock that are issuable upon the exercise of 875,000 warrants (the “Forward
Purchase Warrants” and together with the Private Placement Warrants, the “Private Warrants”) originally issued in a
private placement at the closing of the Business Combination (as defined below) by the holders thereof other than the initial holder
and (iii) up to 11,650,454 shares of Common Stock issuable upon the exercise of 11,650,454 warrants (the “Public Warrants”
and, together with the Private Warrants, the “Warrants”) originally issued in the initial public offering of TortoiseCorp
by the holders thereof.
The
Registration Statement also initially registered the offer and sale from time to time by the selling stockholders identified in the prospectus
of (i) up to 132,637,517 shares of Common Stock (including up to 7,535,183 shares of Common Stock that may be issued upon exercise of
the Private Warrants and 20,000 shares of Common Stock that may be issued upon exercise of 20,000 Public Warrants) and (ii) up to 7,555,183
Warrants, which consists of up to 7,535,183 Private Warrants and up to 20,000 Public Warrants.
This
Post-Effective Amendment No. 1 to Form S-1 (“Post-Effective Amendment No. 1”) is being filed by the Company to update the
Registration Statement to (i) remove references to the registration of the Warrants and the shares of Common Stock to be issued upon
exercise thereof to reflect the redemption or exercise of all Warrants on or before December 31, 2020; (ii) include updated information
regarding the selling stockholders named in the prospectus, including a reduction in the number of shares of Common Stock being offered
by the selling stockholders to 91,394,533 shares of Common Stock and (iii) include the information from the Company’s filings with
the SEC. No additional securities are being registered under this Post-Effective Amendment No. 1. All applicable registration fees were
paid at the time of the original filing of the Registration Statement.
The information in this preliminary prospectus
is not complete and may be changed. Neither we nor the selling securityholders may sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT
TO COMPLETION — DATED JULY 8, 2021
PRELIMINARY
PROSPECTUS
Up
to 91,394,533 Shares of Common Stock
This
prospectus relates to the offer and sale from time to time by the selling securityholders named in this prospectus (the “Selling
Securityholders”) of up to 91,394,533 shares of Common Stock. We will not receive any proceeds from the sale of shares of Common
Stock by the Selling Securityholders pursuant to this prospectus. Our registration of the securities covered by this prospectus does
not mean that the Selling Securityholders will offer or sell any of the shares of Common Stock. The Selling Securityholders may offer,
sell or distribute all or a portion of their shares of Common Stock publicly or through private transactions at prevailing market prices
or at negotiated prices. We provide more information about how the Selling Securityholders may sell the shares in the section entitled
“Plan of Distribution.”
We
are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and are subject to
reduced public company reporting requirements. This prospectus complies with the requirements that apply to an issuer that is an emerging
growth company.
Our
Common Stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “HYLN”. On July 7, 2021,
the closing price of our Common Stock was $10.78.
See
the section entitled “Risk Factors” beginning on page 6 of this prospectus to read about factors you should consider before
buying our securities.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined
if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is , 2021.
TABLE
OF CONTENTS
You
should rely only on the information provided in this prospectus, as well as the information incorporated by reference into this prospectus
and any applicable prospectus supplement. Neither we nor the Selling Securityholders have authorized anyone to provide you with different
information. Neither we nor the Selling Securityholders are making an offer of these securities in any jurisdiction where the offer is
not permitted. You should not assume that the information in this prospectus or any applicable prospectus supplement is accurate as of
any date other than the date of the applicable document. Since the date of this prospectus and the documents incorporated by reference
into this prospectus, our business, financial condition, results of operations and prospects may have changed.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-1 that we filed with the SEC using the “shelf” registration process.
Under this shelf registration process, the Selling Securityholders may, from time to time, sell the securities offered by them described
in this prospectus. We will not receive any proceeds from the sale by such Selling Securityholders of the securities offered by them
described in this prospectus.
Neither
we nor the Selling Securityholders have authorized anyone to provide you with any information or to make any representations other than
those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf
of us or to which we have referred you. Neither we nor the Selling Securityholders take responsibility for, and can provide no assurance
as to the reliability of, any other information that others may give you. Neither we nor the Selling Securityholders will make an offer
to sell these securities in any jurisdiction where the offer or sale is not permitted.
We
may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or
change information contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective
amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus
entitled “Where You Can Find More Information.”
On
October 1, 2020 (the “Closing Date”), Tortoise Acquisition Corp., our predecessor company, consummated the previously announced
merger pursuant to that certain Business Combination Agreement, dated June 18, 2020 (the “Business Combination Agreement”),
by and among the TortoiseCorp, SHLL Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of TortoiseCorp (“Merger
Sub”), and Hyliion Inc., a Delaware corporation (“Legacy Hyliion”). Pursuant to the terms of the Business Combination
Agreement, a business combination between the Company and Legacy Hyliion was effected through the merger of Merger Sub with and into
Legacy Hyliion, with Legacy Hyliion surviving as the surviving company and as a wholly-owned subsidiary of TortoiseCorp (the “Merger”
and, collectively with the other transactions described in the Business Combination Agreement, the “Business Combination”).
On the Closing Date, and in connection with the closing of the Business Combination (the “Closing”), Tortoise Acquisition
Corp. changed its name to Hyliion Holdings Corp.
Unless
the context indicates otherwise, references in this prospectus to the “Company,” “Hyliion,” “we,”
“us,” “our” and similar terms refer to Hyliion Holdings Corp. (f/k/a Tortoise Acquisition Corp.) and its consolidated
subsidiaries (including Legacy Hyliion). References to “TortoiseCorp” refer to our predecessor company prior to the consummation
of the Business Combination.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange
Act. All statements, other than statements of present or historical fact, included in this prospectus are forward-looking statements,
including, but not limited to, our strategy, prospects, plans, objectives, future operations, future revenue and earnings, projected
margins and expenses, markets for our services, potential acquisitions or strategic alliances, financial position, and liquidity and
anticipated cash needs and availability. The words “anticipates,” “believes,” “estimates,” “expects,”
“intends,” “may,” “plans,” “projects,” “will,” “would,” variations
of such words and similar expressions or the negatives thereof are intended to identify forward-looking statements. However, not all
forward-looking statements contain these identifying words. These forward-looking statements represent our management’s expectations
as of the date of this filing and involve known and unknown risks, uncertainties and other factors that may cause our actual results,
performance and achievements or industry results to be materially different from any future results, performance or achievements expressed
or implied by such forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited
to, our ability to disrupt the powertrain market, our focus in 2021 and beyond; the effects of our dynamic and proprietary solutions
on its commercial truck customers; the ability to accelerate the commercialization of the Hypertruck ERX; our ability to meet 2021 and
future product milestones; the impact of the novel coronavirus (“COVID-19”) on long-term objectives; the ability of our solutions
to reduce carbon intensity and greenhouse gas emissions and the other risks and uncertainties described under the heading “Risk
Factors” in our other SEC filings including in our Annual Report, as amended on Form 10-K/A for the year ended December 31, 2020
which was filed with the SEC on May 17, 2021 (the “2020 Amended Annual Report”) (See Item 1A. Risk Factors). Should one or
more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material
respects from those projected in these forward-looking statements. Except as required by law, we
do not undertake, and expressly disclaim any duty, to publicly update or revise these statements, whether as a result of new information,
new developments, or otherwise and even if experience or future changes make it clear that any projected results expressed in this prospectus
will not be realized. Unless specifically indicated otherwise, the forward-looking statements in this prospectus do not reflect the potential
impact of any divestitures, mergers, acquisitions or other business combinations that have not been completed as of the date of this
prospectus. In addition, the inclusion of any statement in this prospectus does not constitute an admission by us that the events or
circumstances described in such statement are material. We qualify all of our forward-looking statements by these cautionary statements.
Forward-looking
statements in this prospectus may include, for example, statements about:
|
●
|
our
financial and business performance, including financial projections and business metrics;
|
|
●
|
our
strategy, future operations, financial position, estimated revenues and losses, projected
costs, prospects and plans;
|
|
●
|
the
implementation, market acceptance and success of our business model;
|
|
●
|
the
effects on our future business of competition;
|
|
●
|
our
ability to scale in a cost-effective manner;
|
|
●
|
developments
and projections relating to our competition and industry;
|
|
●
|
the
impact of health epidemics, including the COVID-19 pandemic, on our business and the actions
we may take in response thereto;
|
|
●
|
our
expectations regarding our ability to obtain and maintain intellectual property protection
and not infringe on the rights of others;
|
|
●
|
our
ability to obtain funding for our operations;
|
|
●
|
our
business, expansion plans and opportunities; and
|
|
●
|
the
outcome of any known and unknown litigation and regulatory proceedings.
|
We
cannot guarantee the accuracy of the forward-looking statements, and you should be aware that results and events could differ materially
and adversely from those contained in the forward-looking statements due to a number of risks and uncertainties including, but not limited
to, the following:
|
●
|
the
outcome of any legal proceedings;
|
|
●
|
our
success in retaining or recruiting, or changes required in, officers, key employees or directors;
|
|
●
|
changes
in applicable laws or regulations;
|
|
●
|
our
ability to execute our business model, including market acceptance of our planned products
and services;
|
|
●
|
our
ability to achieve planned competitive advantages with respect to our product;
|
|
●
|
that
we have identified a material weakness in our internal control over financial reporting which,
if not corrected, could affect the reliability of our consolidated financial statements;
|
|
●
|
the
possibility that the COVID-19 pandemic may adversely affect our results of operations, financial
position and cash flows; and
|
|
●
|
the
possibility that we may be adversely affected by other economic, business or competitive
factors.
|
Given
these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Additional cautionary statements
or discussions of risks and uncertainties that could affect our results or the achievement of the expectations described in forward-looking
statements may also be contained in any accompanying prospectus supplement.
Should
one or more of the risks or uncertainties described in this prospectus, or should underlying assumptions prove incorrect, actual results
and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and
other factors that may impact the operations and projections discussed herein can be found in the section entitled “Risk Factors”
and in our periodic filings with the SEC. Our SEC filings are available publicly on the SEC’s website at www.sec.gov.
You
should read this prospectus and any accompanying prospectus supplement completely and with the understanding that our actual future results,
levels of activity and performance as well as other events and circumstances may be materially different from what we expect. We qualify
all of our forward-looking statements by these cautionary statements.
SUMMARY
This
summary highlights selected information appearing elsewhere in this prospectus. Because it is a summary, it may not contain all of the
information that may be important to you. To understand this offering fully, you should read this entire prospectus carefully, including
the information set forth under the heading “Risk Factors” and our financial statements.
The
Company
We
design, develop and sell electrified powertrain solutions that can be installed on Class 8 trucks from most major commercial vehicle
original equipment manufacturers (“OEMs”). Our mission is to be the leading provider of electrified powertrain solutions
for the commercial vehicle industry. Our goal is to reduce the carbon intensity and the greenhouse gas (“GHG”) emissions
of the transportation sector by providing electrified powertrain solutions for Class 8 commercial vehicles at the lowest total cost of
ownership (“TCO”). Our solutions utilize our proprietary battery systems, control software and data analytics, combined with
fully integrated electric motors and power electronics, to produce electrified powertrain systems that either augment, in the case of
our hybrid electric powertrain (“Hybrid”) system, or fully replace, in the case of the Hypertruck Electric Range Extender
(“Hypertruck ERX”) system, a natural gas fueled engine powering the battery that improves their performance. By reducing
both GHG emissions and TCO, our environmentally conscious solutions support our customers’ pursuit of their sustainability and
financial objectives.
Background
We
were originally known as Tortoise Acquisition Corp. On October 1, 2020, TortoiseCorp consummated the Business Combination with Legacy
Hyliion pursuant to the Business Combination Agreement dated as of June 18, 2020 among TortoiseCorp, Legacy Hyliion and Merger Sub. In
connection with the Closing of the Business Combination, TortoiseCorp changed its name to Hyliion Holdings Corp. Legacy Hyliion was deemed
to be the accounting acquirer in the Merger based on an analysis of the criteria outlined in Accounting Standards Codification (“ASC”)
805. While TortoiseCorp was the legal acquirer in the Merger, because Legacy Hyliion was deemed the accounting acquirer, the historical
financial statements of Legacy Hyliion became the historical financial statements of the combined company, upon the consummation of the
Merger.
Immediately
prior to the effective time of the Merger (the “Effective Time”), each share of Legacy Hyliion preferred stock (“Legacy
Hyliion Preferred Stock”) that was issued and outstanding was automatically converted into a share of Legacy Hyliion common stock,
par value $0.001 per share (“Legacy Hyliion Common Stock”), such that each converted share of Legacy Hyliion Preferred Stock
was no longer outstanding and ceased to exist, and each holder of Legacy Hyliion Preferred Stock thereafter ceased to have any rights
with respect to such securities.
Also
immediately prior to the Effective Time, the outstanding principal and unpaid accrued interest due on Legacy Hyliion’s outstanding
convertible notes (“Legacy Hyliion Convertible Notes”) immediately prior to the Effective Time were automatically converted
into shares of Legacy Hyliion Common Stock in accordance with the terms of such Legacy Hyliion Convertible Notes, and such converted
Legacy Hyliion Convertible Notes were no longer outstanding and ceased to exist, and any liens securing obligations under the Legacy
Hyliion Convertible Notes were released.
At
the Effective Time, each share of Legacy Hyliion Common Stock was converted into and exchanged for 1.45720232 shares (the “Exchange
Ratio”) of our Common Stock.
At
the Effective Time, all shares of Legacy Hyliion Common Stock and Legacy Hyliion Preferred Stock held in the treasury of Legacy Hyliion
were canceled without any conversion thereof and no payment or distribution was made with respect thereto.
At
the Effective Time, each share of common stock, par value $0.0001 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time was converted into and exchanged for one validly issued, fully paid and nonassessable share of Legacy Hyliion Common
Stock.
Each
Legacy Hyliion option that was outstanding immediately prior to the Effective Time, whether vested or unvested, was converted into an
option to purchase a number of shares of Common Stock (such option, an “Exchanged Option”) equal to the product (rounded
up or down to the nearest whole number, with a fraction of 0.5 rounded up) of (i) the number of shares of Legacy Hyliion Common Stock
subject to such Legacy Hyliion option immediately prior to the Effective Time and (ii) the Exchange Ratio, at an exercise price per share
(rounded up or down to the nearest whole cent, with a fraction of $0.005 rounded up) equal to (A) the exercise price per share of such
Legacy Hyliion option immediately prior to the Effective Time, divided by (B) the Exchange Ratio. Except as specifically provided in
the Business Combination Agreement, following the Effective Time, each Exchanged Option will continue to be governed by the same terms
and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Legacy Hyliion option immediately
prior to the Effective Time.
No
certificates or scrip or shares representing fractional shares of Common Stock were issued upon the exchange of Legacy Hyliion Common
Stock. Any fractional shares were rounded up or down to the nearest whole share of Common Stock, with a fraction of 0.5 rounded up. No
cash settlements were made with respect to fractional shares eliminated by such rounding.
Pursuant
to our prior amended and restated certificate of incorporation, each share of TortoiseCorp’s Class B Common Stock, par value $0.0001
per share (the “Class B Common Stock”), converted into one share of TortoiseCorp’s Class A Common Stock, par value
$0.0001 per share (the “Class A Common Stock”), at the Closing. After the Closing and following the effectiveness of our
second amended and restated certificate of incorporation (“Certificate of Incorporation”), each share of Class A Common Stock
was automatically reclassified, redesignated and changed into one validly issued, fully paid and non-assessable share of Common Stock,
without any further action by us or any stockholder.
On
October 1, 2020, a number of purchasers (each, a “Subscriber”) purchased from the Company an aggregate of 30,750,000 shares
of Common Stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $307,500,000,
pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into effective as of June 18, 2020.
Pursuant to the Subscription Agreements, the Company gave certain registration rights to the Subscribers with respect to the PIPE Shares.
The sale of PIPE Shares was consummated concurrently with the Closing.
On
October 1, 2020, Atlas Point Energy Infrastructure Fund, LLC (“Atlas Point Fund”) purchased 1,750,000 TortoiseCorp units
(consisting of one share of Common Stock and one half of one Warrant, the “Forward Purchase Units”), consisting of 1,750,000
shares of Common Stock (the “Forward Purchase Shares”) and Forward Purchase Warrants to purchase 875,000 shares of Common
Stock, for an aggregate purchase price of $17,500,000, and transferred 894,375 shares of Common Stock to TortoiseEcofin Borrower LLC
(formerly known as “Tortoise Borrower LLC” and hereinafter referred to as “Tortoise Borrower”) pursuant to the
Amended and Restated Forward Purchase Agreement, dated February 6, 2019 (“Amended and Restated Forward Purchase Agreement”),
as amended by the First Amendment to Amended and Restated Forward Purchase Agreement, dated June 18, 2020 (“First Amendment to
Forward Purchase Agreement”) (as amended, “Forward Purchase Agreement”).
On
November 30, 2020, we issued a notice of redemption of all the outstanding Public Warrants and Forward Purchase Warrants which was completed
in December 2020. However, the Private Warrants held by the initial holders thereof or permitted transferees of the initial holders were
not subject to this redemption. As of December 31, 2020, all outstanding Public Warrants and Forward Purchase Warrants were either exercised
or redeemed by the holder. A total of 15,786,127 shares of Common Stock were issued in connection with the exercise of an equivalent
number of Warrants. Certain holders of the Warrants elected a cashless exercise, resulting in the forfeiture of 3,118,445 shares of Common
Stock. There were 281,065 Warrants not exercised by the end of the redemption period that were redeemed for a price of $0.01 per warrant,
and subsequently cancelled by us.
Our
Common Stock is currently listed on the NYSE under the symbol “HYLN”.
The
rights of holders of our Common Stock are governed by our Certificate of Incorporation, our amended and restated bylaws (the “Bylaws”)
and the Delaware General Corporation Law (the “DGCL”). See the section entitled “Description of our Securities.”
Risk
Factors Summary
We
are subject to a variety of risks and uncertainties, including risks related to our (i) business and industry, (ii) environmental and
regulatory matters, (iii) financial and tax matters, and (iv) ownership of our securities and certain general risks, which could have
a material adverse effect on our business, financial condition, results of operations and cash flows. Risks that we deem material are
described in more detail under “Risk Factors”. In summary:
|
●
|
We
are an early-stage company with a history of losses and expect to incur significant expenses
and continuing losses for the foreseeable future. As an early-stage company, our management
is still becoming accustomed to the compliance and reporting requirements applicable to public
companies, and as an “emerging growth company,” we take advantage of certain
exemptions from various reporting requirements applicable to other public companies that
are not emerging growth companies. We also have been, and may be in the future, adversely
affected by the global COVID-19 pandemic. These factors combined with our limited operating
history may increase the risk of investing in our Company.
|
|
●
|
We
note that our products and solutions are also in early stages of development and commercialization,
which may make them uniquely at risk for recalls, delays, warranty claims, costs and disruptions.
|
|
●
|
We
have also 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 such as a failure to meet reporting obligations.
|
|
●
|
If
we are unable to establish and maintain confidence in our long-term business prospects, then
our financial condition, operating results, business prospects and access to capital may
suffer materially.
|
|
●
|
We
also may be subject to securities litigation, shareholder activism, or product liability,
patent, copyright or trademark infringement, or trade secret misappropriation claims, which
may be time-consuming, cause us to incur substantial costs, hinder execution of business
and growth strategy, and impact the price of our Common Stock. Our business also may be adversely
affected if we are unable to protect our intellectual property rights from unauthorized use
by third parties.
|
|
●
|
Because
we are early in our development, we plan to accept reservation orders that are cancellable,
and we may not be able to convert early trial deployments into meaningful orders. If we do
not manage our growth effectively, including with respect to our efforts to outsource production
and address the service needs of our customers on an ongoing basis, we may not be commercially
successful.
|
|
●
|
Both
we and our outsourcing partners are reliant on complex machinery, including software and
hardware that is highly technical, which increases the risks and uncertainties associated
with the production of our solutions. Our commercial success is in part reliant on a number
of third parties, some of whom are single or limited source suppliers, whose performance
we may not be able to control or predict. We also may experience significant delays in our
production processes.
|
|
●
|
If
our solutions fail to perform as expected our ability to develop, market and sell our solutions
could be harmed, and the performance of our solutions may vary due to factors outside of
our control. Moreover, our beliefs regarding the ability of our solutions to limit carbon
intensity, reduce GHG emissions and contribute to global decarbonization may be based on
inaccurate assumptions.
|
|
●
|
Our
future growth is dependent upon the commercial trucking industry’s willingness to adopt
alternative fuel and hybrid and electric vehicles. Our failure to obtain or retain specific
customers may have adverse impacts on our business. Although we hope to be one of the first
to bring solutions to market, competitors have already displayed prototypes and may enter
the market before us. Moreover, developments in alternative technology or improvements in
the internal combustion engine may adversely affect the demand for our solutions.
|
|
●
|
We
are subject to risks associated with work stoppages, cybersecurity and data utilization considerations,
and information technology and communication synergies. In addition, demand for our products
may be cyclical.
|
|
●
|
We
and our outsourcing partners and suppliers are subject to substantial and evolving U.S. laws
and regulation, and we could face criminal liability and other serious consequences for violations,
which can harm our business. Moreover, our business could be negatively affected by unfavorable
changes to federal or state tax laws, the adoption of federal or state laws or regulations
mandating new or additional limits on the production of GHG emissions, fuel costs, including
the cost of natural gas, other fuels and “tailpipe” emissions. Changes in tax
laws may materially adversely affect our business, prospects, financial condition and operating
results; our ability to use net operating loss carryforwards and other tax attributes may
be more limited than we expected.
|
|
●
|
We
intend to expand internationally in the future and will face risks associated with our international
operations, including unfavorable regulatory, political, tax and labor conditions, which
could harm our business.
|
|
●
|
We
may need to raise additional funds, and these funds may not be available to us when we need
them. We also 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
people are integral to our business. We are highly dependent on the services of Thomas Healy,
our Chief Executive Officer, and if we are unable to retain Mr. Healy, attract and retain
key employees and hire qualified management, technical and vehicle engineering personnel,
our ability to compete could be harmed. Moreover, if any of our employees or independent
contractors engage in misconduct or other improper activities, including noncompliance with
regulatory standards and requirements, it could have an adverse effect on our business, prospects,
financial condition and operating results.
|
|
●
|
Because
of the concentration of our ownership among insiders and certain corporate governance decisions
our Board and investors have made, new investors may have limited influence in our corporate
decisions. Our ownership is currently concentrated among our existing executive officers,
directors and their respective affiliates, which may prevent new investors from influencing
significant corporate decisions.
|
|
●
|
Our
governance documents also limit certain stockholder rights and a significant number of our
common stock is restricted from immediate resale, which could cause the market price of our
common stock to drop significantly, even if our business is doing well.
|
|
●
|
We
also 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.
|
Corporate
Information
TortoiseCorp
which was incorporated in the State of Delaware in November 2018 for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination involving TortoiseCorp and one or more businesses. TortoiseCorp
completed its initial public offering in March 2019. In October 2020, Merger Sub merged with and into Legacy Hyliion, with Legacy Hyliion
surviving the merger as a wholly-owned subsidiary of TortoiseCorp. In connection with the Merger, we changed our name to Hyliion Holdings
Corp. Our principal executive offices are located at 1202 BMC Drive, Suite 100, Cedar Park, Texas 78613. Our telephone number is (833)
495-4466. Our website address is www.hyliion.com. Information contained on our website or connected thereto does not constitute
part of, and is not incorporated by reference into, this prospectus or the registration statement of which it forms a part.
THE
OFFERING
Issuer
|
Hyliion Holdings Corp. (f/k/a Tortoise Acquisition Corp.).
|
|
|
Shares of Common Stock Offered by the
Selling Securityholders
|
91,394,533 shares of Common Stock.
|
|
|
Use of Proceeds
|
We will not receive any proceeds from the sale of shares of Common Stock by the Selling Securityholders.
|
|
|
Market for Common Stock
|
Our Common Stock is currently traded on the NYSE under the symbol “HLYN”.
|
|
|
Lock-Up Restrictions
|
Certain of our stockholders are subject to certain restrictions on transfer until the termination of applicable lock-up periods. See “Certain Relationships and Related Party Transactions” for further discussion.
|
|
|
Risk Factors
|
See “Risk Factors” and other information included in this prospectus for a discussion of factors you should consider before investing in our securities.
|
RISK
FACTORS
Investing
in our securities involves risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed
above under “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the specific risks set
forth herein. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of
operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally,
the risks and uncertainties described in this prospectus or any prospectus supplement are not the only risks and uncertainties that we
face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material
and adversely affect our business.
Risks
Related to our Business and Industry
We
are an early stage company with a history of losses, and expect to incur significant expenses and continuing losses for the foreseeable
future.
Given
that we are an early stage company with a history of operating losses, we believe that we will incur operating and net losses each quarter
until at least the time we begin commercial deliveries of both of our Hybrid system and our Hypertruck ERX system, which are not expected
to begin until 2021 and 2022, respectively, and may occur later or not at all. Even if we are able to successfully develop and sell our
electrified powertrain solutions, there can be no assurance that they will be commercially successful. Our potential profitability is
dependent upon the successful development and successful commercial introduction and acceptance of our electrified powertrain solutions,
which may not occur.
We
expect the rate at which we will incur losses to be significantly higher in future periods as we:
|
●
|
continue
to market our first generation Demonstrator Hybrid system and design, develop and produce
our second generation (“next generation”) Hybrid system as well as our Hypertruck
ERX system;
|
|
●
|
continue
to utilize our third-party partners for design, testing and commercialization;
|
|
●
|
expand
our production capabilities to produce our electrified powertrain solutions, including costs
associated with outsourcing the production of our electrified powertrain solutions;
|
|
●
|
build
up inventories of parts and components for our electrified powertrain solutions;
|
|
●
|
produce
an inventory of our electrified powertrain solutions;
|
|
●
|
expand
our design, development, installation and servicing capabilities;
|
|
●
|
increase
our sales and marketing activities and develop our distribution infrastructure; and
|
|
●
|
increase
our general and administrative functions to support our growing operations.
|
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 will be significant. Our business is capital intensive, and we can be expected to continue to sustain substantial operating
expenses without generating sufficient revenues to cover expenditures. In addition, 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. We may find that these efforts are more expensive than we currently anticipate or that these efforts may
not result in revenues, which would further increase our losses.
We
are in the early stages of developing key commercial relationships with suppliers and customers, and our ability to predict the outcome
of those relationships is limited.
We
are in the process of developing partnerships to accelerate the development and production of our solutions and have deployed demonstration
Hybrid system units to certain companies we expect to be customers in the future, however all of our commercial relationships are in
the early stages of development, and we do not have the ability to predict with certainty the outcome of those relationships. Our partners
may face delays or be unable to meet our business requirements and standards at the quantity, quality and price levels needed for our
business. The entities that we expect to be customers in the future may decide not to do business with us. Because we are still getting
to know our partners and the commercial space in which we are doing business, these relationships could result in controversies or even
litigation, which could have a material adverse effect on our ability to continue our plans for strategic growth and ultimately our business
results.
We
are highly dependent on the services of Thomas Healy, our Chief Executive Officer, and if we are unable to retain Mr. Healy, 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 Thomas Healy, our Chief
Executive Officer, and largest stockholder. Mr. Healy is the source of many, if not most, of the ideas and execution driving us. If Mr.
Healy 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.
We
do not currently maintain key man life insurance policies with respect to Thomas Healy or any other officer and we will continue to evaluate
whether to obtain such key man life insurance policies. 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.
If
we fail to manage our growth effectively, including failing to attract and integrate qualified personnel, we may not be able to develop,
produce, market and sell our electrified powertrain solutions successfully.
Any
failure to manage our growth effectively could materially and adversely affect our business, prospects, operating results and financial
condition. We intend to expand our operations significantly. We expect our future expansion to include:
|
●
|
expanding
the management team;
|
|
●
|
hiring
and training new personnel;
|
|
●
|
leveraging
consultants to assist with company growth and development;
|
|
●
|
forecasting
production and revenue;
|
|
●
|
controlling
expenses and investments in anticipation of expanded operations;
|
|
●
|
establishing
or expanding design, production, sales and service facilities;
|
|
●
|
implementing
and enhancing administrative infrastructure, systems and processes; and
|
|
●
|
expanding
into international markets, including Europe.
|
We
intend to continue to hire a significant number of additional personnel, including software engineers, design and production personnel
and service technicians for our electrified powertrain solutions. Because our electrified powertrain solutions are based on a different
technology platform than traditional internal combustion engines, individuals with sufficient training in alternative fuel and electric
vehicles may not be available to hire, and as a result, we will need to expend significant time and expense training any newly hired
employees. Competition for individuals with experience designing, producing and servicing electrified vehicles and their software is
intense, and we may not be able to attract, integrate, train, motivate or retain additional highly qualified personnel, particularly
with respect to software engineers in the Austin, Texas area. The failure to attract, integrate, train, motivate and retain these additional
employees could seriously harm our business, prospects, financial condition and operating results.
We
have identified material weaknesses in our internal control over financial reporting which, if not corrected, could affect the reliability
of our consolidated financial statements and have other adverse consequences.
We
have identified material weaknesses in internal control over financial reporting, which relate to: (a) segregation of duties (resulting
from the small number of individuals performing the accounting functions), including the lack of a formal journal entry review and approval
process; (b) the design and operation of our information technology general controls; (c) the overall closing and financial reporting
processes, including accounting for significant and unusual transactions; and (d) controls in the determination of the appropriate accounting
and classification for complex financial instruments.
A
material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis. The remaining
deficiencies could result in additional misstatements to our financial statements that would be material and would not be prevented or
detected on a timely basis.
Our
management has concluded that these material weaknesses in our internal control over financial reporting are due to the fact that, prior
to the Closing, Legacy Hyliion was a private company with limited resources and did not have: (1) the necessary business processes and
related internal controls formally designed and implemented, (2) the appropriate resources, level of experience and technical expertise
to oversee its business processes and controls surrounding information technology general controls, or (3) the closing and financial
reporting processes to address the accounting and financial reporting requirements related to significant and unusual transactions.
Our
management has developed a remediation plan to address the remaining material weaknesses. Specifically, (a) to alleviate the information
technology controls issue, the Company plans to implement NetSuite, an Oracle cloud-based ERP and financial solution. This solution will
allow personnel to implement workflow controls; (b) to alleviate the segregation of duties issue, the plans to leverage NetSuite configuration
and workflow while expanding the accounting team and reviewing roles; and (c) to alleviate the lack of a formal journal entry review
and approval process, the Company will be implementing work flow steps within NetSuite to ensue all journal entries are approved before
posting to the general ledger. The material weaknesses will not be considered remediated until management has concluded, through testing,
that these controls are effective. Our management will monitor the effectiveness of our remediation plans and will make changes management
determines to be appropriate.
If
not remediated, these material weaknesses could result in further material misstatements to our annual or interim financial statements
that would not be prevented or detected on a timely basis, restatements, 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.
Risks
Related to our Financial Results
Our
financial results may vary significantly from period to period due to fluctuations in our operating costs and other factors.
Our
quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including:
|
●
|
the
pace at which we continue to design, develop and produce new products and increase production
capacity;
|
|
●
|
the
number of customer orders in a given period;
|
|
●
|
changes
in manufacturing costs;
|
|
●
|
the
timing and cost of, and level of investment in, research and development relating to our
technologies and our current or future facilities;
|
|
●
|
developments
involving our competitors;
|
|
●
|
changes
in governmental regulations or applicable law;
|
|
●
|
future
accounting pronouncements or changes in our accounting policies; and
|
|
●
|
general
market conditions and other factors, including factors unrelated to our operating performance
or the operating performance of our competitors.
|
As
a result of these factors, we believe that period-to-period 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 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
may be unable to adequately control the costs associated with our operations.
We
will require significant capital to develop and grow our business, including developing and producing our electrified powertrain solutions
and building our brand. We expect to incur significant expenses which will impact our profitability, including research and development
expenses (including developing our next generation Hybrid system as well as our Hypertruck ERX system), component and service procurement
costs, sales and distribution expenses as we build our brand and market our electrified powertrain solutions, and general and administrative
expenses as we scale our operations and incur costs as a public company. In addition, we may incur significant costs servicing our electrified
powertrain solutions. Our ability to become profitable in the future will not only depend on our ability to complete the design and development
of our electrified powertrain solutions to meet projected performance metrics and successfully market our electrified powertrain solutions
and services, but also to sell our products at prices to achieve our expected margins and control our costs. If we are unable to efficiently
design, produce, market, sell, distribute and service our electrified powertrain solutions, our margins, profitability and prospects
would be materially and adversely affected.
Risks
Related to our Customers and Products
We
may not be able to successfully engage target customers or convert early trial deployments with truck fleets into meaningful orders or
additional deployments in the future.
Our
success, and our ability to increase revenue and operate profitably, depends in part on our ability to identify target customers and
to convert early trial deployments with truck fleets into meaningful orders or additional deployments in the future. Our Demonstrator
Hybrid system has been delivered to certain customers on an early trial deployment basis, where such customers have the ability to evaluate
whether the Demonstrator Hybrid system meets such customers’ performance and other requirements before such customers commit to
meaningful orders or additional deployments in the future. Although we have begun the process of commercializing our Demonstrator Hybrid
system, our Demonstrator Hybrid system is still undergoing testing, and it may not perform as we, or our customers, expect. If we are
unable to meet our customers’ performance requirements or industry specifications, identify target customers or convert early trial
deployments in truck fleets into meaningful orders or obtain additional deployments in the future, our business, prospects, financial
condition and operating results would be materially adversely affected. Moreover, if we or our customers find that our Demonstrator Hybrid
system does not perform as expected, we may cease to distribute our Demonstrator Hybrid system, or recall some or all of our product,
and future distributions may be delayed or cease for some period of time or indefinitely.
We
plan to accept reservation orders for the sale of our electrified powertrain solutions that are cancellable, and our initial pre-launch
sales order for Hypertruck ERX equipped trucks is cancellable.
Our
electrified powertrain solutions are still in the development and testing phase and commercial deliveries of the Hybrid system and the
Hypertruck ERX system are not expected to begin until late 2021 and 2022, respectively, and may occur later or not at all. As a result,
we plan to accept reservation orders for our electrified powertrain solutions that will be cancellable by customers without penalty.
Given the anticipated lead times between reservation orders and the delivery date of our electrified powertrain solutions, there is a
heightened risk that customers who place reservation orders may ultimately decide not to convert such reservation orders into binding
contracts and take delivery of their ordered electrified powertrain solutions from us due to potential changes in customer preferences,
competitive developments and other factors. As a result, no assurance can be made that reservations will not be cancelled or that reservations
will result in the purchase of our electrified powertrain solutions, and any such cancellations could harm our business, prospects, financial
condition and operating results.
We
may also enter into contracts for the sale of our electrified powertrain solutions that include various cancellation rights in favor
of the customer. For example, in May 2020, we entered into a pre-launch sales agreement (the “Agility Pre-Launch Agreement”)
with Agility Logistics Cargo Transport Co. WLL (“Agility Transport”), a company organized under the laws of and based in
Kuwait and a subsidiary of Agility Public Warehousing Company K.S.C.P. Under the Agility Pre-Launch Agreement, Agility Transport agreed
to order 1,000 trucks equipped with our Hypertruck ERX system in one or more future purchase orders, subject to certain testing and performance
requirements and termination rights. If we are unable to deliver our Hypertruck ERX trucks according to the performance requirements
and delivery timelines set forth in the contract, Agility Transport has the right to cancel our order. Additionally, even if we satisfy
such performance requirements and delivery timelines, Agility Transport may terminate the Agility Pre-Launch Agreement by giving us 360-days’
advance notice after the date on which we have delivered a Hypertruck ERX demonstration truck. Furthermore, the Agility Pre-Launch Agreement
does not specify the terms or periods upon which these purchase orders may be entered into, such that the sale of any Hypertruck ERX
equipped trucks to Agility Transport is subject to the parties reaching an agreement on the terms of one or more purchase orders, including
as to the amount of the deposit to be paid by Agility Transport to us in connection with such purchase order. Failure to reach agreement
on the terms of such purchase order could result in Agility Transport refusing to purchase all or a portion of the 1,000 Hypertruck ERX
equipped trucks that it pre-ordered. Should a dispute arise under the Agility Pre-Launch Agreement, we may face challenges enforcing
the terms of such contract due to the jurisdictional challenges involved with instituting legal proceedings against a foreign entity
and enforcing an award against such entity in a foreign jurisdiction. As a result, no assurance can be given that Agility Transport will
not terminate the Agility Pre-Launch Agreement prior to purchasing all or any portion of the 1,000 Hypertruck ERX equipped trucks it
pre-ordered under such agreement or that we would be able to enforce such agreement against Agility Transport. Any of these adverse actions
related to the Agility Pre-Launch Agreement or any future customer contracts could harm our business, prospects, financial condition
and operating results.
We
intend to sell our electrified powertrain solutions to large commercial vehicle OEM customers and large volume customers, and the failure
to obtain such customers, loss of sales to such customers or failure to negotiate acceptable terms in contract renewal negotiations could
have an adverse impact on our business.
Although
we intend to sell our electrified powertrain solutions to commercial vehicle OEMs and other large volume customers, we may not be able
to establish relationships with such OEMs or large volume customers if customer demand is not as high as we expect or if commercial vehicle
OEMs face pressure from their existing suppliers not to purchase our electrified powertrain solutions. We may enter into long-term contracts
with certain of these commercial vehicle OEMs and other large volume customers, who have substantial bargaining power with respect to
price and other commercial terms, and any long-term contracts would be subject to renegotiation and renewal from time to time. Failure
to obtain new customers, loss of all or a substantial portion of sales to any future customers for whatever reason (including, but not
limited to, loss of contracts or failure to negotiate acceptable terms in contract renewal negotiations, loss of market share by these
customers, insolvency of such customers, reduced or delayed customer requirements, plant shutdowns, strikes or other work stoppages affecting
production by such customers) or continued reduction of prices to these customers could have a significant adverse effect on our financial
results. There can be no assurance that we will be able to obtain large volume customers, not lose all or a portion of sales to any future
large volume customers or that we will be able to offset any reduction of prices to these customers with reductions in our costs or by
obtaining new customers.
The
level of any future sales to commercial vehicle OEMs, including the realization of future sales from awarded business or obtaining new
business or customers, is inherently subject to a number of risks and uncertainties, including the number of vehicles that these commercial
vehicle OEMs actually manufacture and sell. Further, to the extent that the financial condition, including bankruptcy or market share,
of any of our largest customers deteriorates or their sales otherwise continue to decline, our business, prospects, financial position
and operating results could be adversely affected. Accordingly, we may not in fact realize all of the future sales represented by our
awarded business. Any failure to realize these sales could have a material adverse effect on our business, prospects, financial condition
and operating results.
Demand
for our products will ultimately depend on our end users, some of whom operate in highly cyclical industries, which may subject us to
the performance of their industries and can result in uncertainty and significantly impact the demand for our products, which could have
a material adverse effect on our business, prospects, financial condition and operating results.
Demand
for our products will ultimately depend on our end users, some of whom operate in highly cyclical industries and have felt the impact
of COVID-19 and other factors on demand for output in their industries. Decisions to purchase our electrified powertrain solutions may
depend on the performance of the industries of our end users and if demand for output in those industries decreases, the demand for our
products will likely decrease. Demand in these industries is impacted by numerous factors, including commodity prices, infrastructure
spending, housing starts, real estate equity values, interest rates, consumer spending, fuel costs, energy demands, municipal spending
and commercial construction, among others. Increases or decreases in these variables may significantly impact the demand for our products.
For example, lower diesel fuel costs, higher compressed natural gas (“CNG”) costs or lower CNG availability would reduce
our products’ cost savings, which could have a material adverse effect on our business, prospects, financial condition and operating
results. Additionally, some of our end users have felt the impact of the COVID-19 pandemic, which has resulted in reduced demand for
commercial vehicles and may affect fueling infrastructure such as CNG stations. If we are unable to accurately predict demand, we may
be unable to meet our customers’ needs, resulting in the loss of potential sales, or we may produce excess products, resulting
in increased inventories and overcapacity in our contracted production facilities, increasing our unit production cost and decreasing
our operating margins.
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. We currently have a limited frame of reference by which to evaluate the performance of our electrified powertrain solutions upon
which our business prospects depend. There can be no assurance that we will be able to detect and fix any defects in our electrified
powertrain solutions. Our electrified powertrain solutions may not perform consistent with customers’ expectations or consistently
with other vehicles that 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 alternative fuel truck
companies or electric consumer vehicles could by association have a negative impact on perception and customer demand for our electrified
powertrain solutions.
The
performance characteristics of our electrified powertrain solutions, including fuel economy and emissions levels, may vary, including
due to factors outside of our control.
The
performance characteristics of our electrified powertrain solutions, including fuel economy and emissions levels, may vary, including
due to factors outside of our control. Our electrified powertrain solutions are still being designed and developed, and there are no
assurances that they will be able to meet their projected performance characteristics, including fuel economy and emissions levels. External
factors may also impact the performance characteristics of our electrified powertrain solutions. 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, driver behavior, speed, terrain, hardware efficiency, payload, vehicle and weather conditions. Additionally, GHG emissions of vehicles
installed with our electrified powertrain solutions may vary due to external factors, including the type of fuel, driver behavior, the
efficiency, regulatory testing, and certification of the engine, where the engine is being operated and the characteristics of the vehicle
itself, including but not limited to the vehicle’s software controls, drivetrain efficiency, aerodynamics and rolling resistance.
These external factors as well as any operation of our electrified powertrain solutions other than as intended, may result in emissions
levels that are greater than we expect. Additionally, the amount of GHG emissions of both the Hybrid and Hypertruck ERX solutions will
vary due to, but not limited to, the factors mentioned above. The ability of our electrified powertrain solutions to have a net carbon
negative profile, will depend on the availability of renewable natural gas (“RNG”) as well as the infrastructure necessary
to purchase RNG through fuel providers. Any limitation on the ability to purchase RNG, such as a decrease or a limitation on the number
of natural gas fueling stations or limitation on the production of natural gas and RNG in particular, will negatively impact the anticipated
carbon intensity profile of our electrified powertrain solutions. In addition, the carbon intensity profiles could vary based on the
source of RNG, which could reduce a fleet’s ability to have favorable carbon intensity scores. 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.
Our
beliefs regarding the ability of our electrified powertrain solutions to limit carbon intensity and reduce GHG emissions and contribute
to global decarbonization may be based on materially inaccurate assumptions.
We
believe that our electrified powertrain solutions, to the extent adopted, may have the ability to limit carbon intensity and reduce GHG
emissions from trucking operations, however, these beliefs are based on certain assumptions, including, but not limited to, our projections
of the extent of natural gas and RNG use in the future, fuel types used, the ability to obtain carbon credits and driver
behavior 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
have limited experience servicing our electrified powertrain solutions and our integrated software. 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.
We
have limited experience in servicing our electrified powertrain solutions and expect to increase our servicing capabilities as we begin
commercial production of our electrified powertrain solutions. Servicing hybrid and electric vehicles is different than servicing vehicles
with internal combustion engines and requires specialized skills, including high voltage training and servicing techniques. We plan to
partner with a third party to perform some or all of the servicing on our electrified powertrain solutions, and there can 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.
Our
electrified powertrain solutions rely on software and hardware that is highly technical, and if these systems contain errors, bugs or
vulnerabilities, or if we are unsuccessful in addressing or mitigating technical limitations in our systems, our business could be adversely
affected.
Our
electrified powertrain solutions rely on software and hardware, including software and hardware developed or maintained internally or
by third parties, that is highly technical and complex and will require modification and updates over the life of the vehicle. In addition,
our electrified powertrain solutions depend on the ability of such software and hardware to store, retrieve, process and manage immense
amounts of data. Our software and hardware may contain, errors, bugs or vulnerabilities, and our systems are subject to certain technical
limitations that may compromise our ability to meet our objectives. Some errors, bugs or vulnerabilities inherently may be difficult
to detect and may only be discovered after the code has been released for external or internal use. Errors, bugs, vulnerabilities, design
defects or technical limitations may be found within our software and hardware. 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 be to the satisfaction
of our customers. Additionally, if we are able to deploy updates to the software addressing any issues but our over-the-air update procedures
fail to properly update the software, our customers would then be responsible for installing such updates to the software and their software
will be subject to these vulnerabilities until they do so. 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.
Future
product recalls could materially adversely affect our business, prospects, financial condition and operating results.
Any
product recall in the future, whether it involves us or a competitor’s product, may result in negative publicity, damage our brand
and materially adversely affect our business, prospects, financial condition and operating results. In the future, we may voluntarily
or involuntarily, initiate a recall if any of our products (including the batteries we design, develop and manufacture) 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.
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.
A
successful product liability claim against us could require us to pay a substantial monetary award. 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, business, prospects, financial condition and operating results.
In most jurisdictions, we generally self-insure against the risk of product liability claims for vehicle exposure, meaning that any product
liability claims will likely have to be paid from company funds, not by insurance.
Insufficient
warranty reserves to cover future warranty claims could materially adversely affect our business, prospects, financial condition and
operating results.
Once
we begin commercial production of our electrified powertrain solutions, we will need to maintain 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.
Risks
Related to our Production Processes and Supply Chain
We
face significant barriers to produce our electrified powertrain solutions, 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 our end users, large capital requirements, investment costs of design
and production, long lead times to bring components to market from the concept and design stage, 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.
Our
success will depend on our ability to economically outsource the production, assembly and installation of our electrified powertrain
solutions at scale, and our ability to develop and produce electrified powertrain solutions of sufficient quality and appeal to customers
on schedule and at scale is unproven.
Our
business depends in large part on our ability to execute our plans to develop, produce, assemble, market, sell, install and service our
electrified powertrain solutions. We currently produce our Demonstrator Hybrid system at our facility in Cedar Park, Texas and expect
to begin production of our next generation Hybrid system in 2021, at the earliest, and our Hypertruck ERX system in 2022, at the earliest,
in each case at our outsourcing partners’ facilities. We anticipate that a significant concentration of this production, assembly
and installation will be performed by a small number of outsourcing partners. While these arrangements can lower operating costs, they
also reduce our direct control over production and distribution. 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.
Production
or 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.
Our
continued development of our electrified powertrain solutions is and will be subject to risks, including with respect to:
|
●
|
the
equipment we plan to use being able to accurately produce our electrified powertrain solutions
within specified design tolerances;
|
|
●
|
the
compatibility of our electrified powertrain solutions with existing and future commercial
vehicle designs;
|
|
●
|
long-
and short-term durability of the components in our electrified powertrain solutions in the
day-to-day wear and tear of the commercial trucking environment;
|
|
●
|
compliance
with environmental, workplace safety and similar regulations;
|
|
●
|
securing
necessary components on acceptable terms and in a timely manner;
|
|
●
|
delays
in delivery of final component designs to our suppliers;
|
|
●
|
our
ability to attract, recruit, hire and train skilled employees;
|
|
●
|
quality
controls, particularly as we plan to expand our production capabilities;
|
|
●
|
delays
or disruptions in our supply chain;
|
|
●
|
other
delays and cost overruns; and
|
|
●
|
our
ability to secure additional funding if necessary.
|
Our
production facilities, the production facilities of our outsourcing partners and suppliers and the equipment used to produce our electrified
powertrain solutions would be costly to replace and could require substantial lead time to replace and qualify for use, 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 us on acceptable terms, if at all.
We
and our future production partners have no experience to date in high volume production of our electrified powertrain solutions. We do
not know whether we or our future production partners will be able to develop efficient, automated, low-cost production capabilities
and processes and reliable sources of component supply, that will 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 future production partners are successful in developing our high-volume production capability and processes and reliably source 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.
Our
electrified powertrain solutions are still in the development and testing phase, and commercial deliveries of the Hybrid systems and
the Hypertruck ERX system are not expected to begin until 2021 and 2022, respectively, and may occur later or not at all. Any delay in
the financing, design, production and launch of our electrified powertrain solutions, including future production of our next generation
Hybrid system and Hypertruck ERX system at our outsourcing partners, could materially damage our brand, business, prospects, financial
condition and operating results. There are often delays in the design, production and commercial release of new products, and to the
extent we delay the launch of our electrified powertrain solutions, our growth prospects could be adversely affected as we may fail to
grow our market share. We will rely on our outsourcing partners to produce our electrified powertrain solutions at scale, and if they
are not able produce products that 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 third-party outsourcing partners or suppliers, we could experience delays in delivering on
our timelines.
We,
our outsourcing partners and our suppliers may rely on complex machinery for our production, which involves a significant degree of risk
and uncertainty in terms of operational performance and costs.
We,
our outsourcing partners and our suppliers may rely on complex machinery for the production, assembly and installation of our electrified
powertrain solutions, which will involve a significant degree of uncertainty and risk in terms of operational performance and costs.
Our production facilities and the facilities of our outsourcing partners and suppliers consist of large-scale machinery combining many
components. These components may suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume
operations, which may not be available when needed. Unexpected malfunctions of these components may significantly affect the intended
operational efficiency. Operational performance and costs can be difficult to predict and are often influenced by factors outside of
our control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with
decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in
electronic systems, industrial accidents, fire, seismic activity and natural disasters. Should operational risks materialize, it may
result in the personal injury to or death of workers, the loss of production equipment, damage to production facilities, monetary losses,
delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential
legal liabilities, all which could have a material adverse effect on our business, prospects, financial condition or operating results.
We
are dependent on large commercial vehicle OEMs and producers of glider kits and rolling chassis to provide vehicles for our electrified
powertrain solutions.
Because
we do not manufacture complete commercial vehicles, we are dependent on commercial vehicle OEMs and producers of glider kits and rolling
chassis to provide vehicle chassis for our electrified powertrain solutions. If OEMs are unable or unwilling to integrate the installation
of our electrified powertrain solutions into their commercial vehicle production lines, we may have to rely on producers of glider kits
and rolling chassis and commercial truck upfitting and modification companies. To the extent that there are limitations on the availability
of glider kits or rolling chassis, either due to the unwillingness or inability of OEMs and producers to produce and provide them to
us or our installation partners, or a change in governmental regulations or policies, we would need to develop our own commercial 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 the prices, or achieve the margins, or in the timeframes that we anticipate. Additionally, if commercial vehicle
OEMs limit or fail to provide a warranty on vehicles with our electrified powertrain solutions, we will incur additional costs by contracting
with a third party to provide warranty services. Any of the foregoing would have a material adverse effect on our business, prospects,
financial condition and operating results.
We
will rely on third parties, including commercial truck upfitting and modification companies and commercial vehicle OEMs, to install our
electrified powertrain solutions in vehicles, which is subject to risks.
We
intend to enter into agreements with commercial truck upfitting and modification companies and commercial vehicle OEMs to install our
electrified powertrain solutions. Using third-party contract manufacturers and installers for the production and installation of our
electrified powertrain solutions is subject to risks with respect to operations that are outside our control. We could experience delays
if our outsourcing partners do not meet agreed upon timelines or experience capacity constraints that make it impossible for us to fulfill
purchase orders on time or at all. The installation of our solutions may also void the warranty of a vehicle or a vehicle’s components,
such as our engine and transmission, which may reduce customer demand for our solutions. 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 outsourcing partners, and we could be affected
by negative publicity related to our partners whether or not such publicity is related to their collaboration with us. Our ability to
successfully build a premium brand could also be adversely affected by perceptions about the quality of our outsourcing partners’
products. In addition, although we are involved in each step of the supply chain, production and installation processes, because we also
rely on our outsourcing partners and third parties 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 third-party contract manufacturers and installers on terms
and conditions acceptable to us and therefore may need to contract with other third parties or significantly add to our own production
capacity. There can be no assurance that in such event we would be able to engage other third parties or establish or expand our own
production capacity to meet our needs on acceptable terms or at all. The expense and time required to complete any transition, and to
assure that our electrified powertrain solutions produced at facilities of new producers comply with our quality standards and regulatory
requirements, may be greater than anticipated. Any of the foregoing could adversely affect our business, prospects, financial condition
and operating results.
We
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 vehicles 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, some of whom are single-source suppliers, for the provision and development of many of the key components
and materials used in our electrified powertrain solutions, such as natural gas generators. Any failure of these suppliers or outsourcing
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. While we plan to obtain components from multiple
sources whenever possible, some of the components used in our vehicles will be purchased by us from a single source. Our third-party
suppliers may not be able to meet their product specifications and performance characteristics or our desired specifications, performance
and pricing, 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 for 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. Additionally,
we have entered into a commercial matters agreement with Dana Limited (“Dana”), pursuant to which we agreed to, among other
things, purchase from Dana and its affiliates, unless we are directed by a customer to use a different vendor, any component, product
or service required or utilized by us that Dana or any of its affiliates manufactures, sells or provides or unless Dana is unwilling
or unable to supply on reasonably competitive terms such component, product or service. 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) 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.
Increases
in costs, disruption of supply or shortage of our components, particularly lithium titanate oxide (“LTO”) battery cells,
could harm our business.
Once
we begin commercial production of our electrified powertrain solutions, we may 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 LTO cells. These risks include:
|
●
|
the
inability or unwillingness of current battery manufacturers to build or operate battery cell
production facilities to supply the numbers of LTO cells required to support the growth of
the electric vehicle industry as demand for such cells increases;
|
|
●
|
disruption
in the supply of cells due to quality issues or recalls by the battery cell manufacturers;
|
|
●
|
a
fewer number of manufacturers of LTO cells compared to lithium nickel manganese cobalt oxide
or lithium nickel cobalt aluminum oxide cells; and
|
|
●
|
an
increase in the cost of raw materials.
|
Any
disruption in the supply of battery cells could temporarily disrupt production of our electrified powertrain solutions until a different
supplier is fully qualified. Moreover, battery cell manufacturers may refuse to supply electric vehicle manufacturers if they determine
that the vehicles are not sufficiently safe. Furthermore, fluctuations or shortages in petroleum and other economic conditions may cause
us to experience significant increases in freight charges. Substantial increases in the prices for raw materials may 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.
Risks
Related to Our Industry and Competitive Landscape
Our
future growth is dependent upon the commercial trucking industry’s willingness to adopt alternative fuel, hybrid and electric vehicles.
Our
growth is highly dependent upon the adoption of alternative fuel, hybrid and electric vehicles by the commercial trucking industry. If
the market for alternative fuel, hybrid and electric vehicles 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 market
for alternative fuels, hybrid and electric vehicles is new and untested and is characterized by rapidly changing technologies, price
competition, numerous competitors, evolving government regulation and industry standards and uncertain customer demands and behaviors.
Factors
that may influence the adoption of alternative fuel, hybrid and electric vehicles include:
|
●
|
perceptions
about alternative fuel, hybrid and electric vehicle quality, safety, design, performance,
reliability and cost, especially if adverse events or accidents occur that are linked to
the quality or safety of alternative fuel, hybrid or electric vehicles;
|
|
●
|
perceptions
about vehicle safety in general, including the use of advanced technology, such as vehicle
electronics, alternative fuel and regenerative braking systems;
|
|
●
|
the
decline of vehicle efficiency 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 and associated costs for alternative fuel, hybrid or electric vehicles;
|
|
●
|
volatility
in the cost of energy, oil, gasoline, natural gas, hydrogen and renewable fuels could affect
buying decisions, which could affect the carbon profile of our solutions;
|
|
●
|
the
availability of refueling stations, particularly CNG stations;
|
|
●
|
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 alternative
fuel, hybrid and electric vehicles or future regulation requiring increased use of nonpolluting
trucks;
|
|
●
|
the
availability of rebates provided by natural gas fueling stations and natural gas providers
to offset the costs of natural gas and natural gas vehicles;
|
|
●
|
the
ability of Hyliion, fleets, utilities and others to purchase and take credit for renewable
fuel and energy, specifically RNG, through low-carbon fuel standard (“LCFS”)
programs or similar programs that take advantage of RNG credits in approved states;
|
|
●
|
the
availability of tax and other governmental incentives to sell natural gas;
|
|
●
|
perceptions
about and the actual cost of alternative fuel itself, as well as hybrid and electric vehicles;
and
|
For
example, if the market price of oil is low, there may be corresponding decreases in the cost of diesel fuel, which may impact the market
for electric vehicles. 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.
Although
we hope to be among the first to bring electrified powertrain solutions to market, competitors have already displayed electrified vehicle
prototypes and may enter the market before us.
We
face intense competition in trying to be among the first to bring electrified powertrain solutions to market. Most of our current and
potential competitors have greater financial, technical, manufacturing, marketing and other resources than we do. They may be able to
deploy greater resources to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their alternative
fuel and electric truck programs. Additionally, our competitors also have greater name recognition, longer operating histories, larger
sales forces, broader customer and industry relationships and other resources than we do. These competitors also compete with us in recruiting
and retaining qualified research and development, sales, marketing and management personnel, as well as 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.
We cannot provide assurances that our electrified systems will be the first to market. Even if our electrified systems are first, or
among the first, to market, there are no assurances that customers will choose vehicles with our electrified systems over those of our
competitors, or over diesel powered trucks.
Tesla,
Inc. (“Tesla”) and Nikola Corporation (“Nikola”) have announced their plans to bring Class 8 long haul battery
electric vehicles (“BEVs”) and fuel cell electric vehicles (“FCEVs”) to the market over the coming years. Tesla
announced its BEV and Nikola announced its plug-in BEVs. Cummins Inc. (“Cummins”), Daimler AG (“Daimler”), parent
of Freightliner Trucks, Dana, Navistar International Corporation (“Navistar”), PACCAR Inc. (“PACCAR”), parent
of Kenworth Trucks, Inc. and Peterbilt Motors Company, Volvo Group (“Volvo”), XOS Trucks and other commercial vehicle manufacturers
have announced their plans to bring Class 8 BEVs or FCEVs to the market. Furthermore, we will also face competition from manufacturers
of internal combustion engines powered by diesel fuel. We expect additional competitors to enter the industry as well.
We
expect competition in our industry to intensify from our existing and future competitors in the future in light of increased demand and
regulatory push for alternative fuel and electric vehicles.
Developments
in alternative technology or improvements in the internal combustion engine may adversely affect the demand for our electrified powertrain
solutions.
Significant
developments in alternative technologies, such as battery cell technology, advanced diesel, ethanol or natural gas, or improvements in
the fuel economy of the internal combustion engine, may materially and adversely affect our business, prospects, financial condition
and operating results in ways we do not currently anticipate. Existing and other battery cell technologies, fuels or sources of energy
may emerge as customers’ preferred alternative to our electrified powertrain solutions. Any failure by us to develop new or enhanced
technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction of
new and enhanced alternative fuel and electric vehicles, which could result in the loss of competitiveness of our electrified powertrain
solutions, decreased revenue and a loss of market share to competitors. Our research and development efforts may not be sufficient to
adapt to changes in alternative fuel and electric vehicle technology. As technologies change, we plan to upgrade or adapt our electrified
powertrain solutions with the latest technology, in particular battery cell technology, which may also negatively impact the adoption
of other our products. 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.
Risks
Related to Technology, Data and Privacy-Related Matters
We
are subject to cybersecurity risks to operational systems, security systems, infrastructure, integrated software in our electrified powertrain
solutions and customer data processed by us or third-party vendors or suppliers and any material failure, weakness, interruption, cyber
event, incident or breach of security could prevent us from effectively operating our business.
We
are at risk for interruptions, outages and breaches of: (a) operational systems, including business, financial, accounting, product development,
data processing or production processes, owned by us or our third-party vendors or suppliers; (b) facility security systems, owned by
us or our third-party vendors or suppliers; (c) transmission control modules or other in-product technology, 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 we process
or our third-party vendors or suppliers process on our behalf. Such cyber incidents could: materially disrupt operational systems; result
in loss of intellectual property, trade secrets or other proprietary or competitively sensitive information; compromise certain information
of customers, employees, suppliers, drivers or others; jeopardize the security of our facilities; or affect the performance of transmission
control modules or other in-product technology and the integrated software in our electrified powertrain solutions. A cyber incident
could be caused by disasters, insiders (through inadvertence or with malicious intent) or malicious third parties (including nation-states
or nation-state supported actors) using sophisticated, targeted methods to circumvent firewalls, encryption and other security defenses,
including hacking, fraud, trickery or other forms of deception. The techniques used by cyber attackers change frequently and may be difficult
to detect for long periods of time. Although we maintain information technology measures designed to protect ourselves against intellectual
property theft, data breaches and other cyber incidents, such measures will require updates and improvements, and we cannot guarantee
that such measures will be adequate to detect, prevent or mitigate cyber incidents. The implementation, maintenance, segregation and
improvement of these systems requires significant management time, support and cost. Moreover, there are inherent risks associated with
developing, improving, expanding and updating current systems, including the disruption of our data management, procurement, production
execution, finance, supply chain and sales and service processes. These risks may affect our ability to manage our data and inventory,
procure parts or supplies or produce, sell, deliver and service our electric powertrain solutions, adequately protect our intellectual
property or achieve and maintain compliance with, or realize available benefits under, applicable laws, regulations and contracts. We
cannot be sure that these systems upon which we rely, including those of our third-party vendors or suppliers, will be effectively implemented,
maintained or expanded as planned. If we do not successfully implement, maintain or expand these systems as planned, our operations may
be disrupted, our ability to accurately and timely report our financial results could be impaired, and deficiencies may arise in our
internal control over financial reporting, which may impact our ability to certify our financial results. Moreover, our proprietary information
or intellectual property could be compromised or misappropriated, and our reputation may be adversely affected. If these systems do not
operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for
performing these functions.
A
significant cyber incident could impact production capability, harm our reputation, cause us to breach our contracts with other parties
or subject us to regulatory actions or litigation, any of which could materially affect our business, prospects, financial condition
and operating results. 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 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, trucks 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 truck. 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.
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.
We
may need to defend ourselves against patent, copyright or trademark infringement claims or trade secret misappropriation claims, which
may be time-consuming and cause us to incur substantial costs.
Companies,
organizations or individuals, including our competitors, may own or obtain patents, trademarks or other proprietary rights that would
prevent or limit our ability to make, use, develop or sell our electrified powertrain solutions, which could make it more difficult for
us to operate our business. We may receive inquiries from patent, copyright or trademark owners inquiring whether we infringe upon their
proprietary rights. We may also be the subject of allegations that we have misappropriated their trade secrets or other proprietary rights.
Companies owning patents or other intellectual property rights relating to battery packs, electric motors, fuel cells 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; or
|
|
●
|
redesign
one or more aspects or systems of our electrified powertrain solutions.
|
A
successful claim of infringement or misappropriation against us could materially adversely affect our business, prospects, financial
condition and operating results. Any litigation or claims, whether valid or invalid, could result in substantial costs and diversion
of resources.
Our
business may be adversely affected if we are unable to protect our intellectual property rights from unauthorized use by third parties.
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 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, consultants 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 our;
|
|
●
|
the
costs associated with enforcing patents, confidentiality and invention agreements or other
intellectual property rights may make enforcement impracticable; and
|
|
●
|
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. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the U.S.
Also,
while we have registered trademarks in an effort to protect our investment in our brand and goodwill with customers, competitors may
challenge the validity of those trademarks and other brand names in which we have invested. Such challenges can be expensive and may
adversely affect our ability to maintain the goodwill gained in connection with a particular trademark.
Our
intellectual property applications for registration may not issue or be registered, which may have a material adverse effect on our ability
to prevent others from commercially exploiting products similar to ours.
We
cannot be certain that we are the first inventor of the subject matter to which we have filed a particular patent application, or if
we are the first party to file such a patent application. If another party has filed a patent application to the same subject matter
as we have, we may not be entitled to the protection sought by the patent application. We also cannot be certain whether the claims included
in a patent application will ultimately be allowed in the applicable issued patent. Further, the scope of protection of issued patent
claims is often difficult to determine. As a result, we cannot be certain that the patent applications that we file will issue, or that
our issued patents will afford protection against competitors with similar technology. In addition, our competitors may design around
our issued patents, which may adversely affect our business, prospects, financial condition and operating results.
Risks
Related to Environmental and Regulatory Matters
The
unavailability, reduction or elimination of government and economic incentives for alternative fuel use due to policy changes or government
regulation could have a material adverse effect on our business, prospects, financial condition and operating results.
Any
reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, the reduced
need for such subsidies and incentives due to the perceived success of the electric vehicle industry or other reasons may result in the
diminished competitiveness of the alternative fuel and electric vehicle industry generally or our electrified powertrain solutions. While
certain tax credits and other incentives for alternative energy production, alternative fuel and electric vehicles have been available
in the past, there is no guarantee these programs will be available in the future. If current tax incentives are not available in the
future, our financial position could be harmed.
In
particular, we are influenced by federal, state and local tax credits, rebates, grants and other government programs and incentives that
promote the use of RNG and natural gas as a vehicle fuel. These include various government programs that make grant funds available for
the purchase of natural gas vehicles, as well as D3 RIN and LCFS programs, which encourage low carbon “compliant” transportation
fuels (including CNG) in the California and Oregon marketplace by allowing producers of these fuels to generate LCFS Credits that can
be sold to noncompliant regulated parties and the Alternative Fuel Tax Credit (“AFTC”) under which a tax credit is available
for natural gas vehicle fuel sales made through the end of 2020 but which may not be available for vehicle fuel sales made after December
31, 2020, particularly if other legislative priorities result in insufficient focus on this program during upcoming congressional sessions.
Additionally, we are influenced by laws, rules and regulations that require reductions in carbon emissions or the use of renewable fuels,
such as the California Low Carbon Fuel Standards and the Oregon Clean Fuels Program. These programs and regulations, which have the effect
of encouraging the use of natural gas as a vehicle fuel, could expire or be repealed or amended for a variety of reasons. For example,
parties with an interest in gasoline and diesel, electric or other alternative vehicles or vehicle fuels, including lawmakers, regulators,
policymakers, environmental or advocacy organizations, OEMs, trade groups, suppliers or other powerful groups, may invest significant
time and money in efforts to delay, repeal or otherwise negatively influence regulations and programs that promote natural gas. Many
of these parties have substantially greater resources and influence than we do. Further, changes in federal, state or local political,
social or economic conditions, including a lack of legislative focus on these programs and regulations, could result in their modification,
delayed adoption or repeal. Any failure to adopt, delay in implementation, expiration, repeal or modification of these programs and regulations,
or the adoption of any programs or regulations that encourage the use of other alternative fuels or alternative vehicles over natural
gas, would reduce the market for natural gas as a vehicle fuel and harm our operating results, liquidity and financial condition. For
instance, California lawmakers and regulators have implemented various measures designed to increase the use of electric, hydrogen and
other zero-emission vehicles, including establishing firm goals for the number of these vehicles operating on state roads by specified
dates and enacting various laws and other programs in support of these goals. Although the influence and applicability of these or similar
measures on our business and natural gas vehicle adoption in general remains uncertain, a focus by these groups on zero tailpipe emissions
vehicles over vehicles with an overall net carbon negative emissions profile, but with some tailpipe emissions operating on RNG, could
adversely affect the market for natural gas vehicles, including those powered by our electrified powertrain solutions. If these economic
incentives are reduced or eliminated, there could be a reduction of the supply of natural gas, a corresponding increase in the price
of natural gas, and our electrified powertrain solutions may not be net carbon negative, which could have a material adverse effect on
our business, prospects, financial condition and operating results.
Additionally,
other changes to governmental regulations and policies could impact the competitiveness of natural gas as a fuel source. For instance,
a limitation or ban on extraction methods like fracking, could have a negative impact on the availability and price of natural gas and
may adversely affect the growth of the alternative fuel automobile markets. Additionally, an increase in the economic incentives for
other fuel sources or BEVs, such as through the subsidization of other fuel sources or higher permitted weight limits for BEVs or FCEVs
or the reduction or elimination of the higher permitted weight limits for natural gas vehicles, could make our products less competitive.
Such changes in regulations and policies could materially and adversely affect our business, prospects, financial condition and operating
results.
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 will own or operate, 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 the required permits and approvals in connection with our planned production facilities 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
business could be negatively affected by unfavorable changes to federal or state tax laws or the adoption of federal or state laws or
regulations mandating new or additional limits on the production of GHG emissions, the cost of natural gas and “tailpipe”
emissions.
Federal
or state laws or regulations may be adopted that would impose new or additional limits on the emissions of GHG. The potential effects
of GHG emission limits on our business are subject to significant uncertainties based on, among other things, the timing of the implementation
of any new requirements, the required levels of emission reductions, the nature of any market-based or tax-based mechanisms adopted to
facilitate reductions, the relative availability of GHG emission reduction offsets, the development of cost-effective, commercial-scale
carbon capture and storage technology and supporting regulations and liability mitigation measures, the range of available compliance
alternatives, and our ability to demonstrate that our products qualify as a compliance alternative under any new statutory or regulatory
programs to limit GHG emissions. If our solutions are not able to meet future GHG emission limits or perform as well as BEV, FCEV or
other alternative fuel vehicles, for instance due to unavailability of RNG in a particular area or a decline in RNG production or an
increase in our cost, our solutions could be less competitive. Additionally, federal, state or road taxes could be added to natural gas
fuel, which would increase the operating cost of our products. Furthermore, additional federal or state taxes could be implemented on
“tailpipe” emissions, which would have a negative impact on the cost of our products and a positive impact on the cost of
BEVs and FCEVs relative to our solutions. Such new federal or state laws or regulations could have a material adverse impact on our business,
prospects, financial condition and operating results.
We,
our outsourcing partners and our suppliers are or may be subject to substantial regulation and unfavorable changes to, or failure by
us, our outsourcing partners 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, our outsourcing partners and our suppliers are or may be
subject to substantial regulation under international, federal, state and local laws. 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 their electrified powertrain solutions in any of these jurisdictions. For instance, our electrified powertrain solutions
are novel technology that may not be readily classified into categories by governmental agencies. If we, our outsourcing partners 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 we currently operate, or those jurisdictions in which we 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. For example, if the battery packs installed in our electrified
powertrain solutions are deemed to be transported, we will need to comply with the mandatory regulations governing the transport of “dangerous
goods,” and any deficiency in compliance may result in us being prohibited from selling our electrified powertrain solutions until
compliant batteries are installed. Additionally, although we do not believe that our current after-market Hybrid system is required to
obtain certifications from the EPA in the event that regulators determine that certifications are necessary, we may be prohibited from
selling our Hybrid system until such time as we obtain the required certifications. Any such required changes to our battery packs or
Hybrid system will require additional expenditures and may delay the shipment of vehicles. In addition, regulations related to the electric
and alternative energy 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;
|
|
●
|
increased
support for other alternative fuel systems, which could have an impact on the acceptance
of our electric powertrain system; and
|
|
●
|
increased
sensitivity by regulators to the needs of established automobile manufacturers with large
employment bases, high fixed costs and business models based on the internal combustion engine,
which could lead them to pass regulations that could reduce the compliance costs of such
established manufacturers or mitigate the effects of government efforts to promote alternative
fuel vehicles.
|
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 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 us 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. For example, California requires connected devices to maintain minimum information security requirements. As legislation
continues to develop, we will likely be required to expend significant additional resources to continue to modify or enhance our protective
measures and internal processes to comply with such legislation. In addition, non-compliance with these laws or a significant breach
of our third-party service providers’ or vendors’ or our own network security and systems could have serious negative consequences
for our business and future prospects, including possible fines, penalties and damages, reduced customer demand for our vehicles and
harm to our reputation and brand.
We
are subject to U.S. and foreign anti-corruption and anti-money laundering laws and regulations. We can face criminal liability and other
serious consequences for violations, which can 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 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.
We
are subject to governmental export and import control laws and regulations. Our failure to comply with these laws and regulations could
have an adverse effect on our business, prospects, financial condition and operating results.
Our
products and solutions are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations,
U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office
of Foreign Assets Control. U.S. export control laws and regulations and economic sanctions prohibit the shipment of certain products
and services to U.S. embargoed or sanctioned countries, governments and persons. In addition, complying with export control and sanctions
regulations for a particular sale may be time-consuming and result in the delay or loss of sales opportunities. Exports of our products
and technology must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and
certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import
privileges, fines, which may be imposed on us and responsible employees or managers and, in extreme cases, the incarceration of responsible
employees or managers.
In
addition, changes in our products or solutions or changes in applicable export or import laws and regulations may create delays in the
introduction and sale of our products and solutions in international markets, increase costs due to changes in import and export duties
and taxes, prevent our customers from deploying our products and solutions or, in some cases, prevent the export or import of our products
and solutions to certain countries, governments or persons altogether. Any change in export or import laws and regulations, shift in
the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted
by such laws and regulations, could also result in decreased use of our products and solutions or in our decreased ability to export
or sell our products and solutions to customers. Any decreased use of our products and solutions or limitation on our ability to export
or sell our products and solutions would likely adversely affect our business, prospects, financial condition and operating results.
Changes
in laws or regulations and U.S. trade policy, including the imposition of tariffs and the resulting consequences, could adversely affect
our business, prospects, financial condition and operating results.
We
are subject to laws and regulations enacted by national, regional and local governments and agencies. Compliance with, and monitoring
of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation
and application may also change from time to time and those changes could have a material adverse effect on our products and business.
In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect
on our business and results of operations.
The
U.S. government has adopted a new approach to trade policy and in some cases has attempted to renegotiate or terminate certain existing
bilateral or multi-lateral trade agreements. It has also imposed tariffs on certain foreign goods, including steel and certain commercial
vehicle parts, which have begun to result in increased costs for goods imported into the U.S. In response to these tariffs, a number
of U.S. trading partners have imposed retaliatory tariffs on a wide range of U.S. products, which makes it more costly for us to export
our products to those countries. If we are unable to pass price increases on to our customer base or otherwise mitigate the costs, or
if demand for our exported products decreases due to the higher cost, our operating results could be materially adversely affected. 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 economy.
We
intend in the future to expand internationally and will face risks associated with our international operations, including unfavorable
regulatory, political, tax and labor conditions, which could harm our business.
We
will face risks associated with our future international operations, including possible unfavorable regulatory, political, tax and labor
conditions, which could harm our business. We anticipate having international operations which would subject us to the legal, political,
regulatory and social requirements and economic conditions in any future jurisdictions. Additionally, as part of our growth strategy,
we intend to expand our sales and servicing services internationally. However, we have no experience to date selling and servicing our
electrified powertrain solutions internationally and such expansion would require us to make significant expenditures, including the
hiring of local employees and establishing facilities, in advance of generating any revenue. We are subject to a number of risks associated
with international business activities that may increase our costs, impact our ability to sell our electrified powertrain solutions and
require significant management attention. These risks include:
|
●
|
conforming
our electrified powertrain solutions to various international regulatory requirements where
our electrified powertrain solutions are sold, or homologation;
|
|
●
|
difficulties
in obtaining or complying with various licenses, approvals, certifications and other governmental
authorizations necessary to manufacture, sell or service our electrified powertrain solutions
in any of these jurisdictions;
|
|
●
|
difficulties
in staffing and managing foreign operations;
|
|
●
|
difficulties
attracting customers in new jurisdictions;
|
|
●
|
difficulties
establishing new partnerships, including with respect to installation centers, assembly facilities,
suppliers and the truck OEMs necessary to install our technology in vehicles;
|
|
●
|
foreign
government taxes, regulations and permit requirements, including foreign taxes that We may
not be able to offset against taxes imposed upon we in the U.S., and foreign tax and other
laws limiting our ability to repatriate funds to the U.S.;
|
|
●
|
fluctuations
in foreign currency exchange rates and interest rates, including risks related to any interest
rate swap or other hedging activities we undertake;
|
|
●
|
U.S.
and foreign government trade restrictions, tariffs and price or exchange controls;
|
|
●
|
foreign
labor laws, regulations and restrictions;
|
|
●
|
changes
in diplomatic and trade relationships;
|
|
●
|
political
instability, natural disasters, global health concerns, including health pandemics such as
the COVID-19 pandemic, war or events of terrorism; and
|
|
●
|
the
strength of international economies.
|
If
we fail to successfully address these risks, our business, prospects, financial condition and operating results could be materially harmed.
Risks
Related to Capital and Tax Matters
We
may need to raise additional funds and these funds may not be available to us when we need them. If we cannot raise additional funds
when we need them, our business, prospects, financial condition and operating results could be negatively affected.
The
design, production, sale and servicing of our electrified powertrain solutions is capital-intensive. In connection with the consummation
of the Business Combination on October 1, 2020, we raised net proceeds of approximately $516.5 million (net of transaction costs and
expenses). As of December 31, 2020, all outstanding warrants were either exercised or redeemed, with gross proceeds of $140.8 million
raised, of which $16.3 million was collected during the first quarter of 2021. However, we may subsequently determine that additional
funds are necessary earlier than anticipated. This capital may be necessary to fund our ongoing operations, continue research, development
and design efforts, create new products and improve infrastructure. We may raise additional funds through the issuance of equity, equity
related or debt securities or through obtaining credit from government or financial institutions. We cannot be certain that additional
funds will be available to us on favorable terms when required, or at all. If we cannot raise additional funds when we need them, our
business, prospects, financial condition and operating results could be materially adversely affected.
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. tax laws. Future
guidance from the IRS with respect to the Tax Act may affect us, 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, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act
or any newly enacted federal tax legislation.
Our
ability to use net operating loss carryforwards and other tax attributes may be limited in connection with the Business Combination or
other ownership changes.
We
have incurred losses during our history and do not expect to become profitable in the near future, and may never achieve profitability.
To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any,
until such unused losses expire, if at all. As of December 31, 2020, we had U.S. federal net operating loss carryforwards of approximately
$82.2 million.
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. It is uncertain if and to what extent various states will conform
to the Tax Act or the CARES Act.
Under
Section 382 of the Code, substantial changes in our ownership may result in an annual limitation on the amount of net operating loss
carryforwards that could be utilized in the future to offset our taxable income. Generally, this limitation may arise in the event of
a cumulative change in ownership of more than 50% within a three-year period. We have completed such analysis and determined that such
an ownership change occurred in 2017. This will limit the usage of our 2017 and prior year net operating losses, and will cause $2.0
million of such losses to expire unused, regardless of future taxable income. No other such ownership changes have occurred through December
31, 2020. Due to this, as well as our overall profitability estimate as noted above, we have recorded a full valuation allowance related
to our net operating loss carryforwards and other deferred tax assets due to the uncertainty of the ultimate realization of the future
benefits of those assets.
We
may not be able to obtain or agree on acceptable terms and conditions for all or a significant portion of the government grants, loans
and other incentives for which we may apply. As a result, our business, prospects, financial condition and operating results may be adversely
affected.
We
anticipate applying for federal and state grants, loans and tax incentives under government programs designed to stimulate the economy
and support the production of alternative fuel and electric vehicles and related technologies. We anticipate that in the future there
will be new opportunities for us to apply for grants, loans and other incentives from federal, state and foreign governments. Our ability
to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and
approval of our applications to participate in such programs. The application process for these funds and other incentives will likely
be highly competitive. We cannot assure you that we will be successful in obtaining any of these additional grants, loans and other incentives.
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.
As
of June 30, 2021, our executive officers, directors and their respective affiliates, as a group, beneficially own approximately 29.6%
of our outstanding Common Stock. As a result, these stockholders are 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 and approval of significant
corporate transactions. This control could have the effect of delaying or preventing a change of control of us or changes in management
and will make the approval of certain transactions difficult or impossible without the support of these stockholders.
Our
Certificate of Incorporation designates specific courts as the exclusive forum for certain stockholder litigation matters, which could
limit the ability of our stockholders to obtain a favorable forum for disputes with us or our directors, officers or employees.
Our
Certificate of Incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against
current or former directors, officers or other employees for breach of fiduciary duty, other similar actions, any other action as to
which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware and any action or proceeding concerning the validity
of our Certificate of Incorporation or our Bylaws may be brought only in the Court of Chancery in the State of Delaware (or, if and only
if the Court of Chancery of the State of Delaware does not have subject matter jurisdiction thereof, any state court located in the State
of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of
Delaware), unless we consent in writing to the selection of an alternative forum. This provision would not apply to suits brought to
enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
Our Certificate of Incorporation also provides that, unless we consent in writing to the selection of an alternative forum, the federal
district courts of the U.S. shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under
the Securities Act. This provision may limit our stockholder’s ability to bring a claim in a judicial forum that it finds favorable
for disputes with us and our directors, officers or other employees and may have the effect of discouraging lawsuits against our directors,
officers and other employees. Furthermore, our stockholders may be subject to increased costs to bring these claims, and the exclusive
forum provision could have the effect of discouraging claims or limiting investors’ ability to bring claims in a judicial forum
that they find favorable.
In
addition, the enforceability of similar exclusive forum provisions in other companies’ certificates of incorporation has been challenged
in legal proceedings, and it is possible that, in connection with one or more actions or proceedings described above, a court could rule
that this provision in our Certificate of Incorporation is inapplicable or unenforceable. In March 2020, the Delaware Supreme Court issued
a decision in Salzburg et al. v. Sciabacucchi, which found that an exclusive forum provision providing for claims under the Securities
Act to be brought in federal court is facially valid under Delaware law. We intend to enforce this provision, but we do not know whether
courts in other jurisdictions will agree with this decision or enforce it. If a court were to find the exclusive forum provision contained
in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving
such action in other jurisdictions, which could harm our business, prospects, financial condition and operating results.
A
significant portion of our total outstanding shares of our Common Stock are restricted from immediate resale but may be sold into the
market in the near future. This could cause the market price of our Common Stock to drop significantly, even if our business is doing
well.
Sales
of a substantial number of shares of our Common Stock in the public market could occur at any time. These sales, or the perception
in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Common Stock.
As of June 30, 2021, 2.6% of our Common Stock was subject to transfer restrictions pursuant to the terms of a letter agreement
entered into at the time of the IPO, and may not be transferred until the earlier to occur of (a) one year after the Closing or (b)
the date on which we complete a liquidation, merger, stock exchange or other similar transaction that results in all of our public
stockholders having the right to exchange their shares of Common Stock for cash, securities or other property; notwithstanding the
foregoing, if the last sale price of our Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 trading day period commencing at
least 150 days after the Closing, such restricted shares will be released from these transfer restrictions. In addition to the
transfer restrictions described above, Thomas Healy also agreed not to transfer more than 10% of the number of shares of Common
Stock held by him immediately after the Effective Time, or issuable upon the exercise of options to purchase shares of Common Stock
held by him immediately after the Effective Time until October 1, 2022. Such restricted shares represent 18.2% of our Common Stock
as of June 30, 2021. Upon expiration of the transfer restrictions, the holders will be eligible to sell their shares into the
market.
We
may issue additional shares of 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;
and
|
|
●
|
may
adversely affect prevailing market prices for our Common Stock.
|
General
Risk Factors
We
have been, and may in the future be, adversely affected by the global COVID-19 pandemic, the duration and economic, governmental and
social impact of which is difficult to predict, which may significantly harm our business, prospects, financial condition and operating
results.
There
has been a widespread worldwide impact from the COVID-19 pandemic, and we have been, and may in the future be, adversely affected as
a result. Numerous government regulations and public advisories, as well as shifting social behaviors, have temporarily limited or closed
non-essential transportation, government functions, business activities and person-to-person interactions, and the duration of such trends
is difficult to predict. Reduced operations and production line shutdowns at commercial vehicle OEMs due to COVID-19, limitations on
travel by our personnel and personnel of our customers and increased demand for commercial trucks within our customers’ fleets
caused some customers to delay the planned installation of our Hybrid system on their trucks past the second quarter of 2020, and future
delays or shutdowns of commercial vehicle OEMs or our suppliers could impact our ability to meet customer orders. We also instituted
certain temporary cost reduction measures such as reducing or deferring discretionary spending.
The
specific timing and pace of our resumption of normal operations will depend on the status of various government regulations and the readiness
of our suppliers, vendors and workforce. Although we are working to resume meetings with potential customers, we ultimately remain uncertain
how we may be impacted should COVID-19 concerns increase in the future. Moreover, travel restrictions and social distancing efforts in
response to the COVID-19 pandemic may negatively impact the commercial trucking industry, such as reduced consumer demand for products
carried by the commercial trucking industry, for an unknown, but potentially lengthy, period of time.
Our
operations and timelines may also be affected by global economic markets and levels of consumer comfort and spend, which could impact
demand in the worldwide transportation industries. Because the impact of current conditions on an ongoing basis is yet largely unknown,
is rapidly evolving and has been varied across geographic regions, this ongoing assessment will be particularly critical to allow us
to accurately project demand and infrastructure requirements globally and deploy our workforce and other resources accordingly. If current
global market conditions continue or worsen, or if we cannot or do not resume reduced operations at a rate commensurate with such conditions
or resume full operational capacity and are later required to or choose to reduce such operations again, our business, prospects, financial
condition and operating results could be materially harmed.
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 result of operating as a public company, we will incur significant legal, accounting and other expenses that we did not incur as a
private company, and these expenses may increase even more after we are no longer an emerging growth company, as defined in Section 2(a)
of the Securities Act. As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act,
the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and the NYSE.
Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. 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. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director
and officer liability insurance and we may be forced to accept reduced policy limits or incur substantially higher costs to maintain
the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these
requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve
on our board of directors, our board committees or as executive officers.
The
JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements
applicable to other public companies that are not emerging growth companies.
We
qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart
Our Business Startups Act of 2012 (the “JOBS Act”). As such, we take advantage of certain exemptions from various reporting
requirements applicable to other public companies that are not emerging growth companies, including (a) the exemption from the auditor
attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (b) the
exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (c) reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information
they deem important. We will remain an emerging growth company until the earliest of (a) the last day of the fiscal year (i) following
March 4, 2024, the fifth anniversary of our IPO, (ii) in which we have total annual gross revenue of at least $1.07 billion (as adjusted
for inflation pursuant to SEC rules from time to time) or (iii) in which we are deemed to be a large accelerated filer, which means the
market value of our Class A Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our prior
second fiscal quarter, and (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three
year period.
In
addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the exemption from complying with
new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company.
An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply
to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the
requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt
out of such extended transition period, which means that when a standard is issued or revised and it has different application dates
for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither
an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible
because of the potential differences in accounting standards used.
We
cannot predict if investors will find our Common Stock less attractive because we will 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 the price of our Common
Stock may be more volatile.
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, installation channels, refueling stations and hydrogen fuel cells.
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 suffer 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. 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. 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.
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.
Work
stoppages or similar difficulties could significantly disrupt our operations.
A
work stoppage, including due to the COVID-19 pandemic, at the production facilities of one or more of our or our outsourcing partners’,
suppliers and commercial vehicle OEMs could have a material adverse effect on our business. In addition, if a significant customer were
to experience a work stoppage, that customer could halt or limit purchases of our products, which could result in shutting down the related
production facilities. Also, a significant disruption in the supply of a key component due to a work stoppage at one of our suppliers
could result in shutting down production facilities, which could have a material adverse effect on 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.
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’s attention and resources from our business. Additionally, such securities litigation and shareholder activism could
give rise to perceived uncertainties as to our future, adversely affect its relationships with service providers and make it more difficult
to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any
securities litigation and activist shareholder matters. Further, the price of our Common Stock and could be subject to significant fluctuation
or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism.
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.
USE
OF PROCEEDS
All
of the Common Stock offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for
their respective accounts. We will not receive any of the proceeds from these sales.
DETERMINATION
OF OFFERING PRICE
Our
Common Stock is listed on the NYSE under the symbol “HYLN”. The actual offering price by the Selling Securityholders of the
shares of Common Stock covered by this prospectus will be determined by prevailing market prices at the time of sale, by private transactions
negotiated by the Selling Securityholders or as otherwise described in the section entitled “Plan of Distribution.”
MARKET
INFORMATION FOR COMMON STOCK AND DIVIDEND POLICY
Market
Information
Our
Common Stock is currently listed on the NYSE under the symbol “HLYN.” As of June 30, 2021, there were 103 holders of record
of our Common Stock.
Dividend
Policy
We
have not paid any cash dividends on our Common Stock to date. We may retain future earnings, if any, for future operations, expansion
and debt repayment and have no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends
in the future will be made at the discretion of our Board of Directors (the “Board”) and will depend on, among other things,
our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem
relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we
or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of the Common Stock in the foreseeable future.
Securities
Authorized for Issuance under Equity Compensation Plans
The
table below sets forth information regarding awards outstanding under our equity compensation plans as of December 31, 2020:
|
|
Number
of securities
to be issued
upon exercise of
outstanding options,
warrants and rights
(a)
|
|
|
Weighted-average
exercise price
of outstanding
options, warrants
and rights
(b)
|
|
|
Number
of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected
in
column (a))
(c)
|
|
Equity
compensation plans approved by security holders (2020 Equity Incentive Plan)
|
|
—
|
|
|
—
|
|
|
12,200,000
|
(2)
|
Equity
compensation plans not approved by security holders (1)
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
|
—
|
|
|
|
—
|
|
|
|
12,200,000
|
|
(1)
|
The Hyliion Inc. 2016
Equity Incentive Plan (the “2016 Plan”) was adopted by Legacy Hyliion prior to the business combination, and no
additional awards will be granted pursuant to the 2016 Plan following the Business Combination. However, we assumed certain stock
option awards outstanding pursuant to the 2016 Plan in connection with the Business Combination (as described further below in the
“Executive Compensation” section). As of December 31, 2020, the number of securities to be issued upon exercise of
outstanding options, warrants and rights pursuant to the 2016 Plan was 3,851,486, and the weighted-average exercise price of
outstanding options, warrants and rights pursuant to the 2016 Plan was $0.13.
|
(2)
|
As noted above, this table is populated as of the end of the
2020 year, therefore it does not reflect any awards that have been granted pursuant to the 2020 Equity Incentive Plan during the 2021
year.
|
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The
following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation
S-X.
The
unaudited pro forma condensed combined financial information does not include an unaudited pro forma condensed combined balance sheet
as of December 31, 2020 as the Business Combination was consummated on October 1, 2020 and is reflected in our historical audited consolidated
balance sheet as of December 31, 2020, included elsewhere in this prospectus.
The
unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020, derived from the historical statement
of operations of the Company for the year ended December 31, 2020 and the historical statement of operations of TortoiseCorp for the
nine months ended September 30, 2020, gives effect to the Business Combination as if it had occurred on January 1, 2020.
The
unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of Regulation S-X as amended
by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” using
the assumptions set forth in the notes to the unaudited pro forma condensed combined financial information. The unaudited pro forma condensed
combined financial information has been adjusted to depict the accounting for the transaction (“Transaction Accounting Adjustments”),
which reflect the application of the accounting required by generally accepted accounting principles in the United States (“GAAP”),
linking the effects of the Business Combination to the Company’s historical consolidated financial statements. The Company has
elected not to present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected
to occur and will only be presenting Transaction Accounting Adjustments in the following unaudited pro forma condensed combined financial
information.
The
unaudited pro forma condensed combined financial information is for illustrative and informational purposes only and is not necessarily
indicative of the operating results that would have occurred if the Business Combination had been completed as of the dates set forth
above, nor is it indicative of the future consolidated results of operations of the Company. Further, pro forma adjustments represent
management’s best estimates based on information available as of the date of this prospectus and are subject to change as additional
information becomes available.
The
unaudited pro forma condensed combined financial information should be read together with “Use of Proceeds,” “Dilution,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Certain
Relationships and Related Party Transactions” and the historical audited consolidated financial statements, and related
notes thereto included elsewhere in this prospectus.
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT
OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2020
(in
thousands, except share and per share data)
|
|
Year
Ended December 31,
2020
Hyliion
|
|
|
Nine
Months Ended September 30, 2020 TortoiseCorp
|
|
|
Transaction
Accounting Adjustment
|
|
|
Notes
|
|
|
Pro
Forma
Hyliion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development expenses
|
|
$
|
(12,598
|
)
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
$
|
(12,598
|
)
|
Selling,
general and administrative expenses
|
|
|
(9,585
|
)
|
|
|
(5,473
|
)
|
|
|
–
|
|
|
|
|
|
|
|
(15,058
|
)
|
Operating
profit
|
|
|
(22,183
|
)
|
|
|
(5,473
|
)
|
|
|
–
|
|
|
|
|
|
|
|
(27,656
|
)
|
Interest
and financing costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(5,459
|
)
|
|
|
–
|
|
|
|
5,449
|
|
|
|
a)
|
|
|
|
(10
|
)
|
Change
in fair value of convertible notes payable derivative liabilities
|
|
|
(1,358
|
)
|
|
|
–
|
|
|
|
1,358
|
|
|
|
a)
|
|
|
|
–
|
|
Change
in fair value of warrant liabilities
|
|
|
363,299
|
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
363,299
|
|
Loss
on extinguishment of debt
|
|
|
(10,170
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
(10,170
|
)
|
Other
income
|
|
|
(12
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
|
|
|
|
(12
|
)
|
Investment
income from investments held in Trust Account
|
|
|
–
|
|
|
|
886
|
|
|
|
(886
|
)
|
|
|
b)
|
|
|
|
–
|
|
Total
interest and financing
|
|
|
346,300
|
|
|
|
886
|
|
|
|
5,921
|
|
|
|
|
|
|
|
353,107
|
|
Income
(loss) before income taxes
|
|
|
324,117
|
|
|
|
(4,587
|
)
|
|
|
5,921
|
|
|
|
|
|
|
|
325,451
|
|
Income
tax expense
|
|
|
–
|
|
|
|
(162
|
)
|
|
|
162
|
|
|
|
c)
|
|
|
|
–
|
|
Net
income (loss)
|
|
$
|
324,117
|
|
|
$
|
(4,749
|
)
|
|
$
|
6,083
|
|
|
|
|
|
|
$
|
325,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
per share, basic
|
|
$
|
3.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2.01
|
|
Loss per share, diluted
|
|
$
|
(0.35
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average share outstanding, basic
|
|
|
104,324,059
|
|
|
|
|
|
|
|
57,298,780
|
|
|
|
d)
|
|
|
|
161,622,839
|
|
Weighted average share
outstanding, diluted
|
|
|
112,570,960
|
|
|
|
|
|
|
|
57,298,784
|
|
|
|
d)
|
|
|
|
169,869,744
|
|
Notes
to Unaudited Pro Forma Condensed Combined Financial Statements
1.
Description of the Transaction & Basis of Presentation
The
unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of Regulation S-X, as amended
by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” and
present the pro forma results of operations of the Company based upon the historical financial information after giving effect to the
Business Combination set forth in the notes to the unaudited pro forma condensed combined financial information.
The
unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements
that the consolidated company may achieve as a result of the Business Combination.
The
unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020, derived from the historical statement
of operations of the Company for the year ended December 31, 2020 and historical statement of operations of TortoiseCorp for the nine
months ended September 31, 2020, gives effect to the Business Combination as if it had occurred on January 1, 2020.
Business
Combination
On
October 1, 2020 (the “Closing Date”), TortoiseCorp entered into a business combination agreement (the “Business Combination”)
with each of the shareholders of Hyliion Inc. (“Legacy Hyliion”). Pursuant to the Business Combination, TortoiseCorp acquired
all of the issued and outstanding shares of common stock from the Legacy Hyliion shareholders. In connection with the closing of the
transaction, Tortoise Corp. changed its name to Hyliion Holdings Corp.
The
Business Combination was accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance
with GAAP. Under this method of accounting, TortoiseCorp was treated as the acquired company for financial reporting purposes. Accordingly,
for accounting purposes, the Business Combination was treated as the equivalent of Legacy Hyliion issuing stock for the net assets of
TortoiseCorp, accompanied by a recapitalization. The net assets of TortoiseCorp were stated at historical cost, with no goodwill or other
intangible assets recorded.
2.
Notes to Unaudited Pro Forma Condensed Combined Statement of Operations
Transaction
Accounting Adjustments include the following adjustments related to the unaudited pro forma condensed combined statement of operations
for the year ended December 31, 2020, as follows:
|
a)
|
Represents
pro forma adjustment to eliminate interest expense and change in fair value of convertible
notes payable derivative liabilities related to the debt converted into common stock in the
Business Combination.
|
|
|
|
|
b)
|
Represents
pro forma adjustment to eliminate investment income related to the investment held in the
Trust Account.
|
|
|
|
|
c)
|
We
have incurred income tax expense primarily related to investment income held in the Trust
account. We are eliminating this income tax expense because this income tax expense will
not be incurred if the Merger was consummated on January 1, 2020.
|
|
|
|
|
d)
|
Represents
the increase in the weighted average shares outstanding due to the issuance of common stock
(and redemptions) in connection with the Business Combination.
|
3.
Income (Loss) per Share
Represents
the net income (loss) per share calculated using the historical weighted average shares outstanding, the dilutive effect of stock
options, warrants and the issuance of additional shares in connection with the Business Combination, assuming the shares were
outstanding since January 1, 2020. As the Business Combination is being reflected as if it had occurred at the beginning of the
period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the
shares issuable relating to the Business Combination have been outstanding for the entire period presented. Basic and diluted
earnings per share are the same for each class of common stock because they are entitled to the same liquidation and dividend
rights.
Weighted
average shares calculation, basic and diluted
|
|
Year
Ended December 31,
2020
|
|
TortoiseCorp
shares
|
|
|
29,126,147
|
|
Shares
issued in Business Combination
|
|
|
100,000,000
|
|
Private
placements and Forward Purchase Agreement shares
|
|
|
32,500,000
|
|
Redemptions
|
|
|
(3,308
|
)
|
Weighted
average shares outstanding, basic
|
|
|
161,622,839
|
|
Add: stock options
|
|
|
6,326,479
|
|
Add: warrants
|
|
|
1,920,426
|
|
Weighted average shares outstanding, diluted
|
|
|
169,869,744
|
|
Net
Loss per Share, Diluted - Calculation
|
|
Year
Ended December 31,
2020
|
|
(in thousands, except for share and per share amounts)
|
|
|
|
|
Pro
forma net income
|
|
$
|
325,451
|
|
Less:
Change in fair value of warrant liabilities
|
|
|
(363,299
|
)
|
Net
loss for loss per share purposes
|
|
$
|
(37,848
|
)
|
|
|
|
|
|
Weighted
average shares outstanding, diluted
|
|
|
169,869,744
|
|
Net
loss per share, diluted
|
|
$
|
(0.22
|
)
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of
our results of operations and financial condition. This discussion and analysis should be read together with the audited, as restated,
and unaudited financial statements and related notes that are included elsewhere in this prospectus. This discussion and analysis should
also be read together with our pro forma financial information for the period ended December 31, 2020 (in the section entitled “Unaudited
Pro Forma Condensed Combined Financial Information”). In addition to historical financial information, this discussion and analysis
contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. See the section
entitled “Cautionary Note Regarding Forward-Looking Statements.” Actual results and timing of selected events may differ
materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under
“Risk Factors” or elsewhere in this prospectus.
Dollar
amounts in this section are expressed in millions, except as otherwise noted. Certain figures, such as interest rates and other percentages,
included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases
been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage
amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our financial
statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.
Company
Overview
Hyliion
is a Delaware corporation headquartered in Cedar Park, Texas. On the Closing Date, TortoiseCorp entered into a Business Combination with
each of the shareholders of Legacy Hyliion, and consummated the Merger contemplated by the Business Combination, with Legacy Hyliion
surviving the Merger as a wholly-owned subsidiary of TortoiseCorp. As a result of the Business Combination, we became a NYSE listed company.
Our
mission is to be the leading provider of electrified powertrain solutions for the commercial vehicle industry. Our goal is to reduce
the carbon intensity and the GHG emissions of the transportation sector by providing electrified powertrain solutions for Class 8 semi-trucks
at the lowest TCO. Our solutions utilize our proprietary battery systems, control software and data analytics, combined with fully integrated
electric motors and power electronics, to produce electrified powertrain systems that either augment, in the case of our Hybrid system,
or fully replace, in the case of the Hypertruck ERX system, traditional diesel or natural gas fueled powertrains and improve their performance.
By reducing both GHG emissions and TCO, our environmentally conscious solutions support our customers’ pursuit of their sustainability
and financial objectives.
We
are currently developing two electrified powertrain systems for long-haul Class 8 commercial vehicles: our Hybrid system and our Hypertruck
ERX system. Our Hybrid system has been installed in low volumes on our initial customers’ commercial vehicles. Across the customer
installations and over the entire Hyliion fleet we have accumulated millions of real world road miles on Class 8 commercial vehicles.
Our Hybrid system can either be installed on a new vehicle during assembly and prior to entering fleet service or retrofit to an existing
in-service vehicle. Our Hypertruck ERX system is in the development stage with vehicles being built for testing and validation. Our Hypertruck
ERX system’s design and technology leverages the experience and operating data from our Hybrid system to replace the traditional
diesel powertrain installed in new vehicles. Our Hypertruck ERX system will offer commercial vehicle owners and operators a net carbon
negative electrified powertrain option for Class 8 commercial vehicles, when using RNG.
Our
initial expected deliveries of our Hypertruck ERX systems to customers are designed to have their batteries recharged with CNG. CNG fueled
recharging is preferable due to both the current comparable cost of fuels and existing availability of CNG refueling infrastructure.
Class 8 commercial vehicles can currently be refueled with CNG through existing, geographically diverse and third-party accessible natural
gas refueling stations established across North America. Globally, RNG, CNG and liquefied natural gas (“LNG”) are used widely
for land-based transport and trucking and Hyliion believes there are established, geographically diverse and third-party accessible refueling
stations available in certain areas in which Hyliion expects it may sell its electrified powertrain solutions in the future. We believe
there is opportunity for adoption of our electrified powertrain solutions across Europe. This existing and accessible refueling infrastructure
will significantly reduce the buildout time and cost required to utilize our Hypertruck ERX system as compared to other proposed potential
electrified solutions. See “Risk Factors — Our future growth is dependent upon the commercial trucking industry’s willingness
to adopt alternative fuel, hybrid and electric vehicles” discussed in our 2020 Amended Annual Report.
Our
Hybrid and Hypertruck ERX systems are designed to be installed on most major Class 8 commercial vehicles, which gives our customers the
flexibility to continue using their preferred vehicle brands and maintain their existing fleet maintenance and operations strategies.
Our early Hybrid system deployments include leaders in the transportation and logistics sector. We are focusing its initial marketing
efforts on large fleet operators as well as companies committed to reducing the overall environmental impact and fuel costs of their
owned and operated trucking fleets.
Recent
Developments
None.
Comparability
of Financial Information
Our
historical operations and statements of assets and liabilities may not be comparable to our operations and statements of assets and liabilities
as a result of the Business Combination and becoming a public company.
Business
Combination and Public Company Costs
On
October 1, 2020, we consummated the Merger contemplated by the Business Combination, with Legacy Hyliion surviving the Merger as a wholly-owned
subsidiary of TortoiseCorp.
Immediately
prior to the closing of the Business Combination, all shares of issued and outstanding redeemable convertible preferred stock converted
into shares of Legacy Hyliion Common Stock and all outstanding convertible notes payable plus accrued interest converted into shares
of Legacy Hyliion Common Stock at the discount rates set forth in the original agreements. Upon the consummation of the Business Combination,
each share of Legacy Hyliion Common Stock issued and outstanding was cancelled and converted into the right to receive the per share
merger consideration. Additionally, Legacy Hyliion issued 1,000,000 shares of Legacy Hyliion Common Stock with a grant date fair value
of $10.00 per share to one of the convertible noteholders in connection with the Commercial Matters Agreement entered into in June 2020
(as defined herein).
Upon
the closing of the Business Combination, TortoiseCorp’s certificate of incorporation was amended and restated to, among other things,
increase the total number of authorized shares of capital stock to 260,000,000 shares, of which 250,000,000 shares were designated Common
Stock, $.0001 par value per share, and of which 10,000,0000 shares were designated preferred stock, $0.0001 par value per share.
In
connection with the Business Combination, a number of investors purchased from the Company an aggregate of 30,750,000 shares of Common
Stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $307.5 million pursuant
to separate subscription agreements entered into effective June 18, 2020 (the “PIPE”). The PIPE investment closed simultaneously
with the consummation of the Business Combination. Additionally, a purchaser purchased 1,750,000 TortoiseCorp units (each unit consisting
of one share of Common Stock and one half of one warrant, the “Forward Purchase Units”), consisting of 1,750,000 shares of
Common Stock (“Forward Purchase Shares”) and the Forward Purchase Warrants for an aggregate purchase price of $17.5 million
pursuant to the Amended and Restated Forward Purchase Agreement, as amended by the First Amendment to Forward Purchase Agreement. On
November 30, 2020, the Company issued a notice of redemption of all its outstanding Public Warrants and Forward Purchase Warrants which
was completed in December 2020. However, the Private Warrants held by the initial holders thereof or permitted transferees of the initial
holders were not subject to this redemption.
Legacy
Hyliion was deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in ASC 805. The
determination was primarily based on Legacy Hyliion’s stockholders prior to the Business Combination having a majority of the voting
interests in the combined company, Legacy Hyliion’s board of directors comprising a majority of the board of directors of the combined
company, Legacy Hyliion’s existing shareholders’ control over decisions regarding the election and removal of directors and
officers of the combined company’s board of directors, and Legacy Hyliion’s senior management comprising the senior management
of the combined company. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Hyliion
issuing stock for the net assets of TortoiseCorp, accompanied by a recapitalization. The net assets of TortoiseCorp are stated at historical
cost, with no goodwill or intangible assets recorded.
As
a result of the Business Combination, we became a NYSE listed company, which will require us to hire additional personnel and implement
procedures and processes to address public company regulatory requirements and customary practices. We have incurred, and expect to continue
to incur, additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance,
director fees and additional internal and external accounting, legal and administrative resources, including increased audit, compliance,
and legal fees.
Key
Factors Affecting Operating Results
We
believe that our performance and future success depend on several factors that present significant opportunities for us but also pose
risks and challenges, including but not limited to those discussed below and in the section entitled “Risk Factors”.
Successful
commercialization of our drivetrain solutions
We
expect to derive future revenue from our Hybrid systems and Hypertruck ERX system. Our Demonstrator Hybrid system is available today,
offering customers the immediate ability to lower costs and improve environmental impact, and we intend to introduce our improved Hybrid
system for customer deliveries in late 2021 and will continue to make improvements to this next iteration Hybrid system in 2022. Demos
of our Hypertruck ERX system is projected to be delivered to customers for evaluation and testing beginning in late 2021 with commercial
availability projected for 2022. To reach commercialization, we must purchase and integrate related property and equipment, as well as
achieve several research and development milestones. We anticipate that a substantial portion of our capital resources and efforts in
the near future will be focused on the continued development and commercialization of our drivetrain solutions. The amount and timing
of our future funding requirements, if any, will depend on many factors, including the pace and results of our research and development
efforts, as well as factors that are outside of our control.
Customer
Demand
As
discussed above in more detail, we have deployed demonstration Hybrid system units to a number of companies, and our Hypertruck ERX system
is generating interest from companies who have received demonstration Hybrid system units and potential new customers.
Key
Components of Statements of Operations
Research
and Development Expense
Research
and development expenses consist primarily of costs incurred for the discovery and development of our electrified powertrain solutions,
which include:
|
●
|
personnel-related
expenses including salaries, benefits, travel and share-based compensation, for personnel
performing research and development activities;
|
|
|
|
|
●
|
fees
paid to third parties such as consultants and contractors for outsourced engineering services;
|
|
|
|
|
●
|
expenses
related to materials, supplies and third-party services;
|
|
|
|
|
●
|
depreciation
for equipment used in research and development activities; and
|
|
|
|
|
●
|
allocation
of general overhead costs.
|
We
expect research and development costs to increase for the foreseeable future as we continue to invest in research and development activities
to achieve operational and commercial goals.
Selling,
General and Administrative Expense
Selling,
general and administrative expenses consist of personnel-related expenses for our corporate, executive, finance, sales, marketing and
other administrative functions, expenses for outside professional services, including legal, audit and accounting services, as well as
expenses for facilities, depreciation, amortization, travel, sales and marketing costs. Personnel-related expenses consist of salaries,
benefits and share-based compensation.
We
expect our selling, general and administrative expenses, including legal, audit, and additional insurance expenses, investor relations
activities and other administrative and professional services, to increase for the foreseeable future as we scale headcount with the
growth of our business and operate as a public company in compliance with the rules and regulations of the SEC..
Other
Income (Expense), Net
Other
income and expenses consist primarily of interest expense incurred on our debt obligations, interest income earned on our investments
and a remeasurement gain or loss associated with the change in the fair value on our convertible notes payable derivative liabilities
and a loss on the extinguishment of our convertible notes payable.
Results
of Operations
Comparison
of Quarters Ended March 31, 2021 and 2020
The
following table summarizes our results of operations on a consolidated basis for the three months ended March 31, 2021 and 2020:
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
(in thousands, except earnings per share)
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
(9,332
|
)
|
|
$
|
(2,671
|
)
|
|
$
|
(6,661
|
)
|
|
|
249.4
|
%
|
Selling, general, and administrative
|
|
|
(7,399
|
)
|
|
|
(691
|
)
|
|
|
(6,708
|
)
|
|
|
970.8
|
%
|
Loss from operations
|
|
|
(16,731
|
)
|
|
|
(3,362
|
)
|
|
|
(13,369
|
)
|
|
|
397.7
|
%
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
—
|
|
|
|
(1,565
|
)
|
|
|
1,565
|
|
|
|
(100.0
|
)%
|
Interest income
|
|
|
169
|
|
|
|
—
|
|
|
|
169
|
|
|
|
—
|
%
|
Change in fair value of convertible notes payable derivative liabilities
|
|
|
—
|
|
|
|
(635
|
)
|
|
|
635
|
|
|
|
(100.0
|
)%
|
Total other income (expense)
|
|
|
169
|
|
|
|
(2,200
|
)
|
|
|
2,369
|
|
|
|
(107.7
|
)%
|
Net loss
|
|
$
|
(16,562
|
)
|
|
$
|
(5,562
|
)
|
|
$
|
(11,000
|
)
|
|
|
197.8
|
%
|
Net loss per share, basic and diluted
|
|
$
|
(0.10
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.04
|
)
|
|
|
60.0
|
%
|
Weighted-average shares outstanding, basic and diluted
|
|
|
170,249,708
|
|
|
|
86,762,463
|
|
|
|
83,487,245
|
|
|
|
96.2
|
%
|
Research
and Development
Research
and development expenses increased by $6.7 million from $2.7 million for the three months ended March 31, 2020 to $9.3 million for the
three months ended March 31, 2021 primarily as a result of increased expenditures for external consultancy by $2.5 million, increased
research and development costs by $2.0 million which was associated with the purchase of vehicles and equipment to be used in testing
of our products, increased labor by $1.2 million as we build out our engineering team and continue to build out our operations team and
capabilities and increased expenditures for components utilized in the development process by $1.0 million in our efforts to finalize
the design of our Hybrid system and continue the design and testing of our Hypertruck ERX system during three months ended March 31,
2021.
Selling,
General and Administrative
Selling,
general, and administrative expenses increased by $6.7 million from $0.7 million for the three months ended March 31, 2020 to $7.4 million
for the three months ended March 31, 2021, primarily due to additional costs incurred to operate as a public company which include increased
expenses for personnel and benefits by $3.0 million, increased expenditures for directors and officers insurance by $1.1 million, increased
expenditures for legal and professional fees by $1.9 million, and increased expenditures for other expenses by $0.7 million.
Other
Income (Expense)
Total
other expense decreased by $2.4 million from $2.2 million of other expense for the three months ended March 31, 2020 to $0.2 million
of other income for the three months ended March 31, 2021. The decrease was primarily due to the following:
|
●
|
Interest
expense for the three months ended March 31, 2020 was primarily related to our convertible
notes payable, which was converted to shares of common stock as part of the Business Combination
in October 2020. As such, there was no interest expense during the three months ended March
31, 2021.
|
|
●
|
A
loss from the change in fair value of convertible notes payable derivative liabilities of
$0.6 million for the three months ended March 31, 2020.
|
|
●
|
Interest
income of $0.2 million on investments owned during the three months ended March 31, 2021
that were not owned during the comparative period.
|
Comparison
of Years Ended December 31, 2020 and 2019 – As Restated
The
following table summarizes our results of operations on a consolidated basis for the years ended December 31, 2020 and 2019:
|
|
Years Ended December 31,
|
|
|
|
2020 restated
|
|
|
2019
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
(in thousands, except earnings per share)
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
(12,598
|
)
|
|
$
|
(9,269
|
)
|
|
$
|
(3,329
|
)
|
|
|
35.9
|
%
|
Selling, general, and administrative
|
|
|
(9,585
|
)
|
|
|
(2,730
|
)
|
|
|
(6,855
|
)
|
|
|
251.1
|
%
|
Loss from operations
|
|
|
(22,183
|
)
|
|
|
(11,999
|
)
|
|
|
(10,184
|
)
|
|
|
84.9
|
%
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(5,465
|
)
|
|
|
(3,260
|
)
|
|
|
(2,205
|
)
|
|
|
67.6
|
%
|
Interest income
|
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
|
|
100.0
|
%
|
Change in fair value of convertible notes payable derivative liabilities
|
|
|
(1,358
|
)
|
|
|
1,119
|
|
|
|
(2,477
|
)
|
|
|
(221.4
|
)%
|
Change in fair value of warrant liability
|
|
|
363,299
|
|
|
|
—
|
|
|
|
363,299
|
|
|
|
(100.0
|
)%
|
Other income (expense)
|
|
|
(12
|
)
|
|
|
27
|
|
|
|
(39
|
)
|
|
|
(144.4
|
)%
|
Loss on extinguishment of debt
|
|
|
(10,170
|
)
|
|
|
—
|
|
|
|
(10,170
|
)
|
|
|
(100.0
|
)%
|
Total other income (expense)
|
|
|
346,300
|
|
|
|
(2,114
|
)
|
|
|
348,414
|
|
|
|
(16,481.3
|
)%
|
Net income (loss) attributable to Common Stockholders, basic and diluted
|
|
$
|
324,117
|
|
|
$
|
(14,113
|
)
|
|
$
|
338,230
|
|
|
|
(2,396.6
|
)%
|
Net income (loss) per share, basic
|
|
$
|
3.11
|
|
|
$
|
(0.16
|
)
|
|
$
|
3.27
|
|
|
|
2,043.8
|
%
|
Net loss per share, diluted
|
|
$
|
(0.35
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.19
|
)
|
|
|
(118.8
|
)%
|
Weighted-average shares outstanding, basic
|
|
|
104,324,059
|
|
|
|
86,643,714
|
|
|
|
17,680,484
|
|
|
|
20.4
|
%
|
Weighted-average shares outstanding, diluted
|
|
|
112,570,960
|
|
|
|
86,643,714
|
|
|
|
25,927,246
|
|
|
|
29.9
|
%
|
Research
and Development
Research
and development expenses increased by $3.3 million from $9.3 million for the year ended December 31, 2019 to $12.6 million for the year
ended December 31, 2020 as a result of increased expenditures for external consultancy by $2.2 million, and increased expenditures for
components utilized in the development process were increased by $1.1 million in our efforts to finalize the design of our Hybrid system
and continue the design and testing of our Hypertruck ERX system during the year ended December 31, 2020.
Selling,
General and Administrative
Selling,
general, and administrative expenses increased by $6.9 million from $2.7 million for the year ended December 31, 2019 to $9.6 million
for the year ended December 31, 2020, primarily due to additional costs incurred to operate as a public company which, include increased
expenditures for personnel and benefits by $2.4 million, increased expenditures for directors and officers insurance by $1.2 million,
increased expenditures for legal and professional fees by $2.8 million, increase in facilities leases by $0.2 million, and increased
expenditures for other expenses by $0.2 million.
Other
Income (Expense)
Total
other income increased by $348.4 million from $2.1 million of other expense for the year ended December 31, 2019 to $346.3 million of
other income for the year ended December 31, 2020. The increase was primarily due to the following:
|
●
|
Loss
on extinguishment of debt of $10.2 million for the year ended December 31, 2020 that is attributable
to the extinguishment of convertible notes in connection with the Business Combination.
|
|
|
|
|
●
|
Interest
expense increased by $2.2 million from $3.3 million for the year ended December 31, 2019
to $5.5 million for the year ended December 31, 2020, primarily due to our convertible notes
payable. There was a $3.2 million issuance of a convertible note payable debt obligation
in January 2020 and $16.8 million issuances of convertible note payable debt obligations
at various points of 2019 were outstanding for a full year in 2020, resulting in an increase
in paid-in-kind interest incurred in 2020. Additionally, all convertible notes payable issuances
contained certain embedded features, which were required to be bifurcated and separately
accounted for as derivative liabilities that were recognized at issuance as a liability and
a corresponding debt discount, which was then amortized to interest expense over the term
of the associated convertible notes payable. For the years ended December 31, 2020 and 2019,
interest expenses consisted primarily of (a) interest payable in kind at an annual stated
rate of 6.0% for a total of $1.1 million and $0.7 million, respectively, (b) convertible
note payable discount amortization of $3.8 million and $2.5 million, respectively and (c)
financing costs of $0.5 million and less than $0.1 million, respectively.
|
|
|
|
|
●
|
A
loss from the change in fair value of convertible notes payable derivative liabilities of
$1.4 million for the year ended December 31, 2020 and a gain from the change in fair value
of convertible notes payable derivative liabilities of $1.1 million for the year ended December
31, 2019.
|
|
|
|
|
●
|
A
gain from the change in fair value of warrant liabilities of $363.3 million for the year
ended December 31, 2020. The change in fair value is directly related to the fair value of
the warrant liability as of each period end as calculated using Level I and Level II inputs.
|
Liquidity
and Capital Resources
Prior
to the Business Combination, the Company’s operations were financed through private placements of redeemable convertible preferred
stock and the issuance of convertible notes payable. As of March 31, 2021, our principal sources of liquidity were our cash and cash
equivalents in the amount of $334.7 million, which are primarily invested in money market funds.
On
November 30, 2020, we issued a notice of redemption to the warrant holders for a redemption of all the outstanding warrants, on a cash
basis, or in the case of the Private Placement Warrants on a cashless basis. As a result, we raised gross proceeds of $140.8 million,
$16.3 million of which was received during the first quarter of 2021.
As
of March 31, 2021, we have yet to generate revenue from our core business operations. As of March 31, 2021, our current assets were $483.2
million, consisting primarily of cash and cash equivalents of $334.7 million, short-term investments of $144.8 million, and prepaid expenses
of $3.6 million. Our current liabilities were $7.9 million primarily comprised of accounts payable, accrued expenses, and operating lease
liabilities.
We
believe the credit quality and liquidity of our investment portfolio as of March 31, 2021 is strong and will provide sufficient liquidity
to satisfy operating requirements, working capital purposes and strategic initiatives. The unrealized gains and losses of the portfolio
may remain volatile as changes in the general interest environment and supply/demand fluctuations of the securities within our portfolio
impact daily market valuations. To mitigate the risk associated with this market volatility, we deploy a relatively conservative investment
strategy focused on capital preservation and liquidity whereby no investment security may have a final maturity of more than 36 months
from the date of acquisition or a weighted average maturity exceeding 18 months. Eligible investments under the Company’s investment
policy bearing a minimum credit rating of A1, A-1, F1 or higher for short-term investments and A2, A, or higher for longer-term investments
include money market funds, commercial paper, certificates of deposit, and municipal securities. Additionally, all our debt securities
are classified as held-to-maturity as we have the intent and ability to hold these investment securities to maturity, which minimizes
the realized losses that we would recognize. However, even with this approach we may incur investment losses as a result of unusual or
unpredictable market developments, and we may experience reduced investment earnings if the yields on investments deemed to be low risk
remain low or decline further due to unpredictable market developments. In addition, these unusual and unpredictable market developments
may also create liquidity challenges for certain of the assets in our investment portfolio.
Based
on our past performance, we believe our current assets will be sufficient to continue and execute on our business strategy and meet our
capital requirements for the next twelve months. Our primary short-term cash needs are paying operating expenses. We expect to continue
to incur net losses in the short term, as we continue to execute on our strategic initiatives by (i) completing the development and commercialization
of the hybrid and electrified drive systems for long haul “Class 8” semi-tractors, (ii) scaling the Company’s operations
to meet anticipated demand, and (iii) hiring personnel. However, actual results could vary materially and negatively as a result of a
number of factors including, but not limited to, those discussed in the section entitled “Risk Factors.”
Cash
Flows for the Three Months ended March 31, 2021 and 2020
Presented
below is a summary of Hyliion’s operating, investing, and financing cash flows:
Cash
Flows Used in Operating Activities
For
the three months ended March 31, 2021, cash flows used in operating activities were $10.8 million. The cash used primarily related to
Hyliion’s net loss of $16.6 million, adjusted for changes in Hyliion’s working capital accounts and certain non-cash expense
of $1.9 million (including $0.2 million related to non-cash lease expense, $0.2 million related to depreciation and amortization, and
$1.5 million related to share based compensation).
For
the three months ended March 31, 2020, cash flows used in operating activities were $3.3 million. The cash used primarily related to
Hyliion’s net loss of $5.6 million, adjusted for changes in Hyliion’s working capital accounts and certain non-cash expense
of $2.8 million (including $0.3 million related to non-cash lease expenses, $0.3 million related to depreciation and amortization, $0.6
million related to a loss from the change in fair value of the convertible notes payable derivative liabilities, $1.3 million related
to amortization of the debt discount and $0.3 million related to paid-in-kind interest on convertible notes payable).
Cash
Flows Used in Investing Activities
Net
cash used in investing activities primarily related to the purchase of investments during the three months ended March 31, 2021 totaling
$219.5 million, offset by the proceeds from the sale of investments of $160.0 million. Net cash used in investing primarily related to
capital expenditures of $0.1 million for the three months ended March 31, 2020.
Net
cash used in investing activities is expected to continue to increase substantially as we purchase additional property and equipment
as we continue the development of our Hybrid and Hypertruck ERX systems and scale the manufacturing operations to meet anticipated demand.
Cash
Flows Provided by Financing Activities
Cash
provided by financing activities was $15.6 million for the three months ended March 31, 2021, which was primarily generated from proceeds
from the exercise of warrants of $16.2 million and proceeds from the exercise of stock options of $0.3 million, partially offset by the
repayment of the Paycheck Protection Program (the “PPP”) loan of $0.9 million. Cash provided by financing activities was
$3.1 million for the three months ended March 31, 2020, which was primarily due to $3.2 million of proceeds from the issuance of a convertible
note payable, partially offset by the repayment on finance lease obligations of $0.1 million.
Cash
Flows for the Years Ended December 31, 2020 and 2019
The
following table summarizes our net cash provided by or used in operating activities, investing activities and financing activities for
the periods indicated and should be read in conjunction with our consolidated financial statements and the notes thereto included in
the Financial Statements section of this prospectus:
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Net cash provided by (used in)
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(22,944
|
)
|
|
$
|
(11,072
|
)
|
Investing activities
|
|
|
(238,140
|
)
|
|
|
(349
|
)
|
Financing activities
|
|
|
644,504
|
|
|
|
16,609
|
|
Net change in cash and cash equivalents
|
|
$
|
383,420
|
|
|
$
|
5,188
|
|
Net
cash used in operating activities
For
the year ended December 31, 2020, cash flows used in operating activities was $23.0 million. The cash used primarily related to a net
income of $324.1 million, adjusted for changes in working capital accounts and certain non-cash expense of $18.9 million (including $10.2
million related to the loss on extinguishment of convertible notes payable, $4.2 million related to amortization of debt discount, $1.4
million related to a loss from the change in fair value of the convertible notes payable derivative liabilities, $1.1 million related
to paid-in-kind interest on convertible notes payable, $0.9 million related to non-cash lease expense, $0.9 million related to depreciation
and amortization, $363.3 million related to changes in fair value of warrant liabilities, and $0.3 million related to share-based compensation).
For
the year ended December 31, 2019, cash flows used in operating activities were $11.1 million. The cash used primarily related to a net
loss of $14.1 million, adjusted for changes in working capital accounts and certain non-cash expense of $4.5 million (including $1.3
million related to non-cash lease expense, $1.0 million related to depreciation and amortization, $1.1 million related to a gain from
the change in fair value of the convertible notes payable derivative liabilities, $2.5 million related to amortization of the debt discount,
$0.7 million related to paid-in-kind interest on convertible notes payable and $0.1 million related to share-based compensation).
Net
cash used in investing activities
Net
cash used in investing activities primarily relates to the purchase of investments during the year ended December 31, 2020 and totaled
$238.1 million. Net cash used in investing activities primarily relates to the purchase of capital expenditures primarily attributable
to equipment and machinery, demonstration and test vehicles, leasehold improvements, office furniture and equipment for the year ended
December 31, 2019 and totaled $0.3 million.
Net
cash used in investing activities is expected to increase substantially as we purchase additional property and equipment as we continue
the development of our Hybrid and Hypertruck ERX systems and scale the manufacturing operations to meet anticipated demand.
Net
cash provided by financing activities
Cash
provided by financing activities was $644.5 million for the year ended December 31, 2020, which was primarily due to net proceeds of
$516.5 million from the Business Combination and PIPE, proceeds from the exercise of warrants of $124.5 million, the issuance of $3.2
million of convertible notes payable in exchange for cash, proceeds of $0.9 million from the PPP loan, partially offset by the payments
for financing costs of $0.5 million and finance lease obligations of $0.2 million.
Cash
provided by financing activities was $16.6 million for the year ended December 31, 2019, which was primarily due to the issuance of $16.8
million of convertible notes payable in exchange for cash, partially offset by the repayment on finance lease obligations of $0.2 million.
Off-Balance
Sheet Arrangements
During
the periods presented, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured
finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.
Critical
Accounting Policies and Estimates
Our
consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements
requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities as of the balance sheet date, as well as the reported expenses incurred during the reporting period. Management
bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the
basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates, and
such differences could be material to our financial statements.
We
believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies
relate to the more significant areas involving management’s judgments and estimates.
While
our significant accounting policies are described in the notes to our financial statements (see Note 3 in the accompanying audited consolidated
financial statements, as restated), we believe that the following accounting policies require a greater degree of judgment and complexity.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition
and results of operations.
In
preparing our condensed consolidated financial statements, we applied the same critical accounting policies as described in our 2020
Amended Annual Report that affect judgments and estimates of amounts recorded for certain assets, liabilities, revenues, and expenses.
Share-Based
Compensation
We
account for share-based payments that involve the issuance of shares of our Common Stock to employees and nonemployees and meet the criteria
for share-based awards as share-based compensation expense based on the grant-date fair value of the award.
For
periods prior to the Business Combination, we issued stock option awards to employees and nonemployees under the Hyliion Inc. 2016 Equity
Incentive Plan (the “2016 Plan”), as amended in August 2017 and approved by the Board. Outstanding stock options, whether
vested or unvested, under the 2016 Plan to purchase shares of Legacy Hyliion Common Stock granted under the 2016 Plan converted into
stock options for shares of the combined company’s Common Stock upon the same terms and conditions that were in effect with respect
to such stock options immediately prior to the Business Combination, after giving effect to the Exchange Ratio. No further grants can
be made under the 2016 Plan.
For
periods subsequent to the Business Combination, share-based awards will be issued under the 2020 Equity Incentive Plan (the “2020
Plan”). As of December 31, 2020, no awards were issued under the 2020 Plan.
The
fair value of the stock options issued to employees and nonemployees under the 2016 Plan was estimated at each grant date using the Black-Scholes
model which requires the input of the following subjective assumptions:
|
a)
|
The
length of time grantees will retain their vested stock options before exercising them for
employees and the contractual term of the option for nonemployees (“expected term”),
|
|
b)
|
The
volatility of our Common Stock price over the expected term,
|
|
|
|
|
c)
|
The
expected dividends, and
|
|
|
|
|
d)
|
The
risk-free interest rate over the option’s expected term.
|
A
summary of the significant assumptions used to estimate the fair value of stock option awards during the years ended December 31, 2020
and 2019 were as follows:
|
|
Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Expected volatility
|
|
|
70.0
|
%
|
|
|
70.0
|
%
|
Expected term (in years)
|
|
|
6.1
|
|
|
|
6.1 - 10
|
|
Risk-free interest rate
|
|
|
1.7
|
%
|
|
|
1.4 - 3.0
|
%
|
Expected dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
●
|
Expected
volatility: The expected volatility was determined by examining the historical volatilities
of a group of industry peers, as the Company did not have any trading history for our Legacy
Hyliion Common Stock.
|
|
|
|
|
●
|
Expected
term: For employees, the expected term is determined using the “simplified”
method, as prescribed by the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment,
to estimate on a formula basis the expected term of the Company’s employee stock options,
which are considered to have “plain vanilla” characteristics. For nonemployees,
the expected term represents the contractual term of the option.
|
|
|
|
|
●
|
Risk-free
interest rate: The risk-free interest rate was based upon quoted market yields for
the United States Treasury instruments with terms that were consistent with the expected
term of the stock options.
|
|
|
|
|
●
|
Expected
dividend yield: The expected dividend yield was based on Legacy Hyliion’s history
and management’s current expectation regarding future dividends.
|
If
factors change, and we utilize different assumptions, share-based compensation cost on future award grants may differ significantly from
share-based compensation cost recognized on past award grants. Higher volatility and longer expected terms result in an increase to share-based
compensation determined at the date of grant. Future share-based compensation cost will increase to the extent that we grant additional
share-based awards to employees and non-employees. If there are any modifications or cancellations of the underlying unvested securities,
we may be required to accelerate any remaining unearned share-based compensation cost or incur incremental cost. Share-based compensation
cost affects our research and development expenses and selling, general and administrative expenses.
Based
on our fair value of Common Stock of $16.48 at December 31, 2020 and our estimated fair value of Common Stock of $0.34 at December 31,
2019, the aggregative intrinsic value of the vested and unvested options to purchase shares of our Common Stock outstanding at December
31, 2020 and 2019 was $113.8 million and $0.3 million, respectively.
We
recognized share-based compensation of $0.3 million and $0.1 million for the years ended December 31, 2020 and 2019, respectively. We
recognize and adjustment to share-based compensation expense in the period in which forfeitures occur. The effect of forfeiture adjustments
during 2020 and 2019 was insignificant.
In
future periods, we expect share-based compensation to increase, due in part to our existing unrecognized share-based compensation and
as we issue additional share-based awards to continue to attract and retain employees. As of December 31, 2020, there was $0.4 million
of unrecognized compensation cost related to share-based payments, which is expected to be recognized over an average period of 2.6 years.
Income
Taxes
We
recognize deferred taxes for temporary differences between the basis of assets and liabilities for financial statement and income tax
purposes. At December 31, 2020, we had federal net operating loss carryforwards of approximately $82.2 million and state net operating
loss carryforwards of $12.5 million that expire in various years starting in 2036. The Company also has R&D credits of $0.3 million
that begin to expire in 2037.
Under
Section 382 of the Code, substantial changes in our ownership may result in an annual limit on the amount of net operating loss carryforwards
that could be utilized in the future to offset our taxable income. Generally, this limitation may arise in the event of a cumulative
change in ownership of more than 50% within a three-year period. We have completed such analysis and determined that such ownership change
occurred in 2017. This will limit the usage of our 2017 and prior year net operating losses, and will cause $2.0 million of such losses
to expire unused, regardless of future taxable income. No other such ownership changes have occurred through December 31, 2020. Due to
this, as well as our overall profitability estimate as noted above, 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.
Our
policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. There was no accrued interest
or penalties related to uncertain tax positions and no amounts have been recognized in our statements of operations for the years ended
December 31, 2020, and 2019.
Emerging
Growth Company Status
Section
102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a
class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such an election to opt out is irrevocable. We elected not to opt out of such extended transition
period, which means that when a standard is issued or revised and it has different application dates for public or private companies,
we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard,
until such time we are no longer considered to be an emerging growth company. At times, we may elect to early adopt a new or revised
standard. See Note 3 of the accompanying audited financial statements, as restated, for the recent accounting pronouncements adopted
and the recent accounting pronouncements not yet adopted for the years ending December 31, 2020, and 2019.
In
addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions
set forth in the JOBS Act, if, as an emerging growth company, we intend to rely on such exemptions, we are not required to, among other
things: (a) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section
404(b) of the Sarbanes-Oxley Act; (b) provide all of the compensation disclosure that may be required of non-emerging growth public companies
under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (c) comply with any requirement that may be adopted by the Public
Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional
information about the audit and the financial statements (auditor discussion and analysis); and (d) disclose certain executive compensation-related
items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation
to median employee compensation.
We
will remain an emerging growth company under the JOBS Act until the earliest of (a) the last day of our first fiscal year following the
fifth anniversary of the Closing, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07
billion, (c) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0
million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non-convertible
debt securities during the previous three years.
New
and Recently Adopted Accounting Pronouncements
From
time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by us as of the
specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective
will not have a material impact on our financial position or results of operations under adoption.
See
Recent Accounting Pronouncements issued, not yet adopted under Note 3 – Summary of Significant Accounting Policies in the
notes to the 2020 consolidated financial statements for more information about recent accounting pronouncements, the timing of their
adoption and our assessment, to the extent we have made one, of their potential impact on our financial condition and results of operations.
Quantitative
and Qualitative Disclosures about Market Risk
We
are exposed to a variety of market and other risks, including the effects of changes in interest rates and inflation, as well as risks
to the availability of funding sources, hazard events and specific asset risks.
Interest
Rate Risk
We
hold cash and cash equivalents for working capital purposes As of December 31, 2020, we had a cash balance of $389.7 million, consisting
of operating and money market accounts which are not affected by changes in the general level of U.S. interest rates. We do not have
material exposure to interest rate risk with respect to cash and cash equivalents as these are all highly liquid investments with a maturity
date of 90 days or less at the time of purchase.
Inflation
Risk
We
do not believe that inflation currently has a material effect on its business. Inflation may become a greater risk in the event of changes
in current economic and governmental fiscal policy.
BUSINESS
Overview
Hyliion
is a Delaware corporation headquartered in Cedar Park, Texas. On the Closing Date, TortoiseCorp entered into the Business Combination
Agreement with each of the shareholders of Legacy Hyliion, and consummated the Merger contemplated by the Business Combination, with
Legacy Hyliion surviving the Merger as a wholly-owned subsidiary of TortoiseCorp. As a result of the Business Combination, we became
a NYSE listed company.
Our
mission is to be the leading provider of electrified powertrain solutions for the commercial vehicle industry. Our goal is to reduce
the carbon intensity and GHG emissions of the transportation sector by providing electrified powertrain solutions for Class 8 commercial
vehicles at the lowest TCO. Our solutions utilize our proprietary battery systems, control software and data analytics, combined with
fully integrated electric motors and power electronics, to produce electrified powertrain systems that either augment, in the case of
our Hybrid system, or fully replace, in the case of the Hypertruck ERX system, a natural gas fueled engine powering the battery that
improves their performance. By reducing both GHG emissions and TCO, our environmentally conscious solutions support our customers’
pursuit of their sustainability and financial objectives.
We
are currently developing two electrified powertrain systems for long-haul Class 8 commercial vehicles: our Hybrid system and our Hypertruck
ERX system. Our Hybrid system has been installed in low volume on our initial customers’ commercial vehicles. Across the customer
installations and over the entire Hyliion fleet we have accumulated millions of real world road miles on Class 8 commercial vehicles.
Our Hybrid system can either be installed on a new vehicle during assembly and prior to entering fleet service or retrofit to an existing
in-service vehicle. Our Hypertruck ERX system is in the development stage with vehicles being built for testing and validation. Our Hypertruck
ERX system’s design and technology leverages the experience and operating data from our Hybrid system to replace the traditional
diesel powertrain installed in new vehicles. Our Hypertruck ERX system will offer commercial vehicle owners and operators a net carbon
negative electrified powertrain option for Class 8 commercial vehicles, when using RNG.
Our
initial expected deliveries of our Hypertruck ERX systems to customers are designed to have their batteries recharged with CNG. CNG fueled
recharging is preferable due to both the current comparable cost of fuels and existing availability of CNG refueling infrastructure.
Class 8 commercial vehicles can currently be refueled with CNG through existing, geographically diverse and third-party accessible natural
gas refueling stations established across North America. Globally, RNG, CNG and LNG are used widely for land-based transport and trucking
and Hyliion believes there are established, geographically diverse and third-party accessible refueling stations available in certain
areas in which Hyliion expects it may sell its electrified powertrain solutions in the future. We believe there is opportunity for adoption
of our electrified powertrain solutions across Europe. This existing and accessible refueling infrastructure will significantly reduce
the buildout time and cost required to utilize our Hypertruck ERX system as compared to other proposed potential electrified solutions.
See “Risk Factors — Our future growth is dependent upon the commercial trucking industry’s willingness to adopt alternative
fuel, hybrid and electric vehicles.”
Our
Hybrid and Hypertruck ERX systems are designed to be installed on most major Class 8 commercial vehicles, which gives our customers the
flexibility to continue using their preferred vehicle brands and maintain their existing fleet maintenance and operations strategies.
Our early Hybrid system deployments include leaders in the transportation and logistics sector. We are focusing its initial marketing
efforts on large fleet operators as well as companies committed to reducing the overall environmental impact and fuel costs of their
owned and operated trucking fleets.
Market
Opportunity
We
estimate that the global market opportunity for our products is $800 billion, based on ACT Research’s estimate of eight million
Class 8 commercial vehicles currently in operation. In addition, ACT Research estimates that the active Class 8 commercial vehicle population
will grow by approximately 4.5% annually from 2020 to 2024.
Challenges
with Other Solutions
With
the global focus on reducing the environmental impact of commercial transportation, a number of companies have begun developing solutions
to lower GHG emissions in commercial vehicles, including plug-in commercial BEVs and commercial FCEVs. However, neither of these solutions
have been commercialized or delivered in volume for the long-haul Class 8 commercial vehicle space at this time. We believe these other
proposed solutions face unique challenges for widespread adoption, which may include:
|
●
|
limited
availability of such commercial vehicles or solutions;
|
|
●
|
a
higher TCO relative to currently available diesel commercial vehicles;
|
|
●
|
limited
availability and capacity of electric charging infrastructure and hydrogen fueling infrastructure;
|
|
●
|
higher
lifecycle GHG emissions due to emissions from electricity generation to recharge the batteries
(from the electrical grid or hydrogen production) and the emissions associated with the production
of the battery cells;
|
|
●
|
the
need or choice to completely redesign the commercial vehicle to implement the solution;
|
|
●
|
reduced
available payload capacity (and resulting loss of revenue-producing transportation capacity)
due to the size and weight of required on-board batteries;
|
|
●
|
limited
range on a single charge or fueling;
|
|
●
|
longer
recharging or refueling times compared to refueling times for currently available diesel
and natural gas fueled commercial vehicles; and
|
|
●
|
the
need to change customers’ existing fleet operations, including procurement, dispatch,
logistics, maintenance, repair, servicing and driver training.
|
Our
Technology and Solutions
Our
electrified powertrain solutions utilize our proprietary battery systems, control software and data analytics, combined with electric
motors and power electronics, to produce an electrified powertrain system technology platform that can be used to either augment, in
the case of our Hybrid system, or fully replace, in the case of our Hypertruck ERX system, conventional powertrains in Class 8 commercial
vehicles and improve their performance. Our solutions are designed to be compatible with most major Class 8 commercial vehicle manufacturers
and are fuel and generator agnostic, giving our customers flexibility to choose the vehicles and fuel source that best fit their overall
commercial vehicle operations strategy in their transition to electrified transportation.
Hybrid
Electric Powertrain Systems
Our
Hybrid system can be installed on most major Class 8 commercial vehicles to reduce fuel usage, decrease GHG emissions, improve performance
and/or reduce operating costs. Our Demonstrator Hybrid system is comprised of our proprietary battery system and an associated software
management solution, a control module running our software and data analytics, high and low voltage power distribution and a thermal
management system. These components are attached to the frame rails of a Class 8 commercial vehicle. The solution also includes an axle
with an electric motor, which replaces the third axle on the vehicle, and our CoPilot in-cab driver display. This system is charged by
regenerative braking and downhill deceleration and discharged to provide additional horsepower and torque when called upon by our control
software, thereby reducing fuel usage and related GHG emissions or applying additional power to improve vehicle performance. Our Hybrid
system’s battery power can be utilized as an auxiliary power unit (“APU”) to supply electricity for in-cab devices
and air conditioning to reduce or eliminate idling when the driver is “hoteling” in the truck.
We
are developing our next generation Hybrid system, which we intend to introduce in 2021. The system is being designed to consolidate the
separate control, battery system and glycol thermal control system boxes from the Demonstrator Hybrid system into a single enclosure
that can be attached to the frame rail of most major Class 8 commercial vehicles, providing additional cost savings and simplifying installation,
and incorporating a custom e-axle solution with associated cooling box to reduce weight and improve system efficiencies. Our next generation
Hybrid system will also include enhanced on-board data analytics capabilities among other improvements. Based on internal and third-party
testing and customer-reported experiences, we believe the benefits of utilizing our Hybrid system compared to conventional diesel or
CNG commercial vehicles will reduce fuel usage, emissions, idling, and/or improved performance.
We
also believe that reduced operating costs will be the main decision factor for many fleets in adopting our Hybrid system. Our Hybrid
system enables fleets to transition from diesel to natural gas engines, which can currently be fueled at a cost significantly lower than
the fuel cost of a diesel engine. Additionally, our customers should save on overall vehicle maintenance with reduced wear and tear on
the vehicles’ engines and brakes.
Range
Extender Powertrain System
Our
Hypertruck ERX system, which is an electric range extender powertrain system, is being designed for installation on most major Class
8 commercial vehicles to create a net carbon negative electrified Class 8 commercial vehicle when using RNG. Our Hypertruck ERX system
builds upon our Hybrid system and consists of a larger version of our proprietary battery system, an associated software management and
data analytics solution, a range extending electric generator powered by a customer’s choice of fuel, a primary electric traction
drive system and power electronics with integrated controls and our CoPilot in-cab driver display. The system works by pairing a fully
electric powertrain with a battery system that is recharged by an onboard generator that produces electricity. This system fully replaces
the traditional powertrain in Class 8 commercial vehicles, while giving our customers the flexibility to choose between most major Class
8 commercial vehicle brands and fuel type for their long-haul applications.
Our
Hypertruck ERX system combines the performance of fully electric powertrains with the refueling efficiency of traditionally fueled vehicles.
In most cases, we estimate that it will be less expensive to run our onboard generator to produce electricity than recharging a BEV from
the grid. By using an onboard generation of electricity, rather than using a large battery pack for a BEV, our Hypertruck ERX system
will provide an extended range over commercial BEVs and improve payload capacity compared to currently available diesel commercial vehicles.
We
believe the benefits of our Hypertruck ERX system will include:
|
●
|
Net
carbon negative electric Class 8 commercial vehicle solution potential.
|
|
●
|
Utilizes
existing infrastructure.
|
|
●
|
Industry
leading payload capacity.
|
|
●
|
Range
comparable to diesel.
|
|
●
|
Industry
standard refueling times.
|
|
●
|
Familiar
existing Class 8 commercial vehicle brands.
|
Rollout
Timeline
We
are currently developing our initial Hypertruck ERX system at our facility in Cedar Park, Texas. We intend to deliver demonstration vehicles
incorporating our Hypertruck ERX system to our customers in late 2021 and begin commercial delivery in 2022.
CNG
and RNG as a Fuel
Our
Hypertruck ERX system will leverage existing CNG fueling stations that provide a cross country refueling network. In the continental
United States, there are approximately 700 public CNG fueling stations already in operation for Class 8 commercial vehicles. These stations
are geographically dispersed across the United States enabling long-haul trucking without the need for incremental refueling infrastructure
buildout. Our Hypertruck ERX system is being designed to allow operation for multiple days before refueling. Furthermore, our Hypertruck
ERX system is being designed to be refueled in approximately ten minutes, which is on par with existing diesel solutions. Internationally,
we believe CNG infrastructure is even more prevalent due to government mandates requiring reduced carbon emissions from transportation.
Additionally, we believe that in certain international jurisdictions, the necessary heavy-duty infrastructure exists that would support
adoption of our Hypertruck ERX system.
The
ability to utilize the existing CNG fueling infrastructure eliminates the time and cost needed to build expensive fueling infrastructure
before our Hypertruck ERX system can be utilized, as compared to Class 8 commercial BEVs and FCEVs, which currently lack electric charging
and hydrogen fueling infrastructure.
RNG
is a form of natural gas that is much cleaner for the environment than most other fuel sources. RNG is generated by capturing methane
from landfills, livestock operations such as dairies, wastewater treatment and other sources or through anaerobic digestion and processing
of food and animal waste streams. Depending on the source, RNG can have a significantly negative carbon intensity score, enabling our
solutions to achieve a net carbon negative emissions profile. RNG is widely available today and new sources are in development. Our customers
interested in achieving a negative carbon intensity score are expected to be able to contract long-term delivery of 100% RNG at various
average carbon intensity scores from their fuel suppliers.
Generator
and Fuel Agnostic
Although
our initial Hypertruck ERX system is being used injunction with CNG it is designed to be generator and fuel agnostic. Our current designs
would allow our Hypertruck ERX system to use any available fuel generator to recharge the battery system without needing to change other
components of its electric powertrain system. In addition to natural gas, other potential generator options include hydrogen fuel cells,
microturbines, and diesel or gasoline generators. The effect of the system’s design is to allow our Hypertruck ERX system customers
to choose their preferred recharging fuel based on their unique priorities, including fuel cost and availability and emissions objectives.
By designing our solutions in this manner, we will be able to quickly adapt to changing commodity price and availability fundamentals,
customer preferences and regulatory signals and mandates without the need to redesign our solutions.
Battery
Systems
In
addition to designing battery systems for our powertrain solutions, we intend to design, develop and sell advanced battery systems to
customers for use in their own applications. These applications are expected to include lower range and smaller class commercial vehicles,
specialty vehicles such as airport or transportation terminal vehicles, as well as standalone components, such as APUs and systems to
power vehicle accessories such as pumps, lifts and thermal control.
Software
and Data Analytics
Our
software and algorithms seek to control and optimize the fuel economy and performance of our powertrain systems by controlling and optimizing
the charging and discharging of the battery systems and the performance of the electric motor and power electronics. Our software and
control algorithms can be remotely updated over the air to enable our customers to receive improvements and the latest features and functionalities.
We
intend to develop additional value-added services and software programs for its customers by further utilizing the data it harvests and
the insights into vehicle performance and utilization its solutions provide, which could include predictive maintenance and other logistics
and fleet management services.
Our
CoPilot product runs on our in-cab display and provides real-time vehicle performance, vehicle status metrics and driving feedback to
the vehicle operators. CoPilot also brings gamification to the driver experience by giving real-time feedback of driving behaviors to
help coach drivers of all experience levels to drive more efficiently.
Additional
Future Products
We
intend to design, develop and sell additional commercial transportation products in the future. For example, our Hybrid technology could
also be utilized on trailers for either trailer electrical loads, such as refrigeration, or to provide power assist or additional battery
recharging to the vehicle when driving.
Customers
and Backlog
We
have deployed demonstration Hybrid system units to certain companies we expect to be customers in the future, including leaders in the
transportation and logistics sector as well as companies committed to reducing the overall environmental impact and fuel costs of their
owned and operated trucking fleets.
Our
initial customer and launch partner for its Hypertruck ERX system is Agility Transport, from which we have received a pre-launch order
of up to 1,000 trucks equipped with our Hypertruck ERX system in one or more future purchase orders, subject to certain testing and performance
requirements and termination rights (including a right to terminate the Agility Pre-Launch Agreement prior to purchasing all or any portion
of Agility Transport’s pre-order). In October 2020, we entered into a sales agreement that includes a pre-order of up to 250 Hypertruck
ERX vehicles, allowing for early availability of our Hypertruck ERX to American Natural Gas (“ANG”) and its fleet customers.
Strategy
Our
mission is to be the leading provider of electrified powertrain solutions for the commercial vehicle industry. Our value proposition
to our customers has five key elements: reduced GHG emissions, cost savings, performance, availability and no new infrastructure requirements.
Key elements of our strategy include:
Maintaining
Technology Leadership and First-Mover Advantage
Our
Hybrid system is currently being deployed into our customers’ fleets, and we intend to be one of the first to the market with an
electric powertrain solution for long-haul Class 8 commercial vehicles. Our Hypertruck ERX system is in advanced development, and we
intend to deliver demonstration vehicles incorporating our Hypertruck ERX system to our customers in late 2021 and begin commercial delivery
in 2022. We expect to capture a market share for low and zero emission commercial vehicles by being one of the first to the market and
by having a solution that can offer a net carbon negative electrified powertrain option to the industry. Our software and the algorithms
that drive our solutions have been utilized in millions of real-world road miles, which are used to drive continuous improvements in
the system management software.
Leveraging
Existing Infrastructure
We
intend to leverage the substantial infrastructure of the existing commercial transportation sector of diesel and CNG to accelerate adoption
of its solutions. To start, utilizing CNG allows for electrified Class 8 commercial vehicle solutions that do not require substantial
new infrastructure, such as the construction of electric charging or hydrogen fueling stations. By utilizing existing commercial transportation
fueling infrastructure, we believe our customers can achieve low GHG emissions, when utilizing CNG, or carbon negative status, when utilizing
RNG, with our solutions.
Focusing
on Powertrains
Our
electrified powertrain solutions are designed to be installed on Class 8 commercial vehicles from most major commercial vehicle OEMs.
By focusing on the powertrain and its associated components and including compatibility into its design, our solutions are intended to
give its customers the flexibility to use their preferred vehicle brand. This will allow our customers to adopt our Hybrid or Hypertruck
ERX system while continuing to utilize their existing maintenance and service organizations. We believe this approach will increase the
adoption of our solutions by reducing our customers’ cost and risk of transitioning to electrified transportation.
Continuing
to Build and Leverage Strategic Relationships
We
intend to continue developing partnerships to accelerate the development and production of our solutions. We have entered into (a) agreements
with Dana, Sensata Technologies, Inc. and other companies for component development and potential future sourcing, (b) non-binding letters
of intent with FEV North America Inc. for design and system integration support and (c) non-binding letters of intent with Lonestar Specialty
Vehicles and Fontaine Modification Company for vehicle installation and (d) partnership agreement with ANG that offers our customers
discounted pricing for RNG at ANG fueling stations across the country. Our strategic, engineering, production and technology partners
augment our internal resources, and we intend to leverage their capabilities and infrastructure to bring our solutions to market more
quickly and to meet industry standards, without requiring us to invest substantial amounts of capital in internal production operations.
See “Risk Factors — Certain of our strategic, development and deployment arrangements could be terminated or may not materialize
into long-term contract partnership arrangements.” and “Risk Factors — 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 vehicles 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.”
Production,
Assembly and Installation
We
intend to primarily outsource the production, assembly and installation of our electrified powertrain systems to our partners at volume,
while maintaining in-house research, development and prototyping capabilities, including low-volume assembly and installation.
Sales
and Marketing
We
currently market and sell our electrified powertrain solutions domestically through a direct sales organization and with our marketing
partners to Class 8 commercial vehicle fleet owners and operators, and we expect to begin marketing and selling our electrified powertrain
solutions internationally in the future.
Research
and Development
Our
research and development activities primarily take place at our headquarters in Cedar Park, Texas, on our testing and demonstration vehicles
on roads and highways, and at our partners’ facilities.
Our
research and development is primarily focused on:
|
●
|
electrified
powertrain development and system integration;
|
|
●
|
control
software and algorithms for our powertrain systems;
|
|
●
|
battery
management system enhancement;
|
|
●
|
next
generation packaging and cooling for our battery systems;
|
|
●
|
interoperability
with third-party powertrain components, such as e-motors, inverters and axles;
|
|
●
|
accelerated
lifetime testing processes to improve reliability, maintainability and system-level robustness;
|
|
●
|
alternative
products for existing and in development components and technology.
|
The
majority of our current activities are primarily focused on the research and development of our electrified powertrain systems, third-party
component integration and the underlying proprietary battery and software technology platforms. We undertake significant testing and
validation of our products and components in order to ensure that they will meet the demands of our customers.
Intellectual
Property
Intellectual
property is important to our business, and we seek protection for our strategic intellectual property. We rely upon a combination of
patents, copyrights, trade secrets, know-how and trademark laws, along with employee and third-party non-disclosure agreements and other
contractual restrictions to establish and protect our intellectual property rights.
As
of December 31, 2020, we had 15 issued U.S. patents and 20 pending U.S. patent applications. We pursue the registration of our domain
names, trademarks and service marks in the United States and in some locations abroad. In an effort to protect our brand, as of December
31, 2020, we had three registered and four pending trademarks in the United States and 26 registered and 14 are pending internationally.
We
regularly review our development efforts to assess the existence and patentability of new intellectual property. To that end, we are
prepared to file additional patent applications as we consider appropriate under the circumstances relating to the new technologies that
we develop.
We
cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications
we may own or license in the future, nor can we be sure that any of our existing patents or any patents we may own or license in the
future will be useful in protecting our technology. Please see the section entitled “Risk Factors” for additional information
on the risks associated with our intellectual property strategy and portfolio.
Facilities
Our
headquarters are located in an approximately 104,000 square foot facility that we lease in Cedar Park, Texas, just north of Austin, Texas,
where we design, develop, prototype and perform low volume assembly and installation of our electrified powertrain systems and components.
Our lease of this facility expires in January 2026 and we have the option to extend the lease for an additional five-year term. We also
lease a 2,500 square foot facility in Braddock, Pennsylvania that is used to support our operations.
Human
Capital
As
of December 31, 2020, we had 91 employees. We have not experienced any work stoppages and we consider our relationship with our employees
to be good. None of our employees are subject to a collective bargaining agreement or represented by a labor union. Our people are integral
to our business, and we are highly dependent on our ability to attract and retain key employees and hire qualified management, and technical
and vehicle engineering personnel. We seek to provide our employees with competitive compensation and benefits, including grants of equity
under our equity incentive plan. While we are currently still a small company in terms of headcount, we have plans to grow, and expect
that our practices and programs with respect to human capital management will grow as we do.
Government
Regulations
We
operate in an industry that is subject to extensive environmental regulation, which has become more stringent over time. The laws and
regulations to which we are subject govern, among others, water use, air emissions, use of recycled materials, energy sources, the storage,
handling, treatment, transportation and disposal of hazardous materials, the protection of the environment, natural resources and endangered
species and the remediation of environmental contamination. We may be required to obtain and comply with the terms and conditions of
multiple environmental permits, many of which are difficult and costly to obtain and could be subject to legal challenges. Compliance
with such laws and regulations at an international, regional, national, provincial and local level is an important aspect of our ability
to continue its operations.
Environmental
standards applicable to us are established by the laws and regulations of the countries in which we operate, and our product are sold,
standards adopted by regulatory agencies and the permits and licenses that we hold. Each of these sources is subject to periodic modifications
and increasingly stringent requirements. Violations of these laws, regulations or permits and licenses may result in substantial civil
and criminal fines, penalties, orders to cease the violating operations or to conduct or pay for corrective works. In some instances,
violations may also result in the suspension or revocation of permits and licenses.
EPA
and CARB Emissions Compliance and Certification
Under
the U.S. Clean Air Act, some of our electrified powertrain solutions may be required to obtain a Certificate of Conformity issued by
the Environmental Protection Agency (“EPA”) and a California Executive Order issued by the California Air Resources Board
(“CARB”), demonstrating that our powertrains and vehicles comply with requirements including as applicable, emission standards
for both criteria pollutants, such as nitrogen oxides (“NOx”) and particulate matter, and GHGs, such as CO2 and nitrous oxide.
A Certificate of Conformity is required for vehicles sold in all states and an Executive Order is required for vehicles sold in California
and states that have adopted the California standards. The California Air Resources Board (“CARB”) sets the California standards
for emissions control for certain regulated pollutants for new vehicles and engines sold in California and must obtain a waiver of preemption
from the EPA before implementing and enforcing such standards. States that have adopted the California standards, as approved by the
EPA, also require a CARB Executive Order for sales of vehicles in those states. There are currently four states that have adopted the
California standard for heavy-duty vehicles.
Pursuant
to its authority under the Clean Air Act, the EPA adopted Phase 1 fuel efficiency and GHG standards for heavy-duty vehicles and engines
effective 2014 through 2018. The EPA subsequently adopted more stringent fuel efficiency and GHG standards for heavy-duty vehicles and
engines in October 2015. Phase II CARB also has adopted GHG and fuel efficiency standards for heavy-duty vehicles and engines effective
2018 to 2027, and is considering an Advanced Clean Trucks rule that would require heavy-duty vehicle manufacturers to produce and offer
for sale in California a certain number of zero-emission vehicles. Manufacturers of vehicles and engines must comply with the GHG standards
as a condition of the EPA Certificate of Conformity and the CARB Executive Order.
Additionally,
CARB is also providing more stringent criteria on heavy-duty engines, now testing requirements an expanded emissions warranty for specific
engines and powertrain components in CARB’s Low NOX Omnibus rule. As currently proposed, CARB’s Low NOV Omnibus rule would
begin in 2024 and be implemented through 2031.
All
vehicles and engines manufactured for sale in the United States must be covered by an EPA Certificate of Conformity (and CARB Executive
Order if sold in California), including engines and vehicles using zero-emission or low-carbon technology. As is necessary, an EPA Certificate
of Conformity and/or CARB Executive Order, covering both criteria pollutants and GHG, must be obtained each model year for each engine
family and heavy-duty vehicle. Failure to obtain or comply with the terms of a Certificate of Conformity or Executive Order is subject
to civil penalty and administrative or judicial enforcement.
Receipt
of an EPA Certificate of Conformity and CARB Executive Order obligates the holder to ensure that the covered engine or vehicle complies
with applicable standards throughout the full useful life of the product, which ranges from ten years or 185,000 miles, whichever comes
first, for medium heavy-duty vehicles, to ten years or 435,000 miles, whichever comes first, for heavy heavy-duty vehicles. Emissions
control system warranty coverage must be provided for a period of five years or 50,000 to 100,000 miles, whichever comes first and depending
on the engine and vehicle size. During this time, manufacturers must repair emission-related defects at no cost to the customer. Throughout
the full useful life of the engine or vehicle, manufacturers are required to remedy in-use problems that cause engines or vehicles to
exceed emission standards for criteria pollutants or GHGs. Manufacturers may have to conduct recalls, service campaigns or other field
actions, or provide extended warranties to address any such in-use issues that may arise. Both the EPA and CARB are considering extending
the emissions warranty period, depending on the engine size.
Manufacturers
of heavy-duty engines and vehicles also must ensure that their products comply with On Board Diagnostics (“OBD”) requirements.
The OBD system is intended to identify and diagnose malfunctions within the engine, aftertreatment and emission control systems and alert
the driver to the underlying issue so the vehicle can be brought in for service. CARB issues approval of the OBD system as part of its
issuance of an Executive Order; the EPA typically deems CARB OBD approval to be compliance with the EPA’s requirements. As with
emissions compliance, manufacturers are required to ensure that the OBD system functions as designed and is able to identify component
malfunctions throughout the full useful life of the vehicle or engine.
Natural
Gas and RNG Credits
Generation
and Sale of Renewable Identification Numbers (“RIN”) Credits and low carbon fuel standards (LCFS) Credits. In February
2010, the EPA finalized the Renewable Fuel Standard (“RFS”) (which was established by the Energy Policy Act of 1992/2005),
which creates RINs that can be generated by the production and use of RNG in the transportation sector and sold to fuel providers that
are not compliant under the RFS. In addition, CARB and comparable agencies in Oregon have adopted the LCFS, which encourages low carbon
“compliant” transportation fuels (including CNG) in the California and Oregon marketplace by allowing producers of these
fuels to generate LCFS Credits that can be sold to noncompliant regulated parties.
Sale
of Natural Gas Vehicle Fuel: Alternative Fuel Tax Credit (AFTC). Under separate pieces of U.S. federal legislation, natural gas vehicle
fuel sales made during the year ending December 31, 2020 are eligible for an AFTC. The AFTC credit is equal to $0.50 per gasoline gallon
equivalent of CNG sold as vehicle fuel. The AFTC may not be reinstated for vehicle fuel sales after December 31, 2020.
GHG
Credits — U.S. EPA
The
EPA’s Greenhouse Gas Regulation requires all manufacturers of heavy-duty engines and vehicles to comply with fleet average GHG
standards. Manufacturers may comply with the standards by producing engines or vehicles, all of which comply with the standards, or by
averaging, banking and trading GHG credits within vehicle or engine categories. Manufacturers may also comply with GHG standards by purchasing
credits from manufacturers with a surplus of credits. The failure to comply with GHG standards can lead to civil penalties or the voiding
of a manufacturer’s EPA Certificate of Conformity. In connection with the delivery and placement into service of zero-emission
and low-emission vehicles, we may earn tradable GHG credits that under current laws and regulations can be sold to other manufacturers.
Under the EPA’s Greenhouse Gas Regulation, plug-in hybrid, all-electric and fuel cell vehicles earn a credit multiplier of 3.5,
4.5, and 5.5, respectively, for use in the calculation of GHG emission credits.
Commercial
engine and vehicle manufacturers are required to meet the NOx emission standard for each type of engine or vehicle produced. Typical
diesel engine emission control technology limits the fuel economy and GHG improvements that can be made while maintaining compliance
with the NOx standard. As the fleet-average GHG standards continue to decrease over time, compliance with the NOx standard will increase
the difficulty for conventional diesel vehicles to meet the applicable GHG standard. Until technology catches up for commercial vehicles,
manufacturers of diesel trucks will likely need to purchase GHG credits to cover their emission deficit. The EPA’s Greenhouse Gas
Regulation provides the opportunity for the sale of excess credits to other manufacturers who apply such credits to comply with these
regulatory requirements. Furthermore, the regulation does not limit the number of GHG credits that can be sold within the same commercial
vehicle categories.
GHG
Credits — California Air Resources Board
California
also has a separate GHG emissions regulatory program which is very similar to the EPA requirements. Like the EPA’s Greenhouse Gas
Rule, the CARB rule allows for averaging, banking and trading of credits to comply with the fleet-average GHG standard and the failure
to comply with the California GHG standard may lead to the imposition of civil penalties. The delivery and placement into service of
our zero-emission and low-emission vehicles in California may earn us tradable credits that can be sold. Under CARB GHG regulations,
advanced technology vehicles also earn a credit multiplier of for use in the calculation of emission credits in the same amounts as under
the EPA’s Greenhouse Gas Rule.
Examples
of other potential incentive and grant programs that either we or our customers can apply for include:
|
●
|
Low
Carbon Fuel Standard (LCFS). The LCFS was initially developed in California and is
quickly gaining traction in other jurisdictions around the world. The goal is to reduce the
well-to-wheel carbon intensity of fuels by providing both mandated reduction targets as well
as tradable and sellable credits.
|
|
●
|
Purchase
Incentives. Both California and New York have active programs that provide “cash
on the hood” incentives to customers that purchase newer, lower emissions vehicles,
including zero-emission vehicles. Other states are considering developing similar programs.
|
|
●
|
Grant
Programs. Government entities at all levels from federal, including the U.S. Department
of Energy, state (for example, CARB) and local (for example, North Texas Council of Governments),
have grant programs designed to increase and accelerate the development and deployment of
zero-emission vehicles and infrastructure technologies.
|
|
●
|
EPA
Smartway. The EPA Smartway program provides grants and funding for the retrofit of
heavy-duty vehicles with components and technologies that reduce emissions. Drivers and fleet
owners who repower vehicles with advanced technology powertrains or CNG engines may be able
to access funding to offset a portion of the cost.
|
European
and Other Requirements for Heavy-Duty Vehicles
Similar
to requirements in the US, Europe and other jurisdictions regulate pollutants, operational characteristics, and content of heavy-duty
vehicles and vehicle equipment. For example, European emission regulations of heavy-duty vehicles (currently under “Euro VI”
regulations) specify criteria pollutant emission limits from various vehicles, including heavy-duty vehicles, that are similar to those
of EPA and CARB. The European regulations also require similar engine and vehicle OBD systems to those of EPA and CARB. However, as these
are ‘similar’ emissions and diagnostic regulations, the EPA and CARB are not the same as European emissions and diagnostic
regulations. Unlike the generally synergistic relation and regulations between EPA and CARB, current European emissions and diagnostic
regulations require separate design, validation, testing and approval such that EPA and/or CARB approval does not directly correlate
to European approval of similar powertrain and vehicle equipment. Other requirements regulating vehicles and vehicle equipment components
similar to Hyliion systems may be applicable to or exempted by regulation. For example, European Restriction of Hazardous Substance regulates
materials in electrical equipment, but currently exempts transport vehicles. As Hyliion considers these other markets, Hyliion systems
will be configured to meet these requirements in other jurisdictions.
Heavy-Duty
Vehicle Safety Requirements
Manufacturers
of vehicles that operate on US highways are subject to, and must comply with, various regulations established by the National Highway
Traffic Safety Administration (“NHTSA”). These federal motor vehicle safety standards (“FMVSS”) cover a wide
variety of vehicle equipment and components. Manufacturers of vehicles, including heavy-duty vehicles, must confirm that their vehicles
and vehicle equipment comply with applicable standards or, as appropriate, are exempt from those standards. Currently, there are several
FMVSS that apply to vehicle manufacturers and may be applicable to Hyliion’s hybrid and ERX systems. As may be required, Hyliion
is evaluating FMVSS requirements for applicability to Hyliion products.
Manufacturers
of vehicles that operate on US highways must also comply with NHTSA safety reporting requirements concerning safety involving Hyliion
systems concerning various issues including, but not limited to, accidents, warranty claims, field actions and reports, and recalls.
As situations may arise, Hyliion will take appropriate actions to comply with these reporting requirements.
Competition
We
have experienced, and expect to continue to experience, intense competition from a number of companies, particularly as the commercial
transportation sector increasingly shifts towards low-emission, zero-emission or carbon neutral solutions. We face competition from many
different sources, including major commercial vehicle OEMs and companies that are developing alternative fuel and electric commercial
vehicles. Existing commercial vehicle OEMs such as Paccar, Navistar, Volvo, Mack Trucks and Daimler maintain the largest market shares
in the sector. Given we primarily develop and sell powertrains that are designed to be installed into an OEM’s commercial vehicle
to augment or replace conventionally fueled powertrains, as opposed to a complete commercial vehicle, we believe we primarily compete
with new low emissions vehicle entrants in the commercial vehicle market and to a lesser extent the in-house powertrain development efforts
of the incumbent commercial vehicle OEMs, as well as existing traditional powertrain component manufacturers. While there are many competitors
addressing electrification of commercial vehicles, many of them are focused on shorter range vehicles. We are providing electrified solutions
that are addressing both the long-haul and regional transportation sectors. We believe the primary competitive factors in the long-haul
Class 8 commercial vehicle market include, but are not limited to:
|
●
|
total
cost of ownership;
|
|
●
|
availability
of charging or fueling network;
|
|
●
|
ease
of integration into existing operations;
|
|
●
|
product
performance and uptime;
|
|
●
|
vehicle
quality, reliability and safety;
|
|
●
|
vehicle
support, parts and on-road service network;
|
|
●
|
technological
innovation specifically around battery, software and data analytics; and
|
We
believe that we compete favorably with our competitors on the basis of these factors; however, most of our current and potential competitors
have greater financial, technical, manufacturing, marketing and other resources than us. Our competitors may be able to deploy greater
resources to the design, development, manufacturing, distribution, promotion, sales, marketing and support of their alternative fuel
and electric truck programs. Additionally, our competitors also have greater name recognition, longer operating histories, larger sales
forces, broader customer and industry relationships and other tangible and intangible resources than us. These competitors also compete
with us in recruiting and retaining qualified research and development, sales, marketing and management personnel, as well as 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. We cannot provide assurances that our electrified systems will be the first to market. Even if
our electrified systems are first to market, or among the first to market, we cannot be sure that customers will choose vehicles with
our electrified systems over those of our competitors, or over conventional diesel-powered vehicles.
Tesla
and Nikola have announced their plans to bring long-haul Class 8 commercial BEVs and FCEVs to the market over the coming years. Cummins,
Daimler, Dana, Navistar, PACCAR, Volvo, Lion Electric, Hyzon and other commercial vehicle manufacturers have announced their plans to
bring Class 8 commercial BEVs or FCEVs to the market. Furthermore, we will also face competition from manufacturers of internal combustion
engines powered by diesel fuel. We expect additional competitors to enter the market as well.
Legal
Proceedings
From
time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We
are not currently a party to any material legal proceedings. Regardless of outcome, such proceedings or claims can have an adverse impact
on us because of defense and settlement costs, diversion of resources and other factors and there can be no assurances that favorable
outcomes will be obtained.
Strategic
Collaborations
Dana
Limited (“Dana”)
Commercial
Matters Agreement
In
June 2020, Hyliion and Dana entered into an agreement as to certain commercial arrangements (the “Commercial Matters Agreement”).
The Commercial Matters Agreement amended and replaced certain prior commercial arrangements between Hyliion and Dana.
Among
other things, pursuant to the Commercial Matters Agreement, as long as Dana or its affiliates hold at least 1,000,000 shares of our Common
Stock or equity securities issued in exchange therefor or into which such shares are otherwise converted (in each case subject to customary
adjustments for stock splits or dividends or other similar changes), and in the case of the Dana Sourcing Arrangement (defined below),
for five years following the date of certain change in control transactions affecting us or our respective affiliates: (a) we agreed
to purchase from Dana and its affiliates, unless we are directed by a customer to use a different vendor, any component, product or service
required or utilized by us that Dana or any of its affiliates manufactures, sells or provides or unless Dana is not capable or willing
to supply on reasonably competitive terms such component, product or service; provided that if a customer so directs us to use an alternative
source, we agreed to use our good faith efforts to cause such customer to use Dana’s or its affiliates’ component, product
or service by providing Dana or its affiliates with the opportunity to meet and speak with such customer (the “Dana Sourcing Arrangement”);
(b) Dana agreed to provide Hyliion with a sourcing arrangement that granted us certain preferred payment terms when purchasing components
from Dana or its affiliates for our own use in connection with its commercial vehicle business operations; (c) Dana and Hyliion agreed
to execute joint marketing and branding activities; (d) Dana and its affiliates were granted a right of first refusal with respect to
any assembly or manufacturing activities required by us; and (e) we agreed not to engage in certain business activities with certain
competitors of Dana, subject to certain conditions.
For
a period of three years following the closing of the Business Combination, Dana agreed to provide to us, at no charge (other than reimbursement
of certain expenses), support services related to our business and operations, substantially comparable to the scope and quantity of
services provided by Dana to us prior to entering into the Commercial Matters Agreement (the “Dana Support Services”) upon
the terms and conditions of a new services agreement to be mutually agreed to, based upon good faith negotiations. In consideration for
the Dana Support Services, Hyliion agreed to issue $10.0 million worth of Hyliion Common Stock to Dana immediately prior to the consummation
of the Business Combination.
Sensata
Technologies, Inc.
Sensata
Collaboration Agreement
In
June 2019, in connection with the notes payable issued to Sensata (“Sensata Notes”), we entered into a Collaboration and
Development Agreement with Sensata relating to the development and supply of power distribution units (“PDUs”) for use in
certain of our products (the “Sensata Collaboration Agreement”). Pursuant to the Sensata Collaboration Agreement, we and
Sensata agreed to collaborate in connection with Sensata’s development, at its cost and expense, of PDUs that meet our specifications.
The Sensata Collaboration Agreement does not require Sensata to complete development of PDUs that meet our specifications. However, if
Sensata is able to deliver PDUs to us that meet our qualifications, we have agreed to negotiate in good faith a definitive supply agreement
for Sensata to manufacture and supply PDUs to us for use in certain of our products. Such definitive supply agreement shall require us
to purchase Hyliion’s total requirements for such PDUs from Sensata for an initial term of three years, so long as Sensata is willing
and able to satisfy our pricing, timing and performance objectives. If we fail to enter into such definitive supply agreement or, if
entered into, fail to purchase our total requirements of PDUs exclusively from Sensata during such three-year period, Sensata shall be
entitled to certain remedies including reimbursement for all of the documented costs incurred by Sensata in the development of the PDUs
pursuant to the Sensata Collaboration Agreement. All intellectual property developed by Sensata in connection with the Sensata Collaboration
Agreement that does not incorporate any of our intellectual property shall be solely owned by Sensata; however, Sensata has granted us
a perpetual, worldwide, irrevocable, royalty-free, non-exclusive, non-transferable and non-sublicensable license to such intellectual
property. The term of the Sensata Collaboration Agreement is 18 months and may be extended by the parties’ written mutual agreement.
Either party may terminate the Sensata Collaboration Agreement by providing the other party with 30 days’ written notice.
Sensata
Data Sharing Agreement
In
June 2019, in connection with the Sensata Notes, we also entered into a Data Sharing and Research Agreement with Sensata, pursuant to
which we and Sensata agreed to engage in predictive maintenance and data capture collaborations in connection with trucks operated by
us (the “Sensata Data Sharing Agreement”). Pursuant to the Sensata Data Sharing Agreement, we agreed to deliver to Sensata
data from its vehicle fleet tests related to powertrain and other applications, and Sensata agreed to use commercially reasonable efforts
to work with Logistics Management Institute (formerly Clockwork Solutions) (“Clockwork”), a data science and predictive maintenance
consulting firm engaged by us, to analyze such data in order to develop and delineate analytics, patterns and predictive algorithms for
the purpose of enhancing Class 8 truck performance. The Sensata Data Sharing Agreement further specified that all data provided by us
to Sensata shall remain our property. To date, we and Sensata have collaborated pursuant to the Sensata Data Sharing Agreement in connection
with capturing data from trucks operated by us to permit a data study conducted by Clockwork. We have not entered into a definitive agreement
with Clockwork to undertake advanced analytic data processing and to assist with data analysis.
FEV
Letter of Intent for Commercial Agreement
In
May 2020, we entered into a non-binding letter of intent with FEV North America Inc. (“FEV”) relating to the provision of
engineering services (the “FEV LOI”). The FEV LOI provides that we will negotiate a definitive agreement for FEV to provide
services to us on a non-exclusive basis relating to engineering and research and development in connection with our development of electrified
solutions for medium and heavy-duty trucks, among other matters. The FEV LOI contemplates that following the execution of a definitive
agreement, we will, from time to time, provide FEV with the details of projects that it is working on and request that FEV submit a proposal
to provide services to us in connection with such projects. If mutually agreed to by us and FEV, FEV would then provide such services
to us pursuant to the definitive agreement. The FEV LOI also contemplates collaboration on customer leads and opportunities, as mutually
agreed to by us and FEV from time to time.
We
are now renegotiating the definitive agreement, but the term of the FEV LOI will continue until the execution of a definitive agreement.
Either party may terminate the FEV LOI by delivering written notice to the other party. In August 2020, we and FEV entered into a statement
of work, pursuant to which FEV is providing limited engineering services to us. As contemplated by the FEV LOI, we and FEV intend to
enter into a definitive agreement that will govern all future work, but there is no guarantee that a binding definitive agreement will
be achieved.
Fontaine
Letter of Intent for Commercial Agreement
In
May 2020, we entered into a non-binding letter of intent with Fontaine Modification Company (“Fontaine”), a North America
based provider of comprehensive post-production truck modification services for OEMs, relating to the provision of post-production truck
modification services (the “Fontaine LOI”). The Fontaine LOI provides that we will negotiate a definitive agreement for Fontaine
to provide services to us on a non-exclusive basis relating to design, engineer, test and build truck modifications and custom solutions
for our products, among other matters. The Fontaine LOI contemplates that Fontaine will have the capacity and capability to modify an
agreed upon number of trucks per year (and per month) on its production lines pursuant to the definitive agreement. The Fontaine LOI
also contemplates that following the completion of modification services by Fontaine, Fontaine will work cooperatively with us to coordinate
delivery of trucks to our customers, including utilizing “ship-thru” agreements with the OEMs of such trucks. The term of
the Fontaine LOI will continue until the execution of a definitive agreement. Either party may terminate the Fontaine LOI by delivering
written notice to the other party. There is no guarantee that a binding definitive agreement will be achieved.
Lonestar
Letter of Intent for Commercial Agreement
Since
2019, Lonestar Specialty Vehicles (“Lonestar”), an installer of powertrains in rolling chassis and glider trucks, has been
providing us with installation services in connection with certain of our products. In April 2020, we entered into a non-binding letter
of intent with Lonestar relating to the provision of truck production, installation and customization services (the “Lonestar LOI”).
The Lonestar LOI provides that we will negotiate a definitive agreement for Lonestar to provide services to us on a non-exclusive basis
relating to the production, installation and customization of trucks that contain or utilize our products, among other matters. The Lonestar
LOI contemplates that Lonestar will reserve capacity on its production line to build an agreed upon number of trucks per year pursuant
to specifications provided by us, and that Lonestar will be responsible for sourcing the truck body and all truck components from applicable
manufacturers, installing our products in such trucks and performing all customization requested by us and our customers. The Lonestar
LOI also contemplates that following the completion of each truck, Lonestar will coordinate delivery of such truck directly to our customers,
Lonestar will be designated as one of our nationally recognized authorized servicers, Lonestar will offer extended warranty contracts
directly to our customers and Lonestar will offer financing and leasing terms directly to our customers to assist them in purchasing
or leasing trucks. The term of the Lonestar LOI will continue until the execution of a definitive agreement. Either party may terminate
the Lonestar LOI by delivering written notice to the other party. There is no guarantee that a binding definitive agreement will be achieved.
Collaboration
with American Natural Gas
Since
2018, we and American Natural Gas (“ANG”) have collaborated, on a non-exclusive basis, in connection with customer inquiries,
on potential co-marketing opportunities and potential opportunities for ANG to provide our customers with RNG/CNG at fueling stations
built, owned or operated by ANG across the United States. In October 2020, we entered into a sales agreement and partnership agreement
with ANG. The sales agreement includes a pre-order of up to 250 Hypertruck ERX vehicles and the partnership agreement offers our customers
discounted pricing for RNG at ANG fueling stations across the country and, for qualifying fleet customers, ANG has also agreed to build
new fueling stations near our customer locations with no upfront capital costs to such customers.
MANAGEMENT
Executive
Officers and Directors
Our
directors and executive officers and their ages as of June 30, 2021 are as follows:
Name
|
|
Age
|
|
Position
|
Executive Officers
|
|
|
|
|
Thomas Healy
|
|
29
|
|
Chief Executive Officer and Director
|
Sherri Baker
|
|
49
|
|
Chief Financial Officer
|
Patrick Sexton
|
|
47
|
|
Chief Technology Officer
|
Jose Oxholm
|
|
54
|
|
Vice President, General Counsel and Chief Compliance Officer
|
|
|
|
|
|
Non-Employee Directors
|
|
|
|
|
Andrew H. Card, Jr.(1)(2)
|
|
74
|
|
Director
|
Vincent T. Cubbage(2)(3*)
|
|
57
|
|
Director
|
Howard Jenkins(2*)(3)
|
|
70
|
|
Director
|
Edward Olkkola(3)
|
|
61
|
|
Chairman of the Board of Directors
|
Stephen Pang(1)
|
|
39
|
|
Director
|
Robert M. Knight, Jr.(1*)(4)
|
|
63
|
|
Director
|
(1)
|
Member
of the audit committee
|
(2)
|
Member
of the compensation committee
|
(3)
|
Member
of the nominating and corporate governance committee
|
(4)
|
Audit
Committee Financial Expert
|
*
|
Committee
Chair.
|
Executive
Officers
Thomas
Healy. Mr. Healy has served as our Chief Executive Officer since October 2020 and prior to this, served as Chief Executive Officer
of Legacy Hyliion since January 26, 2016. While leading Hyliion, Mr. Healy has been awarded numerous patents in the space of electrifying
commercial vehicles. Mr. Healy founded Hyliion while studying to obtain a Master’s in mechanical engineering and had previously
founded multiple start-ups during his undergraduate studies. He took a leave of absence during his Master’s program in 2015 to
pursue founding Hyliion. Mr. Healy holds a B.S. degree in Mechanical Engineering with a double-major in Engineering and Public Policy
from Carnegie Mellon University.
Sherri
Baker. Ms. Baker has served as our Chief Financial Officer since February 2021. Prior to joining us, Ms. Baker served as
Senior Vice President and Chief Financial Officer of PGT Innovations, Inc., a company that builds products including windows and doors
to withstand major storms, beginning from March 2019 to January 2021. Prior thereto, Ms. Baker served as Vice President of Investor
Relations, Strategy and Corporate Finance for Dean Foods Company (OTCMKTS: DFODO), a leading food and beverage company, from January
2016 to March 2019. From January 2013 through December 2015, Ms. Baker served as Vice President of Finance, Logistics for Dean Foods
Company. Prior to Dean Foods Company, Ms. Baker spent 13 years at Frito-Lay, Inc., a subsidiary of PepsiCo, Inc., in a
succession of finance and accounting roles. Ms. Baker holds a bachelor of science and masters of science in accounting from the
University of North Texas.
Patrick
Sexton. Mr. Sexton has served as our Chief Technical Officer since October 2020 and prior to this, served as Chief Technical
Officer of Legacy Hyliion since May 2020 and prior to this, as Vice President of Engineering since June 2019. Prior to joining Legacy
Hyliion, Mr. Sexton served as a Director of Engineering in Powertrain Innovations at Dana Incorporated (NYSE: DAN), a manufacturer of
vehicle components, from April 2013 to June 2019. Mr. Sexton has served as a director of Solexpro LLC since 2021. Mr. Sexton holds a
bachelor’s degree in Mechanical and Manufacturing Engineering from the Cork Institute of Technology.
Jose
Oxholm. Mr. Oxholm has served as our Vice President, General Counsel and Chief Compliance Officer since November 23, 2020. Prior
to joining Hyliion, Mr. Oxholm served in various legal positions at Meritor, Inc. (from January 2017 to February 2020), LoJack Corporation
(from April 2012 to March 2016), The Goodyear Tire & Rubber Company (from 2005 to April 2012) and the Ford Motor Company (from 2000
to 2005). Mr. Oxholm also serves as a director on the board of directors of three non-profit organizations. Mr. Oxholm holds a bachelor’s
degree from the University of Michigan and a juris doctor degree from the University of Pennsylvania, Carey Law School.
Non-Employee
Directors
Andrew
H. Card, Jr. Mr. Card has served as a director of the Board since October 2020. Mr. Card served as Chairman of National Endowment
for Democracy, a nonprofit foundation, from January 2018 to January 2021. From 2015 until 2016, Mr. Card served as President of Franklin
Pierce University, and also previously served as the Executive Director of the Office of the Provost and Vice President for Academic
Affairs at Texas A&M University. Prior to that, Mr. Card served as Chief of Staff to President George W. Bush, the 11th Secretary
of Transportation under President H.W. Bush and Deputy Assistant to the President and Director of Intergovernmental Affairs for President
Ronald Reagan. Additionally, Mr. Card previously served as Vice President-Government Relations for General Motors Corporation, and as
the President and Chief Executive Officer of the American Automobile Manufacturers Association. Mr. Card has served as a director of
Union Pacific Corporation (NYSE: UNP), a transportation company that primarily operates one of the largest railroads in North America,
since July 2006, Draganfly Inc. (OTCMKTS: DFLYF), a manufacturer of unmanned aerial vehicles, since November 2019 and Lorillard Inc.,
a tobacco company, from July 2011 to June 2015. Mr. Card is a graduate of the University of South Carolina with a B.S. in Engineering.
He also attended the U.S. Merchant Marine Academy and the John F. Kennedy School of Government at Harvard University. Mr. Card served
in the U.S. Navy from 1965 to 1967.
Vincent
T. Cubbage. Mr. Cubbage served as TortoiseCorp’s Chief Executive Officer, President and director from November 2018 to
September 2020, as Chairman of the TortoiseCorp board of directors since the completion of its initial public offering in March 2019,
and has continued to serve on the Board following the completion of the Business Combination. Since July 2020, Mr. Cubbage has served
as Chief Executive Officer, President and as a Director of Tortoise Acquisition Corp. II, and as Chairman of the Board of Tortoise Acquisition
Corp. II since the completion of its initial public offering in September 2020. Mr. Cubbage has served as Chief Executive Officer and
as a Director of TortoiseEcofin Acquisition Corp. III since February 2021 and is expected to serve as Chairman of the Board of Directors
following the completion of its initial public offering. He has served as Managing Director — Private Energy of Tortoise Capital
Advisors, L.L.C. since January 2019 and of Ecofin Investments, LLC since September 2020. Mr. Cubbage was the founder and served as the
Chief Executive Officer and a member of the Board of Managers of Lightfoot Capital Partners GP LLC, the general partner of Lightfoot
Capital Partners, LP, from its formation in 2006 through its wind-up in December 2019. He served as Chief Executive Officer, Director
and Chairman of the Board of Arc Logistics GP LLC, the general partner of Arc Logistics Partners LP (NYSE: ARCX), from October 2013 to
the date of its sale in December 2017. From 2007 to 2011, Mr. Cubbage also served on the board of managers of the general partner of
International Resources Partners LP, a private partnership founded by Lightfoot Capital. Prior to founding Lightfoot Capital, Mr. Cubbage
was a Senior Managing Director and Sector Head in the Investment Banking Division of Banc of America Securities, where he worked from
1998 to 2006. Before joining Banc of America Securities, Mr. Cubbage was a Vice President at Salomon Smith Barney in the Global Energy
and Power Group where he worked from 1994 to 1998. Mr. Cubbage received an M.B.A. from the American Graduate School of International
Management and a B.A. from Eastern Washington University.
Howard
Jenkins. Mr. Jenkins has served as a director of the Board since October 2020 and prior to this, served as a director of Legacy
Hyliion since 2016. Since January 2017, Mr. Jenkins has served as managing partner of Axioma Ventures, LLC, an investment firm. Beginning
in 1977, Mr. Jenkins served on the board of directors and later as CEO of Publix Super Markets, Inc., an employee-owned company operating
supermarkets in seven states in the Southeast U.S. Mr. Jenkins also served on the board of directors of several other privately held
companies and charities. In 1975, Mr. Jenkins received his B.A. in Economics from Emory University.
Edward
Olkkola. Mr. Olkkola has served as a director of the Board since October 2020 and prior to this, served as a director of Legacy
Hyliion since June 2016. Mr. Olkkola also served as the Chief Operating Officer of Legacy Hyliion from January 2018 to October 2018 and
as an employee of Legacy Hyliion until March 2020, however his employment ended prior to the Business Combination. Since 2009, Mr. Olkkola
has served as a managing director of Teakwood Capital, LP, an investment firm, where he manages private equity investment funds focused
on micro-cap portfolio companies. Prior to joining Teakwood Capital, LP, Mr. Olkkola served as the Senior Vice President, New Products
and Business Development for A. H. Belo Corporation, a Dallas, Texas based media company, from 2007 to 2009, where his responsibilities
were focused on strategic investments in media and technology companies. Prior to joining A. H. Belo Corporation, Mr. Olkkola was a general
partner at Austin Ventures from 1997 to 2005 and an operating partner from 2006 to 2007 where he established the communications technology
and hardware investment practice. Before joining Austin Ventures, Mr. Olkkola was with Compaq Computer with his last role being the Vice
President & General Manager of the Communications Division. Before Compaq, Mr. Olkkola was with Motorola/Codex with his role as Senior
Director, Systems Division. During his career, Mr. Olkkola has brought over a dozen new products to market. He co-founded the Compaq
Venture Fund, and with partners at Teakwood Capital and Austin Ventures, raised over $2 billion in venture and private equity funds.
He holds patents in core communications and network technologies including voice recognition, home networking, real-time signal processing
and high-speed digital network switching. Mr. Olkkola holds a B.S. in Finance and Management Information Systems from the University
of Massachusetts and an M.B.A. from Northeastern University.
Stephen
Pang. Mr. Pang has served as a director of the Board since October 2020 and prior to this, served as a director of TortoiseCorp
since the completion of its initial public offering on March 4, 2019 and as TortoiseCorp’s Chief Financial Officer from January
2020 until the closing of its Business Combination with Hyliion on October 1, 2020. Mr. Pang has served as a director of Tortoise Acquisition
II since the completion of its initial public offering in September 2020 and Chief Financial Officer since July 2020. Since 2019, Mr.
Pang has served as a Managing Director and Portfolio Manager at Tortoise and is responsible for Tortoise’s public and private direct
investments across its energy strategies. Mr. Pang also served as Vice President of Tortoise Pipeline & Energy Fund, Inc., a closed-end
fund, from May 2017 to December 11, 2020. Prior to joining Tortoise Investments, LLC in 2014, Mr. Pang was a Director in Credit Suisse
Securities (USA) LLC’s Equity Capital Markets Group. Before joining Credit Suisse Securities (USA) LLC in 2012, he spent eight
years in Citigroup Global Markets Inc.’s Investment Banking Division, where he focused on equity underwriting and corporate finance
in the energy sector. Since October 2019, Mr. Pang has served as a member of the board of managers of Mexico Pacific Limited LLC. Mr.
Pang holds a B.S. in Business Administration from the University of Richmond and is a CFA charterholder.
Robert
M. Knight, Jr. Mr. Knight has served as a director of the Board since October 2020. Mr. Knight served as Chief Financial Officer
of Union Pacific Corporation (NYSE: UNP), a transportation company that primarily operates one of the largest railroads in North America,
from 2004 until his retirement in 2019. Mr. Knight has served as a director of Schneider National, Inc. (NYSE: SNDR), a transportation
and logistics company, since April 2020 and Carrix, Inc., a privately-held marine terminal and rail operator company, since February
2020. Mr. Knight holds a bachelor’s degree in business administration from Kansas State University and an M.B.A. from Southern
Illinois University.
Board
Composition
Our
business and affairs are organized under the direction of the Board which consists of seven members. Edward Olkkola serves as Chair of
the Board. The primary responsibilities of the Board are to provide oversight, strategic guidance, counseling and direction to our management.
The Board meets on a regular basis and additionally as required. The Board held four meetings in 2020. Each director attended at least
75% of the meetings of the Board and each committee on which he served in 2020 (held during the period in which the director served).
Our independent directors regularly hold executive sessions without our Chief Executive Officer or management present, and in 2020, our
independent directors met in executive session at least once. We did not hold an annual meeting last year.
The
Board is divided into three classes, Class I, Class II and Class III, with members of each class serving staggered three-year terms.
The Board is divided into the following classes:
|
●
|
Class
I, which consists of Vincent T. Cubbage and Thomas Healy, whose terms will expire at our
2021 annual meeting;
|
|
●
|
Class
II, which consists of Andrew H. Card, Jr., Howard Jenkins and Stephen Pang, whose terms will
expire at our 2022 annual meeting; and
|
|
●
|
Class
III, which consists of Edward Olkkola and Robert M. Knight, Jr., whose terms will expire
at our 2023 annual meeting.
|
At
each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election
and qualification until the third annual meeting following their election and until their successors are duly elected and qualified.
Pursuant to a stockholders rights agreement we entered into with Vincent T. Cubbage, Stephen Pang, and certain stockholders of Hyliion
and the Company (the “Stockholders Rights Agreement”), we agreed to take all necessary action to cause the Board to nominate
and recommend Vincent T. Cubbage and Thomas Healy for election at the annual meeting of stockholder in 2021. The stockholders who are
party to the Stockholders Rights Agreement agreed to vote in favor of Messrs. Cubbage and Healy at the annual meeting.
Director
Independence
The
Board has determined that each of the following directors qualifies as an independent director as defined under the NYSE listing standards:
Messrs. Card, Cubbage, Jenkins, Olkkola, Pang and Knight. Mr. Healy is not independent because of his service as our CEO. The Board consists
of a majority of “independent directors,” as defined under the rules of the SEC and NYSE listing standards relating to director
independence requirements. In addition, we are subject to the rules of the SEC and the NYSE relating to the membership, qualifications,
and operations of the audit committee, as discussed below.
Role
of the Board in Risk Oversight
One
of the key functions of the Board is informed oversight of our risk management process. The Board does not have a standing risk management
committee, but administers this oversight function directly through the Board as a whole, as well as through various standing committees
of the Board that address risks inherent in their respective areas of oversight. In particular, the Board is responsible for monitoring
and assessing strategic risk exposure and our audit committee has the responsibility to consider and discuss our major financial risk
exposures and the steps our management will take to monitor and control such exposures, including guidelines and policies to govern the
process by which risk assessment and management is undertaken. Our audit committee also monitors compliance with legal and regulatory
requirements. Our compensation committee assesses and monitors whether our compensation plans, policies and programs comply with applicable
legal and regulatory requirements.
Board
Committees
The
Board has a standing audit committee, compensation committee, and nominating and corporate governance committee, each of which has adopted
a charter which complies with the applicable requirements of current NYSE rules. Copies of these charters are available in the “Governance—Governance
Documents” section of our website at www.investors.hyliion.com.
Audit
Committee
Our
audit committee consists of Robert M. Knight, Jr., Andrew H. Card, Jr. and Stephen Pang. The Board has determined that each of the members
of the audit committee satisfies the independence requirements of the NYSE and Rule 10A-3 under the Exchange Act. Each member of the
audit committee can read and understand fundamental financial statements in accordance with NYSE audit committee requirements. In arriving
at this determination, the Board examined each audit committee member’s scope of experience and the nature of their prior and/or
current employment.
Robert
M. Knight, Jr. serves as the chair of the audit committee. The Board has determined that each of Robert M. Knight, Jr. and Stephen Pang
qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication requirements
of the NYSE listing rules. In making this determination, the Board considered each such director’s formal education and previous
experience in financial roles. Both our independent registered public accounting firm and management periodically will meet privately
with our audit committee. The audit committee held two meetings during the 2020 fiscal year.
The
functions of this committee include, among other things:
|
●
|
evaluating
the performance, independence and qualifications of our independent auditors and determining
whether to retain our existing independent auditors or engage new independent auditors;
|
|
●
|
reviewing
our financial reporting processes and disclosure controls;
|
|
●
|
reviewing
and approving the engagement of our independent auditors to perform audit services and any
permissible non-audit services;
|
|
●
|
reviewing
the adequacy and effectiveness of our internal control policies and procedures, including
the responsibilities, budget, staffing and effectiveness of our internal audit function;
|
|
●
|
reviewing
with the independent auditors the annual audit plan, including the scope of audit activities
and all critical accounting policies and practices applicable to us;
|
|
●
|
obtaining
and reviewing at least annually a report by our independent auditors describing the independent
auditors’ internal quality control procedures and any material issues raised by the
most recent internal quality-control review;
|
|
●
|
prior
to engagement of any independent auditor, and at least annually thereafter, reviewing relationships
that may reasonably be thought to bear on their independence, and assessing and otherwise
taking the appropriate action to oversee the independence of our independent auditor;
|
|
●
|
reviewing
our annual and quarterly financial statements and reports, including the disclosures contained
in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and “Risk Factors,” as appropriate, and discussing the statements
and reports with our independent auditors and management;
|
|
●
|
reviewing
with our independent auditors and management significant issues that arise regarding accounting
principles and financial statement presentation and matters concerning the scope, adequacy,
and effectiveness of our financial controls and critical accounting policies;
|
|
●
|
reviewing
with management and our auditors any earnings announcements and other public announcements
regarding material developments;
|
|
●
|
establishing
procedures for the receipt, retention and treatment of complaints received by us regarding
financial controls, accounting, auditing or other matters;
|
|
●
|
preparing
the report that the SEC requires in our annual proxy statement;
|
|
●
|
reviewing
and providing oversight of any related party transactions in accordance with our related
party transaction policy and reviewing and monitoring compliance with legal and regulatory
responsibilities, including our code of ethics;
|
|
●
|
reviewing
our major financial risk exposures, including the guidelines and policies to govern the process
by which risk assessment and risk management is implemented; and
|
|
●
|
reviewing
and evaluating on an annual basis the performance of the audit committee and the audit committee
charter.
|
Compensation
Committee
Our
compensation committee consists of Andrew H. Card, Jr., Vincent T. Cubbage and Howard Jenkins. Howard Jenkins serves as the chair of
the compensation committee. The Board has determined that each of the members of the compensation committee is a non-employee director,
as defined in Rule 16b-3 promulgated under the Exchange Act and satisfies the independence requirements of the NYSE.
The
functions of the committee include, among other things:
|
●
|
reviewing
and approving the corporate objectives that pertain to the determination of executive compensation;
|
|
●
|
reviewing
and approving the compensation and other terms of employment of our executive officers;
|
|
●
|
reviewing
and approving performance goals and objectives relevant to the compensation of our executive
officers and assessing their performance against these goals and objectives;
|
|
●
|
making
recommendations to the Board regarding the adoption or amendment of equity and cash incentive
plans and approving amendments to such plans to the extent authorized by the Board;
|
|
●
|
reviewing
and making recommendations to the Board regarding the type and amount of compensation to
be paid or awarded to our non-employee Board members;
|
|
●
|
reviewing
and assessing the independence of compensation consultants, legal counsel and other advisors
as required by Section 10C of the Exchange Act;
|
|
●
|
administering
our equity incentive plans, to the extent such authority is delegated by the Board;
|
|
●
|
reviewing
and approving the terms of any employment agreements, severance arrangements, change in control
protections, indemnification agreements and any other material arrangements for our executive
officers;
|
|
●
|
reviewing
with management our disclosures under the caption “Compensation Discussion and Analysis”
in our periodic reports or proxy statements to be filed with the SEC, to the extent such
caption is included in any such report or proxy statement;
|
|
●
|
preparing
an annual report on executive compensation that the SEC requires in our annual proxy statement;
and
|
|
●
|
reviewing
and evaluating on an annual basis the performance of the compensation committee and recommending
such changes as deemed necessary with the Board.
|
Compensation
Committee Interlocks and Insider Participation
None
of our executive officers currently serve, or has served during the last completed fiscal year, on the compensation committee or board
of directors of any other entity that has one or more executive officers that has served or currently serves as a member of the Board
or compensation committee.
Nominating
and Corporate Governance Committee
Our
nominating and corporate governance committee consists of Vincent T. Cubbage, Howard Jenkins and Edward Olkkola. Vincent T. Cubbage serves
as the chair of the nominating and corporate governance committee. The Board has determined that each of the members of our nominating
and corporate governance committee satisfies the independence requirements of the NYSE. The nominating and corporate governance committee
held one meeting during the 2020 fiscal year.
The
functions of this committee include, among other things:
|
●
|
identifying,
reviewing and making recommendations of candidates to serve on the Board;
|
|
●
|
evaluating
the performance of the Board, committees of the Board and individual directors and determining
whether continued service on the Board is appropriate;
|
|
●
|
evaluating
nominations by stockholders of candidates for election to the Board;
|
|
●
|
evaluating
the current size, composition and organization of the Board and its committees and making
recommendations to the Board for approvals;
|
|
●
|
developing
a set of corporate governance policies and principles and recommending to the Board any changes
to such policies and principles;
|
|
●
|
reviewing
issues and developments related to corporate governance and identifying and bringing to the
attention of the Board current and emerging corporate governance trends; and
|
|
●
|
reviewing
periodically the nominating and corporate governance committee charter, structure and membership
requirements and recommending any proposed changes to the Board, including undertaking an
annual review of its own performance.
|
Considerations
and Process for the Selection of New Directors
In
evaluating the nominees for the Board, the Board and the nominating and corporate governance committee took into account the qualities
they seek for directors, and the directors’ individual qualifications, skills, and background that enable the directors to effectively
and productively contribute to the Board’s oversight of Hyliion. When evaluating re-nomination of existing directors, the nominating
and corporate governance committee also considers the nominees’ past and ongoing effectiveness on the Board and, with the exception
of Mr. Healy, who is an employee, their independence.
In
fulfilling its responsibility to oversee the selection of directors, the nominating and corporate governance committee will consider
persons identified by our stockholders, management, and others. The nominating and corporate governance committee considers recommendations
for Board candidates submitted by stockholders using substantially the same criteria it applies to recommendations from the nominating
and corporate governance committee, directors and members of management. Stockholders may submit informal recommendations by providing
the person’s name and appropriate background and biographical information in writing to the nominating and corporate governance
committee at 1202 BMC Drive, Suite 100, Cedar Park, Texas 78613.
Stockholder
Engagement Efforts and Board Communication
Our
relationship and on-going dialogue with our stockholders is an important part of our Board’s and our executive team’s corporate
governance commitment. The Board welcomes communications from our stockholders and other interested parties. We actively seek input from
our stockholders because we value the contribution stockholder engagement gives to overall business success. Our executives meet with
our investment community regularly and discuss a variety of matters, including common investor interests, Environmental, Social and Governance
matters and emerging issues. We provide our Board with reports on the key themes and results of these discussions.
Stockholders
and other interested parties may communicate with our executive team or the Board (including the Board Chair, the chair of any committee,
the independent directors as a group and/or any Board member) by IR@hyliion.com. Stockholders and any other interested parties should
mark the envelope containing each communication as “Stockholder Communication with Directors” and clearly identify the intended
recipient(s) of the communication.
Code
of Business Conduct and Ethics and Corporate Governance Guidelines
We
have adopted a Code of Business Conduct and Ethics applicable to the directors, officers and employees of the Company and its subsidiaries.
We have also adopted Corporate Governance Guidelines that address, among other things, director qualifications, responsibilities and
compensation, director access to officers, employees and advisors, and determinations regarding director independence. Copies of the
Code of Business Conduct and Ethics and our Corporate Governance Guidelines are available in the “Governance—Governance Documents”
section of our website at www.investors.hyliion.com. We intend to disclose any amendments to, or waivers from, our Code of Business Conduct
and Ethics that apply to senior executives by posting such information, if any, on the Company’s website.
Limitation
on Liability and Indemnification of Directors and Officers
Our
Certificate of Incorporation limits our directors’ liability to the fullest extent permitted under the DGCL. The DGCL provides
that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors,
except for liability:
|
●
|
for
any transaction from which the director derives an improper personal benefit;
|
|
●
|
for
any act or omission not in good faith or that involves intentional misconduct or a knowing
violation of law;
|
|
●
|
for
any unlawful payment of dividends or redemption of shares; or
|
|
●
|
for
any breach of a director’s duty of loyalty to the corporation or its stockholders.
|
If
the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability
of our directors will be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
Delaware
law and our amended and restated bylaws provide that we will, in certain situations, indemnify our directors and officers and may indemnify
other employees and other agents, to the fullest extent permitted by law. Any indemnified person is also entitled, subject to certain
limitations, to advancement, direct payment, or reimbursement of reasonable expenses (including attorneys’ fees and disbursements)
in advance of the final disposition of the proceeding.
In
addition, we have entered into separate indemnification agreements with our directors and officers. These agreements, among other things,
require us to indemnify our directors and officers for certain expenses, including attorneys’ fees, judgments, fines and settlement
amounts incurred by a director or officer in any action or proceeding arising out of their services as one of our directors or officers
or any other company or enterprise to which the person provides services at our request.
We
maintain a directors’ and officers’ insurance policy pursuant to which our directors and officers are insured against liability
for actions taken in their capacities as directors and officers. We believe these provisions in our Certificate of Incorporation, our
amended and restated bylaws and these indemnification agreements are necessary to attract and retain qualified persons as directors and
officers.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or control persons, in the
opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Non-Employee
Director Compensation
Prior
to our Business Combination, none of our directors received cash, equity or other non-equity compensation for service on our Board.
In October 2020, our Board approved the following cash and equity compensation for each of our current non-employee directors on
a going-forward basis:
|
●
|
an
annual cash retainer equal to $100,000, paid in 4 equal quarterly installments on the first
day of each quarter; and
|
|
●
|
an
award of restricted stock units covering 10,000 shares of our Common Stock (the “Initial
Award”), with 25% of the Initial Award vesting on March 26, 2022, and 6.25% of the
Initial Award vesting on a quarterly basis thereafter, subject to the non-employee director’s
continued service with us through each applicable vesting date, except if the non-employee director
resigns before the end of his scheduled term on the Board, the Initial Award immediately
will fully accelerate vesting.
|
The
program was not provided to the directors until the 2021 year, therefore there are no amounts reportable for 2020.
The
Board expects to review director compensation periodically to ensure that director compensation remains competitive such that we are
able to recruit and retain qualified directors. We intend to develop a board of directors’ compensation program that is designed
to align compensation with our business objectives and the creation of stockholder value, while enabling us to attract, retain, incentivize
and reward directors who contribute to our long-term success.
EXECUTIVE
COMPENSATION
We
are currently considered an emerging growth company for purposes of the SEC’s executive compensation disclosure rules. In accordance
with such rules, we are required to provide a Summary Compensation Table and an Outstanding Equity Awards at Fiscal Year-End Table as
well as limited narrative disclosures. Further, our reporting obligations extend only to the individuals serving as our chief executive
officer and our two other most highly compensated executive officers during the 2020 fiscal year. For purposes of this executive compensation
discussion, the names and positions of our named executive officers for the 2020 fiscal year were:
|
●
|
Thomas
Healy, Chief Executive Officer;
|
|
●
|
Greg
Van de Vere, Chief Financial Officer; and
|
|
●
|
Patrick
Sexton, Chief Technology Officer.
|
On
January 8, 2021, Mr. Van de Vere announced his intention to resign from his duties as an executive officer, and his resignation and retirement
was effective January 15, 2021. Due to the fact that Mr. Van de Vere was still active in his prior executive officer position as of December
31, 2020, he will still be referred to in this section as a named executive officer for 2020.
Summary
Compensation Table
The
following table sets forth all of the compensation awarded to, earned by or paid to our named executive officers during the 2019 and
2020 year. The position noted for each individual was applicable as of December 31, 2020.
Name
and Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Option
Awards
($)(1)
|
|
|
All
Other Compensation ($)(2)
|
|
|
Total
($)
|
|
Thomas
Healy
|
|
2020
|
|
|
|
320,192
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31,000
|
|
|
|
351,192
|
|
Chief
Executive Officer
|
|
2019
|
|
|
|
183,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,600
|
|
|
|
189,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greg
Van de Vere
|
|
2020
|
|
|
|
231,854
|
|
|
|
—
|
|
|
|
56,665
|
|
|
|
—
|
|
|
|
288,519
|
|
Chief
Financial Officer
|
|
2019
|
|
|
|
157,500
|
|
|
|
—
|
|
|
|
38,729
|
|
|
|
6,600
|
|
|
|
202,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick
Sexton(3)
|
|
2020
|
|
|
|
253,440
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,500
|
|
|
|
254,940
|
|
Chief
Technology Officer
|
|
2019
|
|
|
|
107,917
|
|
|
|
—
|
|
|
|
23,065
|
|
|
|
3,300
|
|
|
|
134,282
|
|
(1)
|
The
amounts in these columns represent the aggregate grant-date fair value of awards granted
to each applicable named executive officer, computed in accordance with the FASB’s
ASC Topic 718, disregarding any estimate of forfeitures. See Note 3 to our audited consolidated
financial statements, as restated, in the Financial Statements section of this prospectus
for a discussion of the assumptions made by Legacy Hyliion in determining the grant-date fair
value of the stock options granted prior to the Business Combination in 2020.
|
(2)
|
Amounts
in this column for the 2020 year reflect company payments to cover payroll taxes relating
to employee gifts associated with the successful completion of the Business Combination.
The underlying gifts for Mr. Sexton did not reach $10,000 and therefore were not included.
With respect to Mr. Healy, the remaining amounts reflected in this column for 2020 also includes
$6,000 for security services, $7,000 for private air travel for Mr. Healy and a guest and
$14,000 for the underlying employee gifts received in connection with the completion of the
Business Combination and attending a ceremony at the stock exchange in New York to recognize
the public listing of our common stock.
|
(3)
|
Mr. Sexton
joined Legacy Hyliion in June 2019.
|
Annual
Base Salary
Base
salary is set at a level that is commensurate with the executive’s duties and authorities, contributions, prior experience and
sustained performance.
Bonus
Compensation
From
time to time, the Board or its compensation committee, in its discretion, may approve bonuses for our named executive officers based
on individual performance, company performance or as otherwise determined to be appropriate.
Health
and Welfare Benefits and Perquisites
We
provide benefits to our named executive officers on the same basis as provided to all of our employees, including: health, dental and
vision insurance; life insurance; accidental death and dismemberment insurance; and short-and long-term disability insurance. We do not
maintain any executive-specific benefit or perquisite programs.
Retirement
Benefits
We
provide a tax-qualified Section 401(k) plan for all employees, including the named executive officers. We do not provide a
match for participants’ elective contributions to the 401(k) plan, nor do we provide to employees, including our named executive
officers, any other retirement benefits, including but not limited to tax-qualified defined benefit plans, supplemental executive
retirement plans and nonqualified defined contribution plans.
Employment
Agreements with Named Executive Officers
We
entered into an employment agreement with each of our named executive officers during the 2020 year, as described below. The Form 8-K
current reports that we filed in 2020 announcing each of these agreements also noted that we expected to grant the performance-based
restricted stock units to each of the officers in December 2020, however those awards were granted on March 26, 2021 and will be disclosed
within the Summary Compensation Table as 2021 compensation for applicable named executive officers. Equity awards granted to the named
executive officers going forward will be granted pursuant to the 2020 Plan (described below).
Thomas
Healy
We
entered into an employment agreement with Mr. Healy on December 2, 2020, which was effective as of October 1, 2020 (the date that we
closed the Business Combination). Mr. Healy’s employment agreement provides for an initial three-year term ending on October 1,
2023, and automatically renews for successive 12-month terms thereafter unless at least 180 days prior to the expiration of any then-existing
term either party notifies the other of non-renewal. Pursuant to the terms of his employment agreement, Mr. Healy receives an annual
base salary of $650,000 and is eligible for discretionary cash bonuses.
Subject
to the approval of the compensation committee of our Board, the employment agreement states that Mr. Healy is eligible to receive (i)
annual time-based restricted stock unit awards, in each case covering a number of shares of our common stock determined by the Board’s
compensation committee in its sole discretion, and (ii) a one-time performance-based restricted stock unit award covering 1,500,000 shares
of our common stock. Each time-based award (if any) will vest over a four-year period, with 25% vesting on the one-year anniversary of
the first quarterly vesting date (as defined in Mr. Healy’s employment agreement) following the grant date, and 6.25% vesting on
each quarterly vesting date thereafter, subject to Mr. Healy’s continuous service through each applicable vesting date. The performance-based
award will vest based upon the achievement of objective performance criteria, as determined by the Board’s compensation committee
prior to the grant date, during the period from October 1, 2020 through December 31, 2025, subject to Mr. Healy’s continuous service
through each applicable vesting date. The employment agreement provides that Mr. Healy will be eligible for certain severance payments
and benefits in connection with specified qualifying terminations, as more fully described below under “—Potential Payments
and Benefits upon Termination or Change in Control.”
Greg
Van de Vere
We
entered into an employment agreement with Mr. Van de Vere effective as of October 23, 2020, which provided for an initial one-year term
ending on October 23, 2021, and automatically renewed for successive 12-month terms thereafter unless at least ninety 90 days prior to
the expiration of any 12-month term either party notified the other of non-renewal. Pursuant to the agreement, Mr. Van de Vere received
an annual base salary of $400,000, was eligible for discretionary cash bonuses and certain equity-based awards, and was eligible for
severance benefits, as described below under “—Potential Payments and Benefits upon Termination or Change in Control.”
The equity-based awards described within his previous employment agreement were not granted to him due to his resignation.
Patrick
Sexton
We
entered into an employment agreement with Mr. Sexton on December 2, 2020, which was also effective as of October 1, 2020 (the date that
we closed the Business Combination). Mr. Sexton’s employment agreement provides for an initial three-year term ending on October
1, 2023, and automatically renews for successive 12-month terms thereafter unless at least 180 days prior to the expiration of any then-existing
term either party notifies the other of non-renewal. Pursuant to the terms of his employment agreement, Mr. Sexton receives an annual
base salary of $450,000 and is eligible for discretionary cash bonuses.
Mr. Sexton
is eligible to receive (i) annual time-based restricted stock unit awards, with the first annual time-based award covering 125,000
shares of our common stock and each subsequent annual time-based award covering a number of shares of our common stock with a grant date
value equal to $1,250,000 (but for purposes of calculating the grant date value of each subsequent annual time-based award, our common
stock will not be deemed to have a value less than $10.00 per share), and (ii) a one-time performance-based restricted stock unit
award covering 500,000 shares of our common stock. Each time-based award will vest over a four-year period, with 25% vesting
on the one-year anniversary of the first quarterly vesting date (as defined in Mr. Sexton’s employment agreement) following
the grant date (or on November 15, 2021 in the case of the initial annual time-based award that Mr. Sexton receives), and 6.25% vesting
on each quarterly vesting date thereafter, subject to Mr. Sexton’s continuous service through each applicable vesting date.
The performance-based award will vest based upon the achievement of objective performance criteria, as determined by the Board’s
compensation committee prior to the grant date, during the period from October 1, 2020 through December 31, 2025, subject to Mr. Sexton’s
continuous service through each applicable vesting date. The employment agreement provides that Mr. Sexton will be eligible for
certain severance payments and benefits in connection with specified qualifying terminations, as more fully described below under “—Potential
Payments and Benefits upon Termination or Change in Control.”
Potential
Payments and Benefits upon Termination or Change in Control
Pursuant
to the terms of the named executive officers’ employment agreement with us, as of December 31, 2020, if the executive’s employment
with us is terminated (i) due to our non-renewal of the term of his employment agreement, (ii) by us without “cause”, or
(iii) by the executive for “good reason” (such terms as defined within the employment agreements), then, provided the executive
timely executes and does not revoke a release of claims in our favor and complies with the confidentiality, non-competition, non-solicitation,
and intellectual property provisions set forth in his employment agreement, he will receive the following severance benefits: (a) continuing
payments of his then-current annual base salary for 36 months, 12 months and 12 months, for Messrs. Healy, Van de Vere and Sexton, respectively;
(b) accelerated vesting and, if applicable, exercisability of the then-unvested portion of each of his outstanding equity awards (other
than any equity awards subject to performance-based or other similar vesting criteria) (i) with respect to Messrs. Healy and Sexton,
that was granted to him more than one year prior to the termination date and (ii) with respect to Mr. Van de Vere, that would have become
vested had he remained employed by us for an additional 12 months following his termination; (c) each of his then-outstanding and unexercised
stock options (to the extent vested) will remain exercisable for up to 36 months following the termination date; and (d) reimbursement
on a monthly basis for the difference between the amount he pays to continue coverage for himself and his eligible dependents under our
group health plans pursuant to COBRA and the employee contribution amount that our similarly situated employees pay for the same or similar
coverage, for up to 18 months, 12 months and 12 months for Messrs. Healy, Van de Vere and Sexton, respectively.
In
addition, the employment agreements each provide that if the named executive officer’s employment with us is terminated due to
his death or “disability” (as defined within the employment agreements), all of his then-outstanding and unvested equity
awards (other than any equity awards subject to performance-based or other similar vesting criteria) will immediately vest in full and,
if applicable, become fully exercisable.
The
employment agreements also provide that in the event of a change in control (as defined in the 2020 Plan), and provided that the executive
remains in continuous service through immediately prior to such change in control, the performance-based restricted stock unit award
provided for in the employment agreements (described in more detail above) will vest immediately prior to such change in control based
upon the actual achievement of the applicable performance vesting criteria to which such award is subject. In addition, if the time-based
restricted stock unit award provided for in the employment agreements (described in more detail above) is not assumed, substituted for,
or continued by the successor corporation (or a parent or subsidiary thereof) in the event of a change in control, such award will fully
vest and will be settled immediately prior to the consummation of such change in control, subject to the executive’s continued
service through immediately prior to such change in control.
In
connection with the Business Combination, each outstanding stock option award covering Legacy Hyliion common stock held by the named
executive officers was converted into an Exchanged Option, but continuing on the same terms applicable to the award prior to the Business
Combination. Conversions for the Exchanged Options occurred using the exchange ratio applicable to the Business Combination. On October
16, 2020, all of Mr. Van de Vere’s unvested Exchanged Options fully accelerated vesting in accordance with the terms of his prior
employment agreement with Legacy Hyliion.
In
accordance with the terms of his employment agreement and equity award agreements, Mr. Van de Vere did not receive severance or equity
acceleration benefits upon his resignation in the 2021 year.
Outstanding
Equity Awards at 2020 Year End
The
following table presents information regarding outstanding equity awards held by our named executive officers as of December 31,
2020.
Name
|
|
Grant
Date(1)
|
|
|
Vesting Commencement
Date
|
|
|
Number of Securities Underlying Unexercised Options Exercisable (#)
|
|
|
Number of Securities Underlying Unexercised Options Unexercisable
(#) (2)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option Expiration Date
|
|
Thomas Healy
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greg Van de Vere
|
|
|
10/11/2017
|
|
|
|
8/16/2017
|
|
|
|
655,740
|
|
|
|
—
|
|
|
|
0.13
|
|
|
|
10/11/2027
|
|
|
|
|
3/29/2019
|
|
|
|
3/29/2019
|
|
|
|
364,300
|
|
|
|
—
|
|
|
|
0.16
|
|
|
|
3/29/2029
|
|
|
|
|
1/16/2020
|
|
|
|
1/16/2020
|
|
|
|
67,954
|
|
|
|
—
|
|
|
|
0.23
|
|
|
|
1/16/2030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick Sexton
|
|
|
7/18/2019
|
|
|
|
6/3/2019
|
|
|
|
81,967
|
|
|
|
136,613
|
|
|
|
0.16
|
|
|
|
7/18/2029
|
|
|
|
|
1/16/2020
|
|
|
|
1/16/2020
|
|
|
|
—
|
|
|
|
218,580
|
|
|
|
0.23
|
|
|
|
1/16/2030
|
|
(1)
|
Each
option award was granted under the 2016 Plan, described below under “— Equity Benefit Plans —Legacy Hyliion 2016 Equity
Incentive Plan and Stock Options Assumed in Connection with the Business Combination.”
|
(2)
|
Option
vests over four years, with 25% vesting on the first anniversary of the vesting commencement date, and 6.25% vesting each quarter thereafter,
subject to continued service with us through each applicable vesting date.
|
Equity
Benefit Plans
Hyliion
2020 Equity Incentive Plan
In
September 2020, our Board adopted and our stockholders approved the Hyliion Holdings Corp. 2020 Equity Incentive Plan (the “2020
Plan”). The 2020 Plan became effective immediately upon the closing of the Business Combination. The 2020 Plan is an omnibus plan
that provides for the grant of incentive stock options within the meaning of Section 422 of the Code, nonstatutory stock options, stock
appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to eligible
employees, directors and consultants, including employees and consultants of our affiliates.
We
expect the primary award to be granted to our service providers pursuant to the 2020 Plan to be a restricted stock unit award. As noted
above, the named executive officers will be eligible to receive annual grants of restricted stock units pursuant to their employment
agreements, which will be granted pursuant to the 2020 Plan. Each of our non-employee directors will also receive an annual equity award
of restricted stock units pursuant to the 2020 Plan (described below).
Legacy
Hyliion 2016 Equity Incentive Plan and Stock Options Assumed in Connection with the Business Combination
Legacy
Hyliion maintained the 2016 Equity Incentive Plan (the “2016 Plan”) prior to the Business Combination. No new awards will
be granted under the 2016 Plan following the Business Combination, but each of the named executive officers held outstanding stock option
awards pursuant to the 2016 Plan prior to the Business Combination. As noted above, we assumed the Exchanged Options and those awards
will continue to be governed by the terms and conditions of the 2016 Plan and any individual stock option agreements that governed the
Exchanged Options prior to the Business Combination.
Anti-Hedging
Policies
We
maintain a policy that prevents our officers, directors, employees and consultants from engaging in hedging or monetization transactions,
including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds and equity,
whether the underlying securities are received through the 2016 Plan, the 2020 Plan or otherwise. Our policy does not directly address
the securities held by designees of our covered service providers.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
A&R
Registration Rights Agreement
We
entered into an Amended and Restated Registration Rights Agreement on October 1, 2020, with Tortoise Sponsor LLC (“Tortoise Sponsor”),
Tortoise Borrower and certain stockholders (the “A&R Registration Rights Agreement”), pursuant to which such stockholders
of Registrable Securities (as defined therein), subject to certain conditions, are entitled to registration rights. Pursuant to the A&R
Registration Rights Agreement, we agreed that, within 30 calendar days after the Closing, we would file with the SEC (at our sole cost
and expense) a registration statement registering the resale of such Registrable Securities, and we would use our reasonable best efforts
to have such registration statement declared effective by the SEC as soon as reasonably practicable after the filing thereof. Such registration
statement was initially filed on October 23, 2020 and declared effective by the SEC on November 27, 2020. Certain of such stockholders
have been granted demand underwritten offering registration rights and all of such stockholders will be granted piggyback registration
rights. The A&R Registration Rights Agreement does not provide for the payment of any cash penalties by us if we fail to satisfy
any of our obligations under the A&R Registration Rights Agreement. The A&R Registration Rights Agreement will terminate upon
the earlier of (a) ten years following the Closing or (b) the date as of which such stockholders cease to hold any Registrable Securities
(as defined therein).
Lock-Up
Agreement
On
October 1, 2020, in connection with the Closing, certain of our stockholders agreed, subject to certain exceptions, not to, without the
prior written consent of our Board, (a) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase
or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate
or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder, any shares of Common Stock held by them immediately after the Effective Time, or issuable upon the exercise of
options to purchase shares of Common Stock held by them immediately after the Effective Time, or securities convertible into or exercisable
or exchangeable for Common Stock held by them immediately after the Effective Time, (b) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of ownership of any of such shares of Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock, whether any such transaction is to be settled by delivery of such securities,
in cash or otherwise or (c) publicly announce any intention to effect any transaction specified in clause (a) or (b), until 180 days
after the Closing Date, which expired on March 30, 2021. Thereafter until October 1, 2022, subject to certain exceptions, Thomas Healy
also agreed not to transfer more than 10% of the number of shares of Common Stock held by him immediately after the Effective Time, or
issuable upon the exercise of options to purchase shares of Common Stock held by him immediately after the Effective Time.
TortoiseCorp
Related Agreements
TortoiseCorp
Class B Common Stock
In
November 2018, Tortoise Sponsor paid $25,000 in offering expenses on our behalf in exchange for the issuance of 5,750,000 shares of Class
B Common Stock. In February 2019, we effected a stock dividend of 718,750 shares of Class B Common Stock, resulting in Tortoise Sponsor
holding an aggregate of 6,468,750 shares Class B Common Stock (up to 843,750 shares of which were subject to forfeiture to the extent
the underwriters of the IPO did not exercise their over-allotment option). Also in February 2019, Tortoise Sponsor transferred 1,265,625
shares of Class B Common Stock to Tortoise Borrower, an affiliate of Tortoise Sponsor. On March 4, 2019, the underwriters of the IPO
partially exercised their over-allotment option and on March 7, 2019, the underwriters waived the remainder of their over-allotment option.
In connection therewith, Tortoise Sponsor forfeited 643,520 shares of Class B Common Stock for cancellation by TortoiseCorp. On March
4, 2019, Tortoise Borrower transferred 1,265,625 shares of Class B Common Stock to Atlas Point Fund, which is a fund managed by CIBC
National Trust but is not affiliated with TortoiseCorp or Tortoise Sponsor, pursuant to the Forward Purchase Agreement and Tortoise Sponsor
transferred 40,000 shares of Class B Common Stock to each of TortoiseCorp’s independent directors in connection with the closing
of the IPO. The shares of Class B Common Stock are identical to the shares of Class A Common Stock included in the units sold in the
IPO except that the shares of Class B Common Stock which automatically converted into shares of Class A Common Stock at Closing and were
subject to certain transfer restrictions, as described in more detail below.
Pursuant
to the Amended and Restated Certificate of Incorporation of TortoiseCorp, each share of Class B Common Stock converted into one share
of Class A Common Stock at the Closing. After the Closing and following the effectiveness of our Certificate of Incorporation, each share
of Class A Common Stock was automatically reclassified, redesignated and changed into one validly issued, fully paid and non-assessable
share of Common Stock, without any further action by the Company or any stockholder thereof.
The
holders of the TortoiseCorp Class B Common Stock have agreed, subject to limited exceptions, not to transfer, assign or sell any of their
shares of Common Stock (which were converted from shares of TortoiseCorp Class B Common Stock in connection with the Closing) until the
earlier to occur of: (a) October 1, 2021 and (b) subsequent to the Closing, (i) if the last reported sale price of our Common Stock equals
or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any
20 trading days within any 30 trading day period commencing at least 150 days after the Closing, or (ii) the date on which we complete
a liquidation, merger, stock exchange or other similar transaction that results in all of our stockholders having the right to exchange
their shares of Common Stock for cash, securities or other property.
Private
Placement Warrants
On
March 4, 2019, simultaneously with the consummation of the IPO, TortoiseCorp completed the private sale of 6,660,183 Private Placement
Warrants at a purchase price of $1.00 per Warrant to Tortoise Borrower, generating gross proceeds of approximately $6.66 million. Each
Private Placement Warrant is exercisable for one share of Common Stock at an exercise price of $11.50 per share. A portion of the proceeds
from the Private Placement Warrants was added to the proceeds from the IPO held in the Trust Account. The Private Placement Warrants
were non-redeemable for cash and exercisable on a cashless basis so long as they were held by Tortoise Borrower or its permitted transferees.
As of December 31, 2020, there were no Private Placement Warrants outstanding. See “Summary—Background.”
Forward
Purchase Agreement
On
June 18, 2020, Atlas Point Fund and TortoiseCorp entered into the First Amendment to Forward Purchase Agreement, an amendment to the
Amended and Restated Forward Purchase Agreement. On October 1, 2020, Atlas Point Fund purchased 1,750,000 Forward Purchase Units, consisting
of 1,750,000 shares of Common Stock and Forward Purchase Warrants to purchase 875,000 shares of Common Stock, for an aggregate purchase
price of $17,500,000, and transferred 894,375 shares of Common Stock to Tortoise Borrower pursuant to the Forward Purchase Agreement.
Pursuant to the Forward Purchase Agreement, the Company gave certain registration rights to Atlas Point Fund with respect to the Forward
Purchase Shares and Forward Purchase Warrants. The Forward Purchase Warrants had the same terms as the Public Warrants, except that the
Forward Purchase Warrants were subject to transfer restrictions and certain registration rights. As of December 31, 2020, all Forward
Purchase Warrants had been exercised or redeemed. See “Summary—Background.”
Subscription
Agreements
In
connection with the execution of the Business Combination Agreement, on June 18, 2020, TortoiseCorp entered into the Subscription Agreements
with a number of Subscribers, pursuant to which the Subscribers agreed to purchase, and TortoiseCorp agreed to sell to the Subscribers,
an aggregate of 30,750,000 PIPE Shares, for a purchase price of $10.00 per share and an aggregate purchase price of $307,500,000 million.
On October 1, 2020, the Subscribers purchased from the Company an aggregate of 30,750,000 shares of Common Stock, for a purchase price
of $10.00 per share and an aggregate purchase price of $307.5 million, pursuant to Subscription Agreements entered into effective as
of June 18, 2020. Pursuant to the Subscription Agreements, the Company gave certain registration rights to the Subscribers with respect
to the PIPE Shares. The sale of PIPE Shares was consummated concurrently with the Closing and a registration statement registering the
resale of the PIPE Shares was initially filed with the SEC on October 23, 2020 and declared effective by the SEC on November 27, 2020.
Legacy
Hyliion Convertible Note
During
2018, the Company issued a convertible note payable in exchange for cash totaling $5.0 million (the “2018 Note”). In conjunction
with the 2018 Note, we entered into a Preferred Sourcing Arrangement (“PSA”) with the noteholder of the 2018 Note (the “2018
Noteholder”). Under the terms of the PSA, so long as the 2018 Noteholder is one of our stockholders or debtholders and for a period
of five years following a change of control of Legacy Hyliion, we will treat the 2018 Noteholder as our preferred source for any products
that the 2018 Noteholder manufactures or sells in preference to other competing products as long as the 2018 Noteholder’s products
meet the technical criteria established by us and on reasonably competitive terms. Under the PSA, we are allowed to purchase competing
products upon the request of any customer.
In
September 2019, we entered into a services agreement with the 2018 Noteholder (“the Services Agreement”) under which the
2018 Noteholder may provide engineering or operational services to us. No services were provided by the 2018 Noteholder under the Services
Agreement.
In
June 2020, we entered note amendments with all noteholders. In conjunction with the note amendments, we entered into the Commercial Matters
Agreement with the 2018 Noteholder, pursuant to which, among other things:
|
(a)
|
The
PSA will remain in place so long as the 2018 Noteholder owns one million shares of our Common
Stock subsequent to the Closing and will be effective for a period of five years following
a change of control affecting us.
|
|
(b)
|
The
Services Agreement was terminated with the intention of replacing it with a new services
agreement (the “New Services Agreement”). The terms of the New Services Agreement
are yet to, and may ultimately not, be negotiated and the 2018 Noteholder is under no obligation
to enter into such New Services Agreement.
|
|
(c)
|
We
issued to the 2018 Noteholder $10,000,000 worth of our Common Stock, as of immediately prior
to the Effective Time, in consideration for the note amendments and for any future services
to be provided pursuant to the terms of the New Services Agreement.
|
Between
February and July 2019, we issued a series of convertible notes payable in exchange for cash totaling approximately $13.6 million (the
“Initial 2019 Notes” and holders of such notes, the “Initial 2019 Noteholders”). The Initial 2019 Notes bear
interest at 6% per annum and mature two to five years after their respective issuance dates. In conjunction with one of the Initial 2019
Notes, we entered into a Collaboration and Development Agreement (the “CDA”) with one of the Initial 2019 Noteholders (the
“Collaboration Partner”). Under the terms of the CDA, we will work with the Collaboration Partner to develop certain products
to be manufactured by the Collaboration Partner for use in our assembled products. The costs incurred under the CDA are the responsibility
of the party who incurred the costs. Once the Collaboration Partner’s developed products meet our technical requirements and the
Collaboration Partner meets or beats reasonably competitive terms, the Collaboration Partner and us will enter into a supply arrangement
under which we will purchase the developed products exclusively from the Collaboration Partner for three years after such supply arrangement’s
effective date. In the event we and the Collaboration Partner fail to enter into such supply agreement or we do not purchase its total
requirements for such supplies exclusively from the Collaboration Partner during the three-year period after the supply agreement is
entered into, the Collaboration Partner is entitled to certain remedies including reimbursement of all of its development costs.
On
October 1, 2020, the outstanding principal and unpaid accrued interest due on Legacy Hyliion Convertible Notes were automatically converted
into shares of Legacy Hyliion Common Stock (which were subsequently exchanged in the Business Combination) in accordance with the terms
of such Legacy Hyliion Convertible Notes, and such converted Legacy Hyliion Convertible Notes were no longer outstanding and ceased to
exist, and any liens securing obligations under the Legacy Hyliion Convertible Notes were released.
Related-Person
Transactions Policy
The
Board has adopted a written Related-Person Transactions Policy that sets forth our policies and procedures regarding the identification,
review, consideration and oversight of related-person transactions. For purposes of our policy, a related-person transaction is a transaction,
arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any related person
are, were or will be participants, in which the amount involved exceeds $120,000. Transactions involving compensation for services provided
to us as an employee, consultant or director will not be considered related-person transactions under this policy.
Under
the policy, a related person is any executive officer, director, nominee to become a director or a security holder known by us to beneficially
own more than 5% of any class of our voting securities (a “significant stockholder”), including any of their immediate family
members and affiliates, including entities controlled by such persons or such person has a 5% or greater beneficial ownership interest.
Each
director and executive officer is required to identify, and we shall request each significant stockholder to identify, any related-person
transaction involving such director, executive officer or significant stockholder or his, her or its immediate family members and inform
our audit committee pursuant to this policy before such related person may engage in the transaction.
In
considering related person transactions, our audit committee takes into account the relevant available facts and circumstances, which
may include, but are not limited to:
|
●
|
the
risk, cost and benefits to us;
|
|
●
|
the
impact on a director’s independence in the event the related person is a director,
immediate family member of a director or an entity with which a director is affiliated;
|
|
●
|
the
terms of the transaction; and
|
|
●
|
the
availability of other sources for comparable services or products.
|
Our
audit committee approves only those related-party transactions that, in light of known circumstances, are in, or are not inconsistent
with, the best interests of the Company and our stockholders, as our audit committee determines in the good faith exercise of its discretion.
PRINCIPAL
SECURITYHOLDERS
The following table sets forth information known
to us regarding the beneficial ownership of the Common Stock as of June 30, 2021 by:
|
●
|
each person who is known by us to be the beneficial owner of more than 5%
of the outstanding shares of the Common Stock;
|
|
|
|
|
●
|
each current named executive officer and director (including each nominee)
of the Company; and
|
|
|
|
|
●
|
all current executive officers and directors of the Company, as a group.
|
Beneficial ownership is determined according to
the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or
shared voting or investment power over that security, including options that are currently exercisable or exercisable within 60 days.
The beneficial ownership percentages set forth
in the table below are based on approximately 172,798,338 shares of Common Stock issued and outstanding as of June 30, 2021.
Unless otherwise noted in the footnotes to the
following table, and subject to applicable community property laws, the persons and entities named in the table have sole voting and investment
power with respect to their beneficially owned Common Stock.
Name and Address of Beneficial Owner
|
|
Number of Shares of Common Stock Beneficially Owned
|
|
|
Percentage of Outstanding Common Stock %
|
|
Directors and Named Executive Officers:
|
|
|
|
|
|
|
Thomas Healy
|
|
|
34,472,856
|
|
|
|
19.9
|
%
|
Greg Van de Vere(1)
|
|
|
1,038,629
|
|
|
|
*
|
|
Sherri Baker(2)
|
|
|
22,381
|
|
|
|
*
|
|
Patrick Sexton(2)(3)
|
|
|
191,257
|
|
|
|
*
|
|
Andrew H. Card, Jr.(2)
|
|
|
5,000
|
|
|
|
*
|
|
Vincent T. Cubbage(2)
|
|
|
1,030,018
|
|
|
|
*
|
|
Howard Jenkins(2)(4)
|
|
|
12,656,790
|
|
|
|
7.3
|
%
|
Edward Olkkola(2)(6)
|
|
|
2,454,844
|
|
|
|
1.4
|
%
|
Stephen Pang(2)
|
|
|
288,574
|
|
|
|
*
|
|
Robert M. Knight, Jr.(2)
|
|
|
—
|
|
|
|
—
|
|
Directors and Executive Officers as a Group (10 Individuals)(7)
|
|
|
51,124,729
|
|
|
|
29.6
|
%
|
|
|
|
|
|
|
|
|
|
Five Percent Holders:
|
|
|
|
|
|
|
|
|
Alexander H. Jenkins(4)(5)
|
|
|
13,256,790
|
|
|
|
7.7
|
%
|
Axioma Ventures, LLC(4)
|
|
|
12,656,790
|
|
|
|
7.3
|
%
|
Colle Capital Partners I, L.P.(8)
|
|
|
9,548,288
|
|
|
|
5.5
|
%
|
(1)
|
Mr. Van de Vere resigned and retired as our Chief Financial Officer
effective as of January 15, 2021.
|
(2)
|
Excludes a grant of restricted stock units ("RSU Award") pursuant to the Company's 2020 Equity Incentive Plan, which will
not begin vesting until March 2022 and thereafter.
|
(3)
|
Includes 27,323 shares of Common Stock issuable upon the exercise of options.
|
(4)
|
Based on a Schedule 13D/A filed with the SEC on June 7, 2021, consists of 12,656,790 shares of Common Stock of Hyliion Holdings Corp.
held of record by Axioma Ventures, LLC (“Axioma Ventures”). The sole member of Axioma Ventures is Axioma Holdings, LLC (“Axioma
Holdings”) and the managers of Axioma Ventures are Alexander H. Jenkins and Kiran Lingam. The sole manager of Axioma Holdings is
Axioma Management, LLC (“Axioma Management”). Howard M. Jenkins, Alexander H. Jenkins and Kiran Lingam are managers of Axioma
Management. Each of Axioma Holdings, Axioma Management, Howard M. Jenkins, Alexander H. Jenkins and Kiran Lingam therefore may be deemed
to share voting and dispositive power with respect to the shares of Common Stock held of record by Axioma Ventures. The address of Axioma
Ventures and each of its control persons is 601 South Blvd, Tampa, FL 33606.
|
(5)
|
Based on a Schedule 13D/A filed with the SEC on June 7, 2021 and information received from Mr. Jenkins as of June 23, 2021, consists
of (a) 600,000 shares of Common Stock owned by Mr. Jenkins and (b) 12,656,790 shares of Common Stock held by Axioma Ventures, of which
Mr. Jenkins is a manager. See footnote 4 for more information about the shares of Common Stock held by Axioma Ventures.
|
(6)
|
Consists of (a) 821,610 shares of Common Stock and 1,466,674 shares of Common Stock issuable upon the exercise of options, each owned
by Mr. Olkkola and (b) 166,560 shares of Common Stock held by Mr. Olkkola’s wife, over which she has sole voting and investment
power. Mr. Olkkola disclaims beneficial interest in the shares of Common Stock of Hyliion Holdings Corp. held by his wife.
|
(7)
|
The amounts disclosed represent shares of Common Stock beneficially owned by current directors and executive officers of the Company.
In addition to the amounts disclosed with respect to the other current directors and executive officers of the Company, includes 3,000
total shares of Common Stock held by one executive officer. Excludes a grant of RSU Award pursuant to the Company's 2020 Equity Incentive
Plan, which will not begin vesting until March 2022 and thereafter.
|
(8)
|
Based on a Schedule 13G/A filed with the SEC on March 2, 2021 and information received from Victoria Grace as of June 24, 2021, consists
of 9,548,288 shares of Common Stock of Hyliion Holdings Corp. owned by Colle Capital Partners I, L.P., Colle HLN Associates LLC and Colle
Logistics Associates LLC, which may be deemed to be beneficially owned by Victoria Grace. Ms. Grace serves as the sole manager of both
Colle HLN Associates LLC and Colle Logistics Associates LLC. Ms. Grace serves as the sole manager of Colle Partners GP LLC, which serves
as the sole general partner of Colle Capital Partners I, L.P. Ms. Grace disclaims beneficial interest in the shares of Common Stock of Hyliion
Holdings Corp. held by Colle Capital Partners I, L.P., Colle HLN Associates LLC and Colle Logistics Associates LLC, except to the extent
of her pecuniary interest therein. The business address of each of the persons named in this paragraph is 55 Hudson Yards, Floor 44, New
York, NY 10001.
|
SELLING
SECURITYHOLDERS
The Selling
Securityholders acquired shares of our Common Stock from us in private offerings pursuant to exemptions from registration under
Section 4(a)(2) of the Securities Act in connection with a private placement concurrent with the IPO and in connection with the
Business Combination. Pursuant to the A&R Registration Rights Agreement, the Subscription Agreements and Forward Purchase
Agreement, we agreed to file a registration statement with the SEC for the purposes of registering for resale, among other things
(i) the Private Warrants (and the shares of Common Stock that may be issued upon exercise of the Private Warrants), (ii) the shares
of our Common Stock issued to the Selling Securityholders pursuant to the Subscription Agreements, Business Combination Agreement
and the Forward Purchase Agreement and (iii) Public Warrants held by certain affiliates of TortoiseCorp. As of December 31, 2020,
all outstanding Warrants were either exercised by the holder or redeemed by the Company.
Except as set forth in
the footnotes below, the following table sets forth, on or about June 30, 2021, based on written representations from the Selling
Securityholders, certain information regarding the beneficial ownership of our Common Stock by the Selling
Securityholders and the shares of Common Stock being offered by the Selling Securityholders. The applicable percentage ownership of
Common Stock is based on approximately 172,798,338 shares of Common Stock outstanding as of June 30, 2021. Information with respect
to shares of Common Stock owned beneficially after the offering assumes the sale of all of the shares of Common Stock offered and no
other purchases or sales of our Common Stock. The Selling Securityholders may offer and sell some, all or none of their shares of
Common Stock.
We have determined beneficial ownership in accordance
with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the
Selling Securityholders have sole voting and investment power with respect to all shares of Common Stock that they beneficially own, subject
to applicable community property laws. Except as otherwise described below, based on the information provided to us by the Selling Securityholders,
no Selling Securityholder is a broker-dealer or an affiliate of a broker-dealer.
|
|
Shares of
Common Stock
Beneficially Owned Prior to
|
|
|
Number of
Shares of
Common
Stock Being
|
|
|
Shares of Common Stock
Beneficially
Owned After the
Offered Shares of
Common
Stock are Sold
|
|
Name of Selling Securityholder
|
|
Offering
|
|
|
Offered(1)
|
|
|
Number
|
|
|
Percent
|
|
1248 Holdings, LLC(2)
|
|
|
1,112,500
|
|
|
|
1,112,500
|
|
|
|
—
|
|
|
|
—
|
|
Alexander H. Jenkins(3)(4)
|
|
|
13,256,790
|
|
|
|
600,000
|
|
|
|
—
|
|
|
|
—
|
|
Andrew J. Orekar(5)
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
Atlas Point Energy Infrastructure Fund, LLC(6)
|
|
|
371,250
|
|
|
|
371,250
|
|
|
|
—
|
|
|
|
—
|
|
Axioma Ventures, LLC(4)
|
|
|
12,656,790
|
|
|
|
12,656,790
|
|
|
|
—
|
|
|
|
—
|
|
Bradley J. Hilsabeck(7)
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
Colle Capital Partners I, L.P.(8)
|
|
|
1,249,300
|
|
|
|
1,249,300
|
|
|
|
—
|
|
|
|
—
|
|
Colle HLN Associates LLC(8)
|
|
|
4,279,467
|
|
|
|
4,279,467
|
|
|
|
—
|
|
|
|
—
|
|
Colle Logistics Associates LLC(8)
|
|
|
4,019,521
|
|
|
|
4,019,521
|
|
|
|
—
|
|
|
|
—
|
|
CRA Fund II LLC(9)
|
|
|
5,181,161
|
|
|
|
5,181,161
|
|
|
|
—
|
|
|
|
—
|
|
Dana Limited(10)
|
|
|
2,988,229
|
|
|
|
2,988,229
|
|
|
|
—
|
|
|
|
—
|
|
Darrell Brock(11)(12)
|
|
|
547,871
|
|
|
|
547,871
|
|
|
|
—
|
|
|
|
—
|
|
David Douglas(13)
|
|
|
433,763
|
|
|
|
433,763
|
|
|
|
—
|
|
|
|
—
|
|
DougCap, LLC(14)
|
|
|
1,000,793
|
|
|
|
1,000,793
|
|
|
|
—
|
|
|
|
—
|
|
Edward Olkkola(15)
|
|
|
2,454,844
|
|
|
|
621,610
|
|
|
|
1,833,234
|
|
|
|
1.1
|
%
|
Edward Russell(12)
|
|
|
289,180
|
|
|
|
173,145
|
|
|
|
116,035
|
|
|
|
*
|
|
Evan Zimmer(12)
|
|
|
133,836
|
|
|
|
132,336
|
|
|
|
1,500
|
|
|
|
*
|
|
Falcon Partners LTD(16)
|
|
|
17,722
|
|
|
|
17,722
|
|
|
|
—
|
|
|
|
—
|
|
FJ Management Inc.(17)
|
|
|
7,278,499
|
|
|
|
7,278,499
|
|
|
|
—
|
|
|
|
—
|
|
Frank M. Semple(18)
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
—
|
|
Gary P. Henson(7)
|
|
|
30,150
|
|
|
|
10,000
|
|
|
|
20,150
|
|
|
|
*
|
|
Greg Van de Vere
|
|
|
1,038,629
|
|
|
|
22,149
|
|
|
|
1,016,480
|
|
|
|
*
|
|
H. Kevin Birzer(7)
|
|
|
25,000
|
|
|
|
10,000
|
|
|
|
15,000
|
|
|
|
*
|
|
Handelsbanken Fonder AB, 556418-8851, on behalf of the fund Handelsbanken Hallbar Energi(19)
|
|
|
3,527,783
|
|
|
|
900,000
|
|
|
|
2,627,783
|
|
|
|
1.5
|
%
|
Jeanne Olkkola(20)
|
|
|
988,170
|
|
|
|
166,560
|
|
|
|
200,000
|
|
|
|
*
|
|
MCHC, LLC(2)
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
—
|
|
|
|
—
|
|
New Era Capital Partners, L.P.(21)
|
|
|
6,262,857
|
|
|
|
6,262,857
|
|
|
|
—
|
|
|
|
—
|
|
Sensata Technologies, Inc.
|
|
|
218,758
|
|
|
|
218,758
|
|
|
|
|
|
|
|
|
|
Sidney L. Tassin(22)
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
—
|
|
Stephen Pang(12)(23)
|
|
|
288,574
|
|
|
|
288,574
|
|
|
|
—
|
|
|
|
—
|
|
Steven C. Schnitzer(12)(24)
|
|
|
545,371
|
|
|
|
545,371
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Shares of
Common Stock
Beneficially Owned Prior to
|
|
|
Number of
Shares of
Common
Stock Being
|
|
|
Shares of Common Stock
Beneficially
Owned After the
Offered Shares of
Common
Stock are Sold
|
|
Name of Selling Securityholder
|
|
Offering
|
|
|
Offered(1)
|
|
|
Number
|
|
|
Percent
|
|
Texas Mutual Insurance Company(25)
|
|
|
32,992
|
|
|
|
32,992
|
|
|
|
—
|
|
|
|
—
|
|
Thomas Healy(26)
|
|
|
34,472,856
|
|
|
|
34,472,856
|
|
|
|
—
|
|
|
|
—
|
|
Tortoise Direct Opportunities Fund II, LP(27)
|
|
|
119,000
|
|
|
|
119,000
|
|
|
|
—
|
|
|
|
—
|
|
TortoiseEcofin Borrower LLC(28)
|
|
|
3,795,085
|
|
|
|
2,666,665
|
|
|
|
1,128,420
|
|
|
|
*
|
|
Vincent T. Cubbage(12)(29)
|
|
|
1,030,018
|
|
|
|
1,030,018
|
|
|
|
—
|
|
|
|
—
|
|
Other Stockholders(30)
|
|
|
1,666,387
|
|
|
|
1,664,776
|
|
|
|
1,611
|
|
|
|
*
|
|
(1)
|
The amounts set forth in this column are the number of shares of Common Stock that may be offered by each Selling Securityholder using
this prospectus. These amounts do not represent any other shares of our Common Stock that the Selling Securityholder may own beneficially
or otherwise.
|
(2)
|
Martin C. Bicknell is deemed to have power to vote or dispose of the Registrable Securities. Based on information provided to us by
the Selling Securityholder, the Selling Securityholder may be deemed to be an affiliate of a broker-dealer. Based on such information,
the Selling Securityholder acquired the shares being registered hereunder in the ordinary course of business, and at the time of the acquisition
of the shares, the Selling Securityholder did not have any agreements or understandings with any person to distribute such shares.
|
(3)
|
Consists of (a) 600,000 shares of Common Stock owned by Mr. Jenkins
and (b) 12,656,790 shares of Common Stock held by Axioma Ventures, of which Mr. Jenkins is a manager. See footnote 4 for more information
about the shares of Common Stock held by Axioma Ventures, LLC (“Axioma Ventures”).
|
(4)
|
The sole member of Axioma Ventures is Axioma Holdings, LLC (“Axioma Holdings”) and the managers of Axioma Ventures are
Alexander H. Jenkins and Kiran Lingam. The sole manager of Axioma Holdings is Axioma Management, LLC (“Axioma Management”).
Howard M. Jenkins, Alexander H. Jenkins and Kiran Lingam are managers of Axioma Management. Each of Axioma Holdings, Axioma Management,
Howard M. Jenkins, Alexander H. Jenkins and Kiran Lingam therefore may be deemed to share voting and dispositive power with respect to
the shares of Common Stock held of record by Axioma Ventures. Howard M. Jenkins is a current member of the board of directors of the Company.
|
(5)
|
Andrew J. Orekar served as a director of TortoiseCorp prior to the Closing of the Business Combination.
|
(6)
|
Paul McPheeters is deemed to have power to vote or dispose of the Registrable Securities.
|
(7)
|
TortoiseEcofin Parent Holdco LLC (f/k/a Tortoise Parent Holdco LLC) is the sole member of TortoiseEcofin Borrower LLC (“Tortoise
Borrower”), and TortoiseEcofin Investments, LLC is the sole member of TortoiseEcofin Parent Holdco LLC. TortoiseEcofin Investments,
LLC (f/k/a/ Tortoise Investments LLC) is controlled by a board of directors, which consists of Jeffrey Lovell, Robert M. Belke, Brad Armstrong,
H. Kevin Birzer, Gary P. Henson and Brad Hilsabeck. Accordingly, each member of the board of directors of TortoiseEcofin Investments,
LLC, may be deemed to have or share beneficial ownership of the Common Stock held directly by Tortoise Borrower. In addition, Tortoise
Sponsor, the sponsor of Tortoise Acquisition Corp. and the owner, since the date of initial public offering of Tortoise Acquisition Corp.
and through the closing of the Business Combination, of certain securities of the Company, was an affiliate of TortoiseEcofin Investments
LLC and Tortoise Borrower. Tortoise Sponsor was dissolved on October 2, 2020, and the shares of Common Stock of the Company held by Tortoise
Sponsor were, upon such dissolution, distributed to the members thereof.
|
(8)
|
Victoria Grace serves as the sole manager of both Colle HLN Associates LLC and Colle Logistics
Associates LLC. Ms. Grace serves as the sole manager of Colle Partners GP LLC, which serves as the sole general partner of Colle
Capital Partners I, L.P. Victoria Grace beneficially owns the shares of Common Stock held by Colle HLN Associates LLC, Colle
Logistics Associates LLC and Colle Capital Partners I, L.P. Ms. Grace disclaims beneficial interest in the shares of Common Stock of
Hyliion Holdings Corp. held by Colle Capital Partners I, L.P., Colle HLN Associates LLC and Colle Logistics Associates LLC, except to
the extent of her pecuniary interest therein. Victoria Grace was also a director of Legacy Hyliion prior to the Closing of the
Business Combination.
|
(9)
|
Gideon Argov beneficially owns greater than 5% of the Selling Securityholder’s interest in the Company and served as a director
of Legacy Hyliion prior to the Closing of the Business Combination.
|
|
(10)
|
Jonathan Mark Collins, Timothy Robert Kraus and John Frederick Geddes are deemed to have power to vote or dispose of the Registrable
Securities.
|
|
(11)
|
Darrell Brock was the Vice President, Business Development of
TortoiseCorp from the completion of its IPO to the date of the Closing of the Business Combination.
|
|
(12)
|
Each of Darrell Brock, Edward Russell, Evan Zimmer, Vincent T.
Cubbage, Steven Schnitzer and Stephen Pang was also a member (i.e., equity owner) of Tortoise Sponsor LLC (“Tortoise Sponsor”),
the sponsor of Tortoise Acquisition Corp. (“TortoiseCorp”), which owned shares of Common Stock and dissolved on October 2,
2020, and is employed by an affiliate of Tortoise Borrower, which owns shares of Common Stock of the Company. Tortoise Borrower was the
managing member of Tortoise Sponsor, the sponsor of TortoiseCorp. Each of Darrell Brock, Edward Russell, Evan Zimmer, Vincent T. Cubbage,
Steven Schnitzer and Stephen Pang has or had no voting or dispositive power over the securities of the Company owned of record or beneficially
by Tortoise Sponsor or Tortoise Borrower.
|
(13)
|
David Douglas was a director of Legacy Hyliion prior to the Closing of the Business Combination.
|
(14)
|
Steven D. Douglas, who was a director of Legacy Hyliion prior to the Closing of the Business Combination, is deemed to have power
to vote or dispose of the Registrable Securities.
|
(15)
|
Consists of (a) 821,610 shares of Common Stock and 1,466,674 shares of Common Stock issuable upon
the exercise of options within 60 days of the Closing of the Business Combination, each owned by Mr. Olkkola and (b) 166,560 shares
of Common Stock held by Mr. Olkkola’s wife, over which she has sole voting and investment power. Mr. Olkkola disclaims
beneficial interest in the shares of Common Stock of Hyliion Holdings Corp. held by his wife. Mr. Olkkola is a current member of the
board of directors of the Company.
|
|
(16)
|
Lamar Mathews, President of the General Partnership, and David Douglas are deemed to have power to vote or dispose of the Registrable
Securities. David Douglas was also a director of Legacy Hyliion prior to the Closing of the Business Combination.
|
|
(17)
|
Crystal Maggelet and Richard L. Bozzelli are deemed to have power to vote or dispose of the Registrable Securities. Richard L. Bozzelli
was a director of Legacy Hyliion prior to the Closing of the Business Combination.
|
(18)
|
Frank M. Semple served as a director of TortoiseCorp prior to the Closing of the Business Combination.
|
(19)
|
Being the portfolio manager of the Selling Securityholder, Patric Lindqvist may be deemed to have the power to vote for and dispose
of the Registrable Securities on behalf of the Selling Securityholder. Based on information provided to us by the Selling Securityholder,
the Selling Securityholder may be deemed to be an affiliate of a broker-dealer. Based on such information, the Selling Securityholder
acquired the shares being registered hereunder in the ordinary course of business, and at the time of the acquisition of the shares, the
Selling Securityholder did not have any agreements or understandings with any person to distribute such shares.
|
(20)
|
Consists of (a) 166,560 shares of Common Stock owned by Mrs. Olkkola and (b) 821,610 shares of Common Stock held by Mrs. Olkkola’s
husband, over which he has sole voting and investment power. Mrs. Olkkola disclaims beneficial interest in the shares of Common Stock of Hyliion Holdings Corp. held by her husband.
|
(21)
|
Ran Simha is deemed to have power to vote or dispose of the Registrable Securities. Gideon Argov, a manager of New Era Capital Partners,
L.P., was a director of Legacy Hyliion prior to the Closing of the Business Combination.
|
(22)
|
Sidney L. Tassin served as a director of TortoiseCorp prior to the Closing of the Business Combination.
|
(23)
|
Stephen Pang was a director of TortoiseCorp from the completion of its IPO to the date of the Closing of the Business Combination.
He also served as the Chief Financial Officer of TortoiseCorp from January 2020 to the date of the Closing of the Business Combination.
Mr. Pang is a current member of the board of directors of the Company.
|
(24)
|
Steven C. Schnitzer was the Vice President, General Counsel and Secretary of TortoiseCorp from the completion of its IPO to the date
of the Closing of the Business Combination.
|
(25)
|
Tortoise Capital Advisors, L.L.C. is an investment adviser to the Selling Securityholder. Primary responsibility for the day-to-day
management of the portfolio containing the Registerable Securities is the joint responsibility of a team of portfolio managers consisting
of Brian A. Kessens, James R. Mick, Matthew G.P. Sallee, Robert J. Thummel, and Nicholas S. Holmes.
|
(26)
|
Thomas Healy is the Chief Executive Officer and member of the board of directors of the Company.
|
(27)
|
Tortoise Capital Advisors, L.L.C. is investment advisor to the Selling Securityholder. Brian A. Kessens, James R. Mick, Matthew G.P.
Sallee, and Robert J. Thummel, in their position as portfolio managers, may be deemed to have voting and investment power with respect
to the Registrable Securities owned by the Selling Securityholder. Tortoise Capital Advisors, L.L.C. has sole voting and dispositive power
over the Registrable Securities held by the Selling Securityholder. The address for the foregoing persons is 5100 W. 115th Place, Leawood,
KS 66211. Based on information provided to us by the Selling Securityholder, the Selling Securityholder may be deemed to be an affiliate
of a broker-dealer. Based on such information, the Selling Securityholder acquired the shares being registered hereunder in the ordinary
course of business, and at the time of the acquisition of the shares, the Selling Securityholder did not have any agreements or understandings
with any person to distribute such shares.
|
(28)
|
The Selling Securityholder was a part of the sponsor network of TortoiseCorp. The Selling Securityholder was the managing member of
Tortoise Sponsor, which held Class B shares of common stock of the Company in connection its IPO. Immediately prior to giving effect to
the Business Combination, Tortoise Sponsor held all of the issued and outstanding shares of Class B common stock of the Company (or 5,825,230
shares) other than (i) 1,265,625 shares of Class B common stock that were previously transferred to Atlas Point Energy Infrastructure
Fund, LLC in connection with the IPO of TortoiseCorp and (ii) 120,000 shares of Class B common stock that were previously transferred,
in the aggregate, to three independent directors of TortoiseCorp in connection with such IPO. After giving effect to the Business Combination
and the transfer on October 1, 2020 of 894,375 shares of Class B common stock by Atlas Point Fund to the Selling Securityholder and the
distribution by Tortoise Sponsor of Class B Common Stock held by it to the members of Tortoise Sponsor upon the dissolution thereof on
October 2, 2020, the Selling Securityholder was the record and beneficial owner of 2,666,665 shares of Common Stock.
|
TortoiseEcofin Parent Holdco LLC (f/k/a Tortoise Parent
Holdco LLC) is the sole member of the Selling Securityholder, and TortoiseEcofin Investments, LLC is the sole member of TortoiseEcofin
Parent Holdco LLC. TortoiseEcofin Investments, LLC is controlled by a board of directors, which consists of Jeffrey Lovell, Robert M.
Belke, Brad Armstrong, H. Kevin Birzer, Gary P. Henson and Brad Hilsabeck. Accordingly, the members of the board of directors of TortoiseEcofin
Investments, LLC may be deemed to have or share beneficial ownership of the Common Stock held directly by the Selling Securityholder.
In addition, Vincent T. Cubbage, Stephen Pang, Steven C. Schnitzer and Darrell Brock, Jr., former officers and, in the case of Messrs.
Cubbage and Pang, former and current directors of the Company, were members of Tortoise Sponsor and are employed by an affiliate of the
Selling Securityholder that is controlled by TortoiseEcofin Investments, LLC. None of Mr. Cubbage, Mr. Pang, Mr. Schnitzer and Mr. Brock
has voting or dispositive power over the shares of Common Stock held beneficially and of record by the Selling Securityholder.
Based on information provided to us by the Selling Securityholder,
the Selling Securityholder may be deemed to be an affiliate of a broker-dealer. Based on such information, the Selling Securityholder
acquired the shares being registered hereunder in the ordinary course of business, and at the time of the acquisition of the shares, the
Selling Securityholder did not have any agreements or understandings with any person to distribute such shares.
|
(29)
|
Vincent T. Cubbage was the President, Chief Executive Officer
and a director of TortoiseCorp from the completion of its IPO to the date of the Closing of the Business Combination. Mr. Cubbage is
a current member of the board of directors of the Company.
|
|
(30)
|
Includes approximately 40
other stockholders not otherwise listed above, none of which currently owns more than 0.15% of the Company’s Common Stock. Collectively,
these stockholders own approximately 0.96% of the Company’s Common Stock.
|
DESCRIPTION
OF OUR SECURITIES
The
following summary of the material terms of our securities is not intended to be a complete summary of the rights and preferences of such
securities, and is qualified by reference to our Second Amended and Restated Certificate of Incorporation and our Bylaws described herein,
which are exhibits to the registration statement of which this prospectus is a part. We urge you to read each of our Certificate of Incorporation
and the Bylaws described herein in their entirety for a complete description of the rights and preferences of our securities.
Authorized
and Outstanding Stock
Our
Certificate of Incorporation authorizes the issuance of 250,000,000 shares of Common Stock, $0.0001 par value per share, and 10,000,000
shares of preferred stock, $0.0001 par value per share. As of June 30, 2021, there were approximately 172,798,338 shares of Common
Stock and no shares of preferred stock outstanding. The outstanding shares of Common Stock are duly authorized, validly issued, fully
paid and non-assessable.
Common
Stock
Voting
Power
Except
as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders
of Common Stock will possess all voting power for the election of our directors and all other matters requiring stockholder action. Holders
of Common Stock will be entitled to one vote per share on matters to be voted on by stockholders.
Dividends
Holders
of Common Stock will be entitled dividends, if any, as may be declared from time to time by the Board in its discretion. Such dividends
may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of our Certificate of Incorporation and
applicable law. We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans
to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion
of the Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions
and other factors that the Board may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing
and future outstanding indebtedness we or our subsidiaries incur.
Preemptive
or Other Rights
Holders
of Common Stock have no conversion, preemptive or other subscription rights and there will be no sinking fund or redemption provisions
applicable to the Common Stock.
Election
of Directors
The
Board is divided into three classes, each of which will serve for a term of three years with only one class of directors being elected
in each year. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than
50% of the shares voted for the election of directors can elect all of the directors.
Preferred
Stock
Our
Certificate of Incorporation provides that shares of preferred stock may be issued from time to time in one or more series. The Board
is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special
rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. The Board will be able
to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and
other rights of the holders of the Common Stock and could have anti-takeover effects. The ability of the Board to issue preferred stock
without stockholder approval could have the effect of delaying, deferring or preventing a change of control of Hyliion or the removal
of the our management.
Lock-Up
Restrictions
Certain
of our stockholders are subject to certain restrictions on transfer until the termination of applicable lock-up periods. See the section
entitled “Certain Relationships and Related Party Transactions” for lock-up restrictions on our securities under the Registration
Rights and Lock-Up Agreement and the Lock-Up Agreements.
Certain
Anti-Takeover Provisions of Delaware Law
Special
Meetings of Stockholders
Our
Certificate of Incorporation provides that special meetings of our stockholders may be called by such persons as provided in the Bylaws.
The Bylaws provide that special meetings of our stockholders may be called only, for any purpose as is a proper matter for stockholder
action under Delaware, by (i) our Chairperson of the Board of Directors, (ii) our Chief Executive Officer or the President if the Chairperson
of the Board of Directors is unavailable, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total
number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption).
Advance
Notice Requirements for Stockholder Proposals and Director Nominations
Our
Bylaws provide that stockholders seeking to bring business before our annual meeting of stockholders, or to nominate candidates for election
as directors at our annual meeting of stockholders, must provide timely notice of their intent in writing. To be timely under the Bylaws,
a stockholder’s notice will need to be received by the company secretary at our principal executive offices not later than the
close of business on the 90th day nor earlier than the open of business on the 120th day prior to the first anniversary of the preceding
year’s annual meeting of stockholders; provided, however, that in the event that no annual meeting was held in the previous year
or the annual meeting is called for a date that is more than 30 days before or after the anniversary date of the previous year’s
annual meeting, notice by the stockholder must be received by the secretary no earlier than the close of business on the 120th day prior
to such annual meeting and no later than the close of business on the latter of the 90th day prior to such annual meeting or the 10th
day following the day on which public announcement of the date of such meeting is first made. Our Certificate of Incorporation and the
Bylaws specify certain requirements as to the form and content of a stockholders’ meeting. These provisions may preclude our stockholders
from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders.
Authorized
but Unissued Shares
Our
authorized but unissued Common Stock and preferred stock are available for future issuances without stockholder approval and could be
utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit
plans. The existence of authorized but unissued and unreserved Common Stock and preferred stock could render more difficult or discourage
an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Exclusive
Forum Selection
Our
Certificate of Incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against
current or former directors, officers and employees for breach of fiduciary duty, other similar actions, any other action as to which
the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware and any action or proceeding concerning the validity
of our Certificate of Incorporation or the Bylaws may be brought only in the Court of Chancery in the State of Delaware (or, if and only
if the Court of Chancery of the State of Delaware does not have subject matter jurisdiction thereof, any state court located in the State
of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of
Delaware). Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the
types of lawsuits to which it applies, the provision may limit a stockholder’s ability to bring a claim in a judicial forum that
it finds favorable for disputes with us and our directors, officers or other employees and may have the effect of discouraging lawsuits
against our directors and officers. This provision would not apply to claims brought to enforce a duty or liability created by the Exchange
Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon
federal law claims, 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. Furthermore, Section 22 of the Securities Act creates
concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities
Act or the rules and regulations thereunder. However, our Certificate of Incorporation provides that the federal district courts of the
United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities
Act. Stockholders may be subject to increased costs to bring these claims, and the exclusive forum provision could have the effect of
discouraging claims or limiting investors’ ability to bring claims in a judicial forum that they find favorable. In addition, the
enforceability of similar exclusive forum provisions in other companies’ certificates of incorporation has been challenged in legal
proceedings, and it is possible that, in connection with one or more actions or proceedings described above, a court could rule that
this provision in our Certificate of Incorporation is inapplicable or unenforceable.
Section
203 of the Delaware General Corporation Law
We
do not opt out of Section 203 of the DGCL under our Certificate of Incorporation.
Limitation
on Liability and Indemnification of Directors and Officers
Our
Certificate of Incorporation eliminates our directors’ liability to the fullest extent permitted under the DGCL. The DGCL provides
that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors,
except for liability:
|
●
|
for
any transaction from which the director derives an improper personal benefit;
|
|
●
|
for
any act or omission not in good faith or that involves intentional misconduct or a knowing
violation of law;
|
|
●
|
for
any unlawful payment of dividends or redemption of shares; or
|
|
●
|
for
any breach of a director’s duty of loyalty to the corporation or its stockholders.
|
If
the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability
of the Company’s directors will be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
Delaware
law and our Certificate of Incorporation and Bylaws provide that the Company will, in certain situations, indemnify its directors and
officers and may indemnify other employees and other agents, to the fullest extent permitted by law. Any indemnified person is also entitled,
subject to certain limitations, to advancement of reasonable expenses (including attorneys’ fees and disbursements) in advance
of the final disposition of the proceeding.
In
addition, we have entered into separate indemnification agreements with our directors and officers. These agreements, among other things,
require us to indemnify our directors and officers for certain expenses, including attorneys’ fees, judgments, fines, and settlement
amounts incurred by a director or officer in any action or proceeding arising out of their services as one of our directors or officers
or any other company or enterprise to which the person provides services at our request.
We
maintain a directors’ and officers’ insurance policy pursuant to which our directors and officers are insured against liability
for actions taken in their capacities as directors and officers. We believe these provisions in our Certificate of Incorporation and
the Bylaws and these indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or control persons, in the
opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Rule
144
Rule
144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell
companies) or issuers that have been at any time previously a shell company, such as the Company. However, Rule 144 also includes an
important exception to this prohibition if the following conditions are met:
|
●
|
the
issuer of the securities that was formerly a shell company has ceased to be a shell company;
|
|
●
|
the
issuer of the securities is subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act;
|
|
●
|
the
issuer of the securities has filed all Exchange Act reports and material required to be filed,
as applicable, during the preceding 12 months (or such shorter period that the issuer was
required to file such reports and materials), other than Form 8-K reports; and
|
|
●
|
at
least one year has elapsed from the time that the issuer filed current Form 10 type information
with the SEC reflecting its status as an entity that is not a shell company.
|
Upon
the Closing, the Company ceased to be a shell company.
When
and if Rule 144 becomes available for the resale of our securities, a person who has beneficially owned restricted shares of our Common
Stock or Warrants for at least six months would be entitled to sell their securities, provided that (i) such person is not deemed to
have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the
Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section
13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale.
Persons
who have beneficially owned restricted shares of our Common Stock or Warrants for at least six months but who are our affiliates at the
time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person
would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
|
●
|
one
percent (1%) of the total number of shares of Common Stock then outstanding; or
|
|
●
|
the
average weekly reported trading volume of the Common Stock during the four calendar weeks
preceding the filing of a notice on Form 144 with respect to the sale.
|
Sales
by our affiliates under Rule 144 will also be limited by manner of sale provisions and notice requirements and to the availability of
current public information about us.
Transfer
Agent and Registrar
The
transfer agent and registrar for our Common Stock is Continental Stock Transfer & Trust Company.
Listing
of Securities
Our
Common Stock is listed on the NYSE under the symbol “HYLN”.
PLAN
OF DISTRIBUTION
We
are registering the resale by the Selling Securityholders or their permitted transferees from time to time of up to 91,394,533 shares
of Common Stock.
We
are required to pay all fees and expenses incident to the registration of the shares of our Common Stock to be offered and sold pursuant
to this prospectus. The Selling Securityholders will bear all commissions and discounts, if any, attributable to their sale of shares
of our Common Stock.
We
will not receive any of the proceeds from the sale of the securities by the Selling Securityholders. The aggregate proceeds to the Selling
Securityholders will be the purchase price of the securities less any discounts and commissions borne by the Selling Securityholders.
The shares of Common Stock beneficially owned by the Selling Securityholders covered by this prospectus may be offered and sold from
time to time by the Selling Securityholders. The term “Selling Securityholders” includes donees, pledgees, transferees or
other successors in interest selling securities received after the date of this prospectus from a Selling Securityholder as a gift, pledge,
partnership distribution or other transfer. The Selling Securityholders will act independently of us in making decisions with respect
to the timing, manner and size of each sale. Such sales may be made on one or more exchanges or in the over-the-counter market or otherwise,
at prices and under terms then prevailing or at prices related to the then current market price or in negotiated transactions. The Selling
Securityholders may sell their shares of Common Stock by one or more of, or a combination of, the following methods:
|
●
|
purchases
by a broker-dealer as principal and resale by such broker-dealer for its own account pursuant
to this prospectus;
|
|
●
|
ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
|
|
●
|
block
trades in which the broker-dealer so engaged will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the transaction;
|
|
●
|
an
over-the-counter distribution in accordance with the rules of NYSE;
|
|
●
|
through
trading plans entered into by a Selling Securityholder pursuant to Rule 10b5-1 under the
Exchange Act, that are in place at the time of an offering pursuant to this prospectus and
any applicable prospectus supplement hereto that provide for periodic sales of their securities
on the basis of parameters described in such trading plans;
|
|
●
|
to
or through underwriters or broker-dealers;
|
|
●
|
in
“at the market” offerings, as defined in Rule 415 under the Securities Act, at
negotiated prices, at prices prevailing at the time of sale or at prices related to such
prevailing market prices, including sales made directly on a national securities exchange
or sales made through a market maker other than on an exchange or other similar offerings
through sales agents;
|
|
●
|
in
privately negotiated transactions;
|
|
●
|
in
options transactions;
|
|
●
|
through
a combination of any of the above methods of sale; or
|
|
●
|
any
other method permitted pursuant to applicable law.
|
In
addition, any shares that qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this prospectus.
To
the extent required, this prospectus may be amended or supplemented from time to time to describe a specific plan of distribution. In
connection with distributions of the shares or otherwise, the Selling Securityholders may enter into hedging transactions with broker-dealers
or other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short
sales of shares of Common Stock in the course of hedging the positions they assume with Selling Securityholders. The Selling Securityholders
may also sell shares of Common Stock short and redeliver the shares to close out such short positions. The Selling Securityholders may
also enter into option or other transactions with broker-dealers or other financial institutions which require the delivery to such broker-dealer
or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The Selling Securityholders may also pledge
shares to a broker-dealer or other financial institution, and, upon a default, such broker-dealer or other financial institution, may
effect sales of the pledged shares pursuant to this prospectus (as supplemented or amended to reflect such transaction).
A
Selling Securityholder may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to
third parties in privately negotiated transactions. If an applicable prospectus supplement indicates, in connection with those derivatives,
the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions.
If so, the third party may use securities pledged by any Selling Securityholder or borrowed from any Selling Securityholder or others
to settle those sales or to close out any related open borrowings of stock, and may use securities received from any Selling Securityholder
in settlement of those derivatives to close out any related open borrowings of stock. If applicable through securities laws, the third
party in such sale transactions will be an underwriter and will be identified in the applicable prospectus supplement (or a post-effective
amendment). In addition, any Selling Securityholder may otherwise loan or pledge securities to a financial institution or other third
party that in turn may sell the securities short using this prospectus. Such financial institution or other third party may transfer
its economic short position to investors in our securities or in connection with a concurrent offering of other securities.
In
effecting sales, broker-dealers or agents engaged by the Selling Securityholders may arrange for other broker-dealers to participate.
Broker-dealers or agents may receive commissions, discounts or concessions from the Selling Securityholders in amounts to be negotiated
immediately prior to the sale.
In
offering the securities covered by this prospectus, the Selling Securityholders and any broker-dealers who execute sales for the Selling
Securityholders may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales.
Any profits realized by the Selling Securityholders and the compensation of any broker-dealer may be deemed to be underwriting discounts
and commissions.
In
order to comply with the securities laws of certain states, if applicable, the securities must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the securities may not be sold unless they have been registered
or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is
complied with.
We
have advised the Selling Securityholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of
securities in the market and to the activities of the Selling Securityholders and their affiliates. In addition, we will make copies
of this prospectus available to the Selling Securityholders for the purpose of satisfying the prospectus delivery requirements of the
Securities Act. The Selling Securityholders may indemnify any broker-dealer that participates in transactions involving the sale of the
shares against certain liabilities, including liabilities arising under the Securities Act.
At
the time a particular offer of securities is made, if required, a prospectus supplement will be distributed that will set forth the number
of securities being offered and the terms of the offering, including the name of any underwriter, dealer or agent, the purchase price
paid by any underwriter, any discount, commission and other item constituting compensation, any discount, commission or concession allowed
or reallowed or paid to any dealer, and the proposed selling price to the public.
LEGAL
MATTERS
The
validity of any securities offered by this prospectus will be passed upon for us by Vinson & Elkins L.L.P., New York, New York.
EXPERTS
The
financial statements as of and for the years ended December 31, 2020 and December 31, 2019 of Hyliion appearing in this prospectus and
registration statement have been audited by Grant Thornton LLP, an independent registered public accounting firm (“Grant Thornton”),
as set forth in their report appearing elsewhere herein, and are included in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
are required to file annual, quarterly and current reports, proxy statements and other information with the SEC as required by the Exchange
Act. You can read our SEC filings, including this prospectus, over the Internet at the SEC’s website at http://www.sec.gov.
Our
website address is www.hyliion.com. Through our website, we make available, free of charge, the following documents as soon as
reasonably practicable after they are electronically filed with, or furnished to, the SEC, including our Annual Reports on Form 10-K;
our proxy statements for our annual and special stockholder meetings; our Quarterly Reports on Form 10-Q; our Current Reports on Form
8-K; Forms 3, 4, and 5 and Schedules 13D with respect to our securities filed on behalf of our directors and our executive officers;
and amendments to those documents. The information contained on, or that may be accessed through, our website is not a part of, and is
not incorporated into, this prospectus.
INDEX
TO FINANCIAL STATEMENTS
Hyliion Unaudited Condensed Financial Statements
|
|
|
|
Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020
|
F-2
|
|
|
Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020
|
F-3
|
|
|
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2021 and 2020
|
F-4
|
|
|
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020
|
F-5
|
|
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
F-6
|
|
|
Hyliion Consolidated Financial Statements, As Restated
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
F-14
|
|
|
Consolidated Balance Sheets as of December 31, 2020 and 2019 – As Restated
|
F-15
|
|
|
Consolidated Statements of Operations for the years ended December 31, 2020 and 2019 – As Restated
|
F-16
|
|
|
Consolidated Statements of Stockholders’ Equity for the years ended December
31, 2020 and 2019 – As Restated
|
F-17
|
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019 – As Restated
|
F-18
|
|
|
Notes to Consolidated Financial Statements
|
F-19
|
HYLIION HOLDINGS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except share and
per share data)
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
334,718
|
|
|
$
|
389,705
|
|
Accounts receivable
|
|
|
80
|
|
|
|
92
|
|
Prepaid expenses and other current assets
|
|
|
3,616
|
|
|
|
20,690
|
|
Short-term investments
|
|
|
144,829
|
|
|
|
201,881
|
|
Total current assets
|
|
|
483,243
|
|
|
|
612,368
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
1,350
|
|
|
|
1,171
|
|
Operating lease right-of-use assets
|
|
|
4,833
|
|
|
|
5,055
|
|
Intangible assets, net
|
|
|
308
|
|
|
|
332
|
|
Other assets
|
|
|
193
|
|
|
|
193
|
|
Long-term investments
|
|
|
152,481
|
|
|
|
35,970
|
|
Total assets
|
|
$
|
642,408
|
|
|
$
|
655,089
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,022
|
|
|
$
|
1,890
|
|
Current portion of operating lease liabilities
|
|
|
790
|
|
|
|
734
|
|
Accrued expenses and other current liabilities
|
|
|
5,073
|
|
|
|
6,313
|
|
Total current liabilities
|
|
|
7,885
|
|
|
|
8,937
|
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities, net of current portion
|
|
|
4,838
|
|
|
|
5,076
|
|
Debt, net of current portion
|
|
|
—
|
|
|
|
908
|
|
Total liabilities
|
|
|
12,723
|
|
|
|
14,921
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 250,000,000 shares authorized; 171,519,811 and 169,316,421 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
|
|
|
19
|
|
|
|
19
|
|
Additional paid-in capital
|
|
|
371,077
|
|
|
|
364,998
|
|
Accumulated deficit
|
|
|
258,589
|
|
|
|
275,151
|
|
Total stockholders’ equity
|
|
|
629,685
|
|
|
|
640,168
|
|
Total liabilities and stockholders’ equity
|
|
$
|
642,408
|
|
|
$
|
655,089
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
HYLIION HOLDINGS CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(Dollar amounts in thousands, except share and
per share data)
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
(9,332
|
)
|
|
|
(2,671
|
)
|
Selling, general and administrative
|
|
$
|
(7,399
|
)
|
|
$
|
(691
|
)
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(16,731
|
)
|
|
|
(3,362
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
—
|
|
|
|
(1,565
|
)
|
Interest income
|
|
|
169
|
|
|
|
—
|
|
Change in fair value of convertible notes payable derivative liabilities
|
|
|
—
|
|
|
|
(635
|
)
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
169
|
|
|
|
(2,200
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(16,562
|
)
|
|
$
|
(5,562
|
)
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding, basic and diluted
|
|
|
170,249,708
|
|
|
|
86,762,463
|
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted
|
|
$
|
(0.10
|
)
|
|
$
|
(0.06
|
)
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
HYLIION HOLDINGS CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY
(Dollar amounts in thousands, except share data)
|
|
For the Three Months Ended March 31, 2021
|
|
|
|
Common Stock
|
|
|
Additional
Paid-In
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance - December 31, 2020
|
|
|
169,316,421
|
|
|
$
|
19
|
|
|
$
|
364,998
|
|
|
$
|
275,151
|
|
|
$
|
640,168
|
|
Common stock issued for warrants exercised, net of issuance costs
|
|
|
371,535
|
|
|
|
—
|
|
|
|
4,282
|
|
|
|
—
|
|
|
|
4,282
|
|
Exercise of common stock options
|
|
|
1,831,855
|
|
|
|
—
|
|
|
|
287
|
|
|
|
—
|
|
|
|
287
|
|
Share-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,510
|
|
|
|
—
|
|
|
|
1,510
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(16,562
|
)
|
|
|
(16,562
|
)
|
Balances - March 31, 2021
|
|
|
171,519,811
|
|
|
$
|
19
|
|
|
$
|
371,077
|
|
|
$
|
258,589
|
|
|
$
|
629,685
|
|
|
|
For the Three Months Ended March 31, 2020
|
|
|
|
Common Stock
|
|
|
Additional
Paid-In
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance - December 31, 2019
|
|
|
86,762,463
|
|
|
$
|
9
|
|
|
$
|
30,888
|
|
|
$
|
(48,966
|
)
|
|
$
|
(18,069
|
)
|
Share-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
57
|
|
|
|
—
|
|
|
|
57
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,562
|
)
|
|
|
(5,562
|
)
|
Balances - March 31, 2020
|
|
|
86,762,463
|
|
|
$
|
9
|
|
|
$
|
30,945
|
|
|
$
|
(54,528
|
)
|
|
$
|
(23,574
|
)
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
HYLIION HOLDINGS CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Dollar amounts in thousands)
|
|
For the Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(16,562
|
)
|
|
$
|
(5,562
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
203
|
|
|
|
251
|
|
Noncash lease expense
|
|
|
222
|
|
|
|
276
|
|
Paid-in-kind interest on convertible notes payable
|
|
|
—
|
|
|
|
306
|
|
Amortization of debt discount
|
|
|
—
|
|
|
|
1,250
|
|
Share-based compensation
|
|
|
1,510
|
|
|
|
57
|
|
Change in fair value of convertible notes payable derivative liabilities
|
|
|
—
|
|
|
|
635
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
12
|
|
|
|
107
|
|
Prepaid expenses and other current assets
|
|
|
817
|
|
|
|
28
|
|
Accounts payable
|
|
|
132
|
|
|
|
(270
|
)
|
Accrued expenses and other current liabilities
|
|
|
3,091
|
|
|
|
(120
|
)
|
Operating lease liabilities
|
|
|
(182
|
)
|
|
|
(283
|
)
|
Net cash used in operating activities
|
|
|
(10,757
|
)
|
|
|
(3,325
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(358
|
)
|
|
|
(80
|
)
|
Purchase of investments
|
|
|
(219,460
|
)
|
|
|
—
|
|
Proceeds from sale of investments
|
|
|
160,001
|
|
|
|
—
|
|
Net cash used in investing activities
|
|
|
(59,817
|
)
|
|
|
(80
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock warrants, net of issuance costs
|
|
|
16,257
|
|
|
|
—
|
|
Payments for Paycheck Protection Program loan
|
|
|
(908
|
)
|
|
|
—
|
|
Proceeds from exercise of common stock options
|
|
|
287
|
|
|
|
—
|
|
Proceeds from convertible notes payable issuance and derivative liability
|
|
|
—
|
|
|
|
3,200
|
|
Repayments on finance lease obligations
|
|
|
(49
|
)
|
|
|
(54
|
)
|
Net cash provided by financing activities
|
|
|
15,587
|
|
|
|
3,146
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(54,987
|
)
|
|
|
(259
|
)
|
Cash and cash equivalents- beginning of the period
|
|
|
389,705
|
|
|
|
6,285
|
|
Cash and cash equivalents - end of the period
|
|
$
|
334,718
|
|
|
$
|
6,026
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
HYLIION HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollar amounts in thousands, except for separately
indicated)
1. Description of
Organization and Business Operations
On October 1, 2020, our predecessor company, Tortoise
Acquisition Corp. (“Tortoise”), consummated a business combination (the “Business Combination”) with Hyliion Inc.,
a Delaware corporation (“Legacy Hyliion”) pursuant to which Legacy Hyliion merged with and into SHLL Merger Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of Tortoise, with Legacy Hyliion surviving the merger (together with the related transactions,
the “Business Combination”). Upon consummation of the Business Combination, Legacy Hyliion became a direct wholly-owned subsidiary
of Tortoise, and Tortoise was renamed Hyliion Holdings Corp. References to the “Company” in this report refer to Tortoise
before the consummation of the Business Combination or Hyliion Holdings Corp. and its wholly owned subsidiary (“Hyliion”,
“we” or “us”) after the Business Combination, unless expressly indicated or the context otherwise requires.
Hyliion designs and develops hybrid and electrified
powertrain systems for long haul “Class 8” semi-trucks which modify semi-tractors into Hybrid and fully electric range extender
vehicles, respectively.
The Company’s Hybrid systems utilize intelligent
electric drive axles with advanced algorithms and battery technology to optimize fuel savings and vehicle performance with reduced emissions,
enabling fleets to access an easy, efficient way to decrease fuel expenses, lower emissions and/or improve vehicle performance.
The Company’s fully electric range extender
systems utilize an intelligent electric powertrain with advanced algorithms to optimize emissions performance and efficiency with no new
infrastructure required. The Hypertruck ERX system enables fleets to reduce the cost of ownership while providing the ability to deliver
net-negative carbon emissions and operate fully electric when needed.
The Company is in a pre-commercialization stage
of development in which its electric Hybrid system is in the testing phase and the Hypertruck ERX system is in the prototype phase.
On October 1, 2020, the Company consummated a
business combination which was accounted for as a reverse recapitalization. For more details on the reverse recapitalization, see Note
3 to the Company's Consolidated Financial Statements as presented in its Annual Report, as amended on Form 10-K/A for the year ended December
31, 2020. As a result of the reverse recapitalization, all references to numbers of common shares and per common share data for 2020 in
these condensed consolidated financial statements and related notes have been retroactively adjusted to account for the effect of the
reverse recapitalization.
These condensed consolidated financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal
course of business. The Company is an early-stage growth company in the pre-commercialization stage of development and has generated negative
cash flows from operating activities since inception. As of March 31, 2021, the Company had a cash and cash equivalents balance of $334.7 million
and total investments of $297.3 million. Based on this, the Company has sufficient funds to continue to execute its business strategy
for the next twelve months.
2. Significant Accounting
Policies
Basis of Presentation: On October
1, 2020, the Company consummated the Business Combination which was accounted for as a reverse recapitalization with Legacy Hyliion being
deemed the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification
(“ASC”) 805. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Hyliion
issuing stock for the net assets of Tortoise, accompanied by a recapitalization. The net assets of Tortoise are stated at historical cost,
with no goodwill or other intangible assets recorded. While Tortoise was the legal acquirer in the Business Combination, because Legacy
Hyliion was deemed the accounting acquirer, the historical financial statements of Legacy Hyliion became the historical financial statements
of the combined company, upon the consummation of the Business Combination. As a result, the financial statements included in this report
reflect (i) the historical operating results of Legacy Hyliion prior to the Business Combination; (ii) the combined results of Tortoise
and Legacy Hyliion following the closing of the Business Combination; (iii) the assets and liabilities of Legacy Hyliion at their historical
cost; and (iv) the Company’s equity structure for all periods presented. For more details on the reverse recapitalization, see Note
3 to the Company’s Consolidated Financial Statements as presented in its Annual Report, as amended on Form 10-K/A for the year ended
December 31, 2020 which was filed with the Securities and Exchange Commission (“SEC”) on May 17, 2021 (the “2020 Amended
Annual Report”). As a result of the reverse recapitalization, all references to numbers of common shares and per common share data
for 2020 in these condensed consolidated financial statements and related notes have been retroactively adjusted to account for the effect
of the reverse recapitalization.
HYLIION HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollar amounts in thousands, except for separately
indicated)
These condensed consolidated financial statements
include the accounts of the Company and its wholly owned subsidiary. Intercompany accounts and transactions have been eliminated in consolidation.
These interim consolidated statements have been prepared pursuant to the rules and regulations of the SEC, which permit reduced disclosure
for interim periods. The Consolidated Balance Sheet as of December 31, 2020 was derived from audited financial statements for the fiscal
year then ended, but does not include all necessary disclosures required by accounting principles generally accepted in the United States
of America (“GAAP”) with respect to annual financial statements. In the opinion of management, these unaudited condensed consolidated
financial statements include all recurring adjustments and normal accruals necessary for a fair presentation of the Company’s financial
position, results of operations and cash flows for the dates and periods presented. These condensed consolidated financial statements
and accompanying notes should be read in conjunction with the Company’s 2020 Amended Annual Report. Results for interim periods
are not necessarily indicative of the results to be expected for a full fiscal year or for any future period.
Emerging Growth Company: Section
102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to
comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement
under the Securities Act of 1933, as amended (the “Securities Act”) declared effective or do not have a class of securities
registered under the Securities Exchange Act of 1934, as amended) (the “Exchange Act”)) are required to comply with the new
or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period
and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company
has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different
application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at
the time private companies adopt the new or revised standard, until such time the Company is no longer considered to be an emerging growth
company. At times, the Company may elect to early adopt a new or revised standard.
Use of estimates and uncertainty of the
coronavirus pandemic: The preparation of financial statements in conformity with U.S. GAAP requires management to make certain
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
as of the balance sheet date, as well as reported amounts of expenses during the reporting period. The Company’s most significant
estimates and judgments involve valuation of share-based compensation, including the fair value of common stock prior to the Business
Combination, and the valuation of the convertible notes payable derivative liability. Management bases its estimates on historical experience
and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying
values of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to the Company’s
condensed consolidated financial statements.
On January 30, 2020, the World Health Organization
declared the coronavirus outbreak a “Public Health Emergency of International Concern” and on March 11, 2020, declared the
coronavirus outbreak a pandemic. In mid-March 2020, U.S. state governors, local officials and leaders outside of the U.S. began ordering
various “shelter-in-place” orders, which have had various impacts on the U.S. and global economies. This has required greater
use of estimates and assumptions in the preparation of the unaudited condensed consolidated financial statements.
As the coronavirus pandemic continues to evolve,
the Company believes the extent of the impact to its businesses, operating results, cash flows, liquidity and financial condition will
be primarily driven by the severity and duration of the coronavirus pandemic, the pandemic’s impact on the U.S. and global economies
and the timing, scope, and effectiveness of federal, state and local governmental responses to the pandemic. Those primary drivers are
beyond the Company’s knowledge and control, and as a result, at this time the Company is unable to predict the cumulative impact,
both in terms of severity and duration, that the coronavirus pandemic will have on its business, operating results, cash flows and financial
condition, but it could be material if the current circumstances continue to exist for a prolonged period. Although the Company has made
its best estimates based upon current information, actual results could materially differ from the estimates and assumptions developed
by management. If so, the Company may be subject to future impairment charges as well as changes to recorded reserves and valuations.
HYLIION HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollar amounts in thousands, except for separately
indicated)
Recently Adopted Accounting Pronouncements:
In December 2019, the FASB issued ASU 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting
for income taxes. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after
December 15, 2020. The Company adopted ASU 2019-12 on January 1, 2021. However, there is no impact to the Company as a result of the adoption
in the current quarter, nor is there an expected impact to the Company for the remainder of the year.
3. Debt
Convertible Notes Payable: During
January 2020, the Company issued a convertible note payable in exchange for cash totaling $3.2 million (the “January 2020 Note”).
The January 2020 Note bears interest at 6% per annum and matures in January 2025 (five years after its issuance date). The January 2020
Note is only prepayable with the consent of the holder. The January 2020 Note is secured by a first priority, senior secured interest
in substantially all the assets of the Company. The January 2020 Note includes the following embedded features:
(a) Optional conversion
upon the next equity financing of at least $15.0 million in proceeds. The conversion price will be based on the per share price of
the next equity financing, with a 50% discount.
(b) Optional conversion
upon a subsequent equity financing of at least $15.0 million if the holder did not elect to convert upon the next equity financing,
at the price that is set by the subsequent equity financing (no discount).
(c) Optional conversion
upon a change in control. In the event of a change in control, the holder can elect to convert the January 2020 Note into shares of common
stock at a conversion price equal to (i) the product of the change in control purchase price multiplied by 50%, divided by (ii) the total
number of outstanding shares of capital stock of the Company (on a fully diluted basis).
(d) Optional redemption
upon a change in control. In the event of a change in control, the holder can elect to request payment of all outstanding principal (with
no penalty) and unpaid accrued interest.
(e) Optional redemption
upon the Company obtaining at least $10.0 million in commercial debt which would result in the January 2020 Note having the same
priority or being treated as subordinate to the commercial debt. In such scenario, the holder can elect to request payment of all outstanding
principal (with no penalty) and unpaid accrued interest.
(f) Automatic or optional
redemption upon an event of default. Upon the occurrence of an event of default, the January 2020 Note will either automatically become
due and payable or can become due and payable at the holder’s option (based on the nature of the event of default). Upon such acceleration,
all outstanding principal (with no penalty) and unpaid accrued interest will become payable.
(g) Additional interest
of 3% (or a total of 9%) upon an event of default.
HYLIION HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollar amounts in thousands, except for separately
indicated)
In addition, in the event the holder did not convert
upon an equity financing or change in control event, the noteholder may extend the maturity date of the January 2020 Note by five years
beyond the original maturity date.
In addition, in the event the holder did not convert
upon an equity financing, the interest rate on the January 2020 Note will automatically be adjusted to a rate of 4% per annum.
The Company assessed the embedded features within
the January 2020 Note and determined that the automatic and optional conversion features upon the next equity financing (share-settled
redemption features), the additional interest feature and the term extension feature met the definition of a derivative and were not clearly
and closely related to the host contract and required separate accounting. The Company also concluded that the conversion features did
not represent beneficial conversion features.
At issuance, the Company estimated the fair value
of the automatic and optional conversion features to be approximately $2.7 million.
At issuance, the Company concluded the fair value
of the additional interest and term extension features was de minimis.
The terms of the convertible notes payable include
certain restrictive covenants related to the Company’s ability to enter into certain transactions or agreements, pay dividends,
or take other similar corporate actions.
In connection with the reverse recapitalization,
immediately prior to the closing of the Business Combination, these convertible notes, plus accrued paid-in-kind interest, were converted
into the Company’s common stock on the closing date.
Payroll Protection Program loan:
During May 2020, the Company received loan proceeds in the amount of $0.9 million under the Payroll Protection Program (the “PPP”).
The PPP was established as part of Coronavirus Aid, Relief, and Economic Security Act and provides for loans to qualifying businesses
for amounts up to 2.5 times the average monthly payroll expenses of the business, subject to certain limitations. The loans and accrued
interest are forgivable after eight weeks so long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits,
rent and utilities, and so long as the borrower maintains its pre-funding employment and wage levels. Although the Company used the PPP
loan proceeds for purposes consistent with the provisions of the PPP and such usage met the criteria established for forgiveness of the
loan, the Company repaid the balance of the PPP loan plus accrued interest during the three months ended March 31, 2021.
HYLIION HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollar amounts in thousands, except for separately
indicated)
4. Investments
The amortized cost, unrealized gains and losses,
and fair value of our held-to-maturity investments at March 31, 2021 and December 31, 2020 are summarized as follows:
|
|
|
|
|
Fair Value Measurements as of
March 31, 2021
|
|
|
|
Amortized Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Fair Value
|
|
|
|
(in thousands)
|
|
Held-to-maturity investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
$
|
116,658
|
|
|
$
|
—
|
|
|
$
|
(24
|
)
|
|
$
|
116,634
|
|
State and municipal bonds
|
|
|
15,805
|
|
|
|
—
|
|
|
|
(21
|
)
|
|
|
15,784
|
|
Corporate bonds and notes
|
|
|
164,847
|
|
|
|
—
|
|
|
|
(644
|
)
|
|
|
164,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity investments
|
|
$
|
297,310
|
|
|
$
|
—
|
|
|
$
|
(689
|
)
|
|
$
|
296,621
|
|
As of March 31, 2021, the Company has determined
that the unrealized losses totaling $0.7 million is temporary and fully expects to recover the cost basis.
|
|
|
|
|
Fair Value Measurements as of
December 31, 2020
|
|
|
|
Amortized Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Fair Value
|
|
|
|
(in thousands)
|
|
Held-to-maturity investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury securities
|
|
$
|
149,996
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
149,995
|
|
Commercial paper
|
|
|
37,963
|
|
|
|
—
|
|
|
|
(15
|
)
|
|
|
37,948
|
|
Corporate bonds and notes
|
|
|
49,892
|
|
|
|
—
|
|
|
|
(63
|
)
|
|
|
49,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity investments
|
|
$
|
237,851
|
|
|
$
|
—
|
|
|
$
|
(79
|
)
|
|
$
|
237,772
|
|
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
|
(in thousands)
|
|
|
(in thousands)
|
|
Due in one year or less
|
|
$
|
144,829
|
|
|
$
|
144,788
|
|
|
$
|
201,881
|
|
|
$
|
201,864
|
|
Due after one year through five years
|
|
|
152,481
|
|
|
|
151,833
|
|
|
|
35,970
|
|
|
|
35,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity securities
|
|
$
|
297,310
|
|
|
$
|
296,621
|
|
|
$
|
237,851
|
|
|
$
|
237,772
|
|
HYLIION HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollar amounts in thousands, except for separately
indicated)
5. Fair Value Measurements
ASC Topic 820, Fair Value Measurements and Disclosures,
establishes a framework for measuring fair value and the corresponding disclosure requirements around fair value measurements. This topic
applies to all financial instruments that are being measured and reported on a fair value basis.
The following table shows the fair value measurements
of the Company's assets that are measured at fair value on a recurring basis as of March 31, 2021 and 2020.
|
|
Fair Value Measurements as of March 31, 2021
|
|
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Total
|
|
|
|
(in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
334,718
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
334,718
|
|
Held-to-maturity investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
—
|
|
|
|
116,634
|
|
|
|
—
|
|
|
|
116,634
|
|
State and municipal bonds
|
|
|
—
|
|
|
|
15,784
|
|
|
|
—
|
|
|
|
15,784
|
|
Corporate bonds and notes
|
|
|
—
|
|
|
|
164,203
|
|
|
|
—
|
|
|
|
164,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
334,718
|
|
|
$
|
296,621
|
|
|
$
|
—
|
|
|
$
|
631,339
|
|
|
|
Fair Value Measurements as of December 31, 2020
|
|
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Total
|
|
|
|
(in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
389,705
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
389,705
|
|
Held-to-maturity investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury securities
|
|
|
—
|
|
|
|
149,995
|
|
|
|
—
|
|
|
|
149,995
|
|
Commercial paper
|
|
|
—
|
|
|
|
37,948
|
|
|
|
—
|
|
|
|
37,948
|
|
Corporate bonds and notes
|
|
|
—
|
|
|
|
49,829
|
|
|
|
—
|
|
|
|
49,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
389,705
|
|
|
$
|
237,772
|
|
|
$
|
—
|
|
|
$
|
627,477
|
|
6. Commitments and
Contingencies
Legal Proceedings: The Company is
periodically involved in legal proceedings, legal actions and claims arising in the normal course of business, including proceedings relating
to product liability, intellectual property, safety and health, employment, and other matters. Management believes that the outcome of
such legal proceedings, legal actions and claims will not have a significant adverse effect on the Company’s financial position,
results of operations or cash flows.
HYLIION HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollar amounts in thousands, except for separately
indicated)
7. Warrants
On November 30, 2020, the Company issued a notice
of redemption of all its outstanding Public Warrants and Forward Purchase Warrants which was completed in December 2020. However, the
Private Warrants held by the initial holders thereof or permitted transferees of the initial holders were not subject to this redemption.
As of December 31, 2020, all outstanding Public Warrants and Forward Purchase Warrants were either exercised or redeemed by the holder.
As of December 31, 2020, the Company’s transfer agent received gross proceeds of $140.8 million corresponding to the exercise
of 15,786,127 warrants. However, due to the timing of the receipt of the warrant exercise and the cash, the Company’s transfer agent
issued 15,414,592 shares of common stock as of December 31, 2020. The remaining 371,535 shares of common stock were issued in January
2021. Additionally, as of December 31, 2020, the Company’s transfer agent had not yet remitted $12.0 million of the gross proceeds
associated with the shares of issued common stock to the Company and is included within prepaid expenses and other current assets on the
accompanying consolidated balance sheets as of December 31, 2020. There were 281,065 warrants not exercised by the end of the redemption
period that were redeemed for a price of $0.01 per warrant, and subsequently cancelled by the Company. The Company made the redemption
payment on these cancelled warrants in January 2021. Certain holders of the warrants elected a cashless exercise, resulting in the forfeiture
of 3,118,445 shares. The accrued liability totaling $4.3 million for warrants exercised but not settled represents all warrants that were
exercised as of December 31, 2020 under broker protects resulting in cash collection and share issuance being delayed until January 4,
2021.
8. Share-based
Compensation
During the three months ended March 31, 2021,
the Company granted 3,174,341 restricted stock units to certain employees, some of which vested at issuance, some of which will vest over
a period of three or four years, and some of which will vest based on achievement of performance criteria. The criteria for the awards
is based on the achievement of key milestones based on the Company's performance.
During the three months ended March 31, 2020,
the Company awarded 1,920,000 options to certain employees and non-employees, which will vest over a period that ranges from four to ten
years. The estimated grant date fair value of the options granted during the three months ended March 31, 2020 totaled $0.4 million.
Share-based compensation expense for the three
months ended March 31, 2021 and 2020 was $1.5 million and $0.1 million, respectively.
9. Net Loss Per
Share
The following table sets forth the computation of basic and diluted
net loss per share of common stock for the three months ended March 31, 2021 and 2020:
|
|
Three Months Ended
March, 31
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(Dollar amounts in thousands, except for shares and per share data)
|
|
Numerator:
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(16,562
|
)
|
|
$
|
(5,562
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted
|
|
|
170,249,708
|
|
|
|
86,762,463
|
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted
|
|
$
|
(0.10
|
)
|
|
$
|
(0.06
|
)
|
The Company excluded the following weighted average
potential common shares from the computation of diluted net loss per share for the three months ended March 31, 2021 and 2020 because
including them would have had an anti-dilutive effect:
|
|
Three Months Ended
March, 31
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Stock options, including incentive stock options and non-qualified
|
|
|
4,360,010
|
|
|
|
4,559,583
|
|
Unvested restricted stock units
|
|
|
3,174,341
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,534,351
|
|
|
|
4,559,583
|
|
HYLIION HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Dollar amounts in thousands, except for separately
indicated)
10. Supplemental Cash
Flow Information
The following table provides supplemental cash flow information for
the three months ended March 31, 2021 and 2020:
|
|
Three months ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
—
|
|
|
$
|
306
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
(321
|
)
|
|
$
|
(404
|
)
|
|
|
|
|
|
|
|
|
|
Operating cash flows from finance leases
|
|
$
|
(1
|
)
|
|
$
|
(9
|
)
|
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Hyliion Holdings Corp.
Opinion on the financial statements
We have audited the accompanying consolidated
balance sheets of Hyliion Holdings Corp. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated
statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the two years in the period ended
December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the
results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting
principles generally accepted in the United States of America.
Restatement of the financial statements
As discussed in Note 2, the 2020 consolidated financial statements
have been restated to correct a misstatement.
Basis for opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor
since 2020.
/s/ GRANT THORNTON LLP
Dallas, Texas
February 25, 2021 (except for the restatement
described in Note 2 and the effects thereof, as to which the date is July 8, 2021)
Hyliion
Holdings Corp.
Consolidated Balance Sheets – As Restated
(Dollar
amounts in thousands, except share and per share data)
|
|
December 31,
|
|
|
|
2020 as restated
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
389,705
|
|
|
$
|
6,285
|
|
Accounts receivable
|
|
|
92
|
|
|
|
145
|
|
Prepaid expenses and other current assets
|
|
|
20,690
|
|
|
|
414
|
|
Short-term investments
|
|
|
201,881
|
|
|
|
-
|
|
Total current assets
|
|
|
612,368
|
|
|
|
6,844
|
|
Property and equipment, net
|
|
|
1,171
|
|
|
|
1,635
|
|
Operating lease right-of-use assets
|
|
|
5,055
|
|
|
|
4,976
|
|
Intangible assets, net
|
|
|
332
|
|
|
|
429
|
|
Other assets
|
|
|
193
|
|
|
|
212
|
|
Long-term investments
|
|
|
35,970
|
|
|
|
-
|
|
Total assets
|
|
$
|
655,089
|
|
|
$
|
14,096
|
|
Liabilities and stockholders’ equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,890
|
|
|
$
|
1,156
|
|
Convertible notes payable derivative liabilities
|
|
|
-
|
|
|
|
3,029
|
|
Current portion of operating lease liabilities
|
|
|
734
|
|
|
|
953
|
|
Current portion of debt
|
|
|
49
|
|
|
|
6,720
|
|
Accrued expenses and other current liabilities
|
|
|
6,264
|
|
|
|
500
|
|
Total current liabilities
|
|
|
8,937
|
|
|
|
12,358
|
|
Operating lease liabilities, net of current portion
|
|
|
5,076
|
|
|
|
4,803
|
|
Convertible notes payable derivative liabilities, net of current
portion
|
|
|
-
|
|
|
|
5,322
|
|
Debt, net of current portion
|
|
|
908
|
|
|
|
9,682
|
|
Total liabilities
|
|
|
14,921
|
|
|
|
32,165
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit)
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 250,000,000 shares authorized;
169,316,421 and 86,762,463 shares issued and outstanding at December 31, 2020 and 2019, respectively
|
|
|
19
|
|
|
|
9
|
|
Additional paid-in capital
|
|
|
364,998
|
|
|
|
30,888
|
|
Accumulated earnings (deficit)
|
|
|
275,151
|
|
|
|
(48,966
|
)
|
Total stockholders’ equity (deficit)
|
|
|
640,168
|
|
|
|
(18,069
|
)
|
Total liabilities and stockholders’ equity (deficit)
|
|
$
|
655,089
|
|
|
$
|
14,096
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
Hyliion
Holdings Corp.
Consolidated Statements of Operations – As Restated
(Dollar
amounts in thousands, except share and per share data)
|
|
Years Ended December 31,
|
|
|
|
2020 as restated
|
|
|
2019
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
Research and development
|
|
$
|
(12,598
|
)
|
|
$
|
(9,269
|
)
|
Selling, general and administrative expenses
|
|
|
(9,585
|
)
|
|
|
(2,730
|
)
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(22,183
|
)
|
|
|
(11,999
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(5,459
|
)
|
|
|
(3,260
|
)
|
Change in fair value of convertible notes payable derivative liabilities
|
|
|
(1,358
|
)
|
|
|
1,119
|
|
Change in fair value of warrant liabilities
|
|
|
363,299
|
|
|
|
-
|
|
Other income (expense)
|
|
|
(12
|
)
|
|
|
27
|
|
Loss on extinguishment of debt
|
|
|
(10,170
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
346,300
|
|
|
|
(2,114
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
324,117
|
|
|
$
|
(14,113
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share, basic
|
|
$
|
3.11
|
|
|
$
|
(0.16
|
)
|
Net loss per share, diluted
|
|
$
|
(0.35
|
)
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding, basic
|
|
|
104,324,059
|
|
|
|
86,643,714
|
|
Weighted-average shares outstanding, diluted
|
|
|
112,570,960
|
|
|
|
86,643,714
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
Hyliion
Holdings Corp.
Consolidated Statements of Stockholders’ Equity (Deficit)
– As Restated
(Dollar
amounts in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
A-1 Redeemable,
Convertible Preferred Stock
|
|
|
Series
A-2 Redeemable,
Convertible Preferred Stock
|
|
|
Series
A-3 Redeemable,
Convertible Preferred Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-In
|
|
|
Accumulated
Earnings
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
(Deficit)
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2018
|
|
|
23,460,903
|
|
|
$
|
20,750
|
|
|
|
8,793,755
|
|
|
$
|
3,893
|
|
|
|
2,545,155
|
|
|
$
|
2,026
|
|
|
|
24,453,750
|
|
|
$
|
24
|
|
|
$
|
4,072
|
|
|
$
|
(34,853
|
)
|
|
$
|
(30,757
|
)
|
Retroactive
application of recapitalization (See Note 4)
|
|
|
(23,460,903
|
)
|
|
|
(20,750
|
)
|
|
|
(8,793,755
|
)
|
|
|
(3,893
|
)
|
|
|
(2,545,155
|
)
|
|
|
(2,026
|
)
|
|
|
61,890,680
|
|
|
|
(15
|
)
|
|
|
26,684
|
|
|
|
-
|
|
|
|
26,669
|
|
Adjusted
balance, beginning of period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
86,344,430
|
|
|
|
9
|
|
|
|
30,756
|
|
|
|
(34,853
|
)
|
|
|
(4,088
|
)
|
Exercise
of common stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
418,033
|
|
|
|
-
|
|
|
|
7
|
|
|
|
-
|
|
|
|
7
|
|
Share-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
125
|
|
|
|
-
|
|
|
|
125
|
|
Net
income (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(14,113
|
)
|
|
|
(14,113
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
86,762,463
|
|
|
|
9
|
|
|
|
30,888
|
|
|
|
(48,966
|
)
|
|
|
(18,069
|
)
|
Exercise
of common stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,112,160
|
|
|
|
-
|
|
|
|
121
|
|
|
|
-
|
|
|
|
121
|
|
Conversion
of convertible notes payable to common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,404,367
|
|
|
|
-
|
|
|
|
44,039
|
|
|
|
-
|
|
|
|
44,039
|
|
Business
Combination and PIPE financing
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61,622,839
|
|
|
|
6
|
|
|
|
153,147
|
|
|
|
-
|
|
|
|
153,153
|
|
Common
stock issued for warrants exercised, net of issuance cost
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,414,592
|
|
|
|
4
|
|
|
|
136,512
|
|
|
|
-
|
|
|
|
136,516
|
|
Redemption
of unexercised warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
(3
|
)
|
Share-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
294
|
|
|
|
-
|
|
|
|
294
|
|
Net
income (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
324,117
|
|
|
|
324,117
|
|
Balance
at December 31, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
169,316,421
|
|
|
$
|
19
|
|
|
$
|
364,998
|
|
|
$
|
275,151
|
|
|
$
|
640,168
|
|
The accompanying notes are
an integral part of these consolidated financial statements.
Hyliion
Holdings Corp.
Consolidated Statements of Cash Flows – As Restated
(Dollar
amounts in thousands, except share data)
|
|
Years Ended December 31,
|
|
|
|
2020 restated
|
|
|
2019
|
|
Operating activities:
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
324,117
|
|
|
$
|
(14,113
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
850
|
|
|
|
1,028
|
|
Loss on extinguishment of debt
|
|
|
10,170
|
|
|
|
-
|
|
Noncash lease expense
|
|
|
928
|
|
|
|
1,312
|
|
Paid-in-kind interest on convertible notes payable
|
|
|
1,085
|
|
|
|
723
|
|
Amortization of debt discount
|
|
|
4,237
|
|
|
|
2,485
|
|
Share-based compensation
|
|
|
294
|
|
|
|
125
|
|
Change in fair value of convertible notes payable derivative liabilities
|
|
|
1,358
|
|
|
|
(1,118
|
)
|
Change in fair value of contingent consideration liability
|
|
|
-
|
|
|
|
(27
|
)
|
Change in fair value of warrant liability
|
|
|
(363,299
|
)
|
|
|
-
|
|
Change in operating assets and liabilities, net of effects of business acquisition:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
53
|
|
|
|
(28
|
)
|
Prepaid expenses and other current assets
|
|
|
(8,301
|
)
|
|
|
(62
|
)
|
Other assets
|
|
|
19
|
|
|
|
106
|
|
Accounts payable
|
|
|
734
|
|
|
|
(684
|
)
|
Accrued expenses and other current liabilities
|
|
|
5,764
|
|
|
|
(21
|
)
|
Operating lease liabilities
|
|
|
(953
|
)
|
|
|
(798
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(22,944
|
)
|
|
|
(11,072
|
)
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(311
|
)
|
|
|
(349
|
)
|
Purchase of investments
|
|
|
(237,851
|
)
|
|
|
-
|
|
Proceeds from sale of property and equipment
|
|
|
22
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(238,140
|
)
|
|
|
(349
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Business Combination and PIPE financing, net of issuance costs paid
|
|
|
516,454
|
|
|
|
-
|
|
Proceeds from the exercise of stock warrants
|
|
|
124,536
|
|
|
|
-
|
|
Proceeds from convertible notes payable issuance and derivative liabilities
|
|
|
3,200
|
|
|
|
16,803
|
|
Proceeds from Paycheck Protection Program loan
|
|
|
908
|
|
|
|
-
|
|
Payments for deferred financing costs
|
|
|
(468
|
)
|
|
|
-
|
|
Repayments on finance lease obligations
|
|
|
(247
|
)
|
|
|
(201
|
)
|
Proceeds from exercise of common stock options
|
|
|
121
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
644,504
|
|
|
|
16,609
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents:
|
|
|
383,420
|
|
|
|
5,188
|
|
Cash and cash equivalents, beginning of period
|
|
|
6,285
|
|
|
|
1,097
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
389,705
|
|
|
$
|
6,285
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
Note
1. Description of business and basis of presentation
Hyliion Holdings Corp. and its wholly owned subsidiary,
designs and develops hybrid and electrified powertrain systems for long haul “Class 8” semi-tractors which modify semi-tractors
into Hybrid and fully electric range extender vehicles, respectively.
Hyliion Holdings Corp.’s Hybrid systems
utilize intelligent electric drive axles with advanced algorithms and battery technology to optimize fuel savings and vehicle performance
with reduced emissions, enabling fleets to access an easy, efficient way to decrease fuel expenses, lower emissions and/or improve vehicle
performance.
Hyliion Holdings Corp.’s fully electric
range extender systems utilize an intelligent electric powertrain with advanced algorithms to optimize emissions performance and efficiency
with no new infrastructure required. The Hypertruck ERX system enables fleets to reduce the cost of ownership while providing the ability
to deliver net-negative carbon emissions and operate fully electric when needed.
Hyliion Holdings Corp. is in a pre-commercialization
stage of development in which its electric Hybrid system is in the testing phase and the Hypertruck ERX system is in the prototype phase.
Basis of Presentation and Principles
of Consolidation: On the Closing Date, Tortoise Acquisition Corp (“TortoiseCorp”) entered into a business
combination agreement (the “Business Combination”) with each of the shareholders of Legacy Hyliion. Pursuant to the
Business Combination, TortoiseCorp acquired all of the issued and outstanding shares of common stock from the Legacy Hyliion
shareholders. In connection with the closing of the transaction, Tortoise Corp. changed its name to Hyliion Holdings Corp. For more
information on this transaction see Note 4.
On the Closing Date, and in connection with the
closing of the Business Combination, TortoiseCorp changed its name to Hyliion Holdings Corp. (the “Company” or “Hyliion”)
and the Company’s common stock began trading on the New York Stock Exchange under the ticker symbol HYLN. Legacy Hyliion was deemed
the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification
(“ASC”) 805. The determination was primarily based on Legacy Hyliion’s shareholders prior to the Business Combination
having a majority of the voting interests in the combined company, Legacy Hyliion’s board of directors comprising a majority of
the board of directors of the combined company, Legacy Hyliion’s existing shareholders’ control over decisions regarding
the election and removal of directors and officers of the combined company’s board of directors, and Legacy Hyliion’s senior
management comprising the senior management of the combined company. Accordingly, for accounting purposes, the Business Combination was
treated as the equivalent of Legacy Hyliion issuing stock for the net assets of TortoiseCorp, accompanied by a recapitalization. The
net assets of TortoiseCorp are stated at historical cost, with no goodwill or other intangible assets recorded.
While
TortoiseCorp was the legal acquirer in the Business Combination, because Legacy Hyliion was deemed the accounting acquirer, the historical
financial statements of Legacy Hyliion became the historical financial statements of the combined company, upon the consummation of the
Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Legacy
Hyliion prior to the Business Combination; (ii) the combined results of TortoiseCorp and Legacy Hyliion following the closing of the
Business Combination; (iii) the assets and liabilities of Legacy Hyliion at their historical cost; and (iv) the Company’s equity
structure for all periods presented.
In accordance with guidance applicable to these
circumstances, the equity structure has been restated in all comparative periods up to the Closing Date, to reflect the number of shares
of the Company’s common stock, $0.0001 par value per share, issued to Legacy Hyliion shareholders and Legacy Hyliion convertible
noteholders in connection with the recapitalization transaction. As such, the shares and corresponding capital amounts and earnings per
share related to Legacy Hyliion redeemable convertible preferred stock and Legacy Hyliion common stock prior to the Business Combination
have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination.
The
accompanying consolidated financial statements include the accounts of Hyliion Holdings Corp. and its wholly-owned subsidiary. Intercompany
transactions and balances have been eliminated upon consolidation. The consolidated financial statements and accompanying notes have
been prepared in accordance with generally accounting principles in the United States of America (“U.S. GAAP”) and in accordance
with the rules and regulations of the Unites States Securities and Exchange Commission (“SEC”). Any reference in these footnotes
to the applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification and Accounting
Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Liquidity:
These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and settlement of liabilities in the normal course of business. The Company is an early stage growth company in the pre-commercialization
stage of development and has generated negative cash flows from operating activities since inception.
On October 1, 2020, the Company consummated the
Business Combination and raised net proceeds of $516.5 million net of transaction costs and expenses. As of December 31, 2020, all outstanding
warrants were either exercised or redeemed, with gross proceeds of $140.8 million raised, of which $16.3 million was collected during
the first quarter of 2021 (see Note 7). As of December 31, 2020, the Company had a cash and cash equivalents balance of $389.7 million
and total investments of $237.9 million. Based on this, the Company has sufficient funds to continue to execute its business strategy
for the next twelve months.
Note 2. Restatement of Previously Issued
Financial Statements
On April 12, 2021, the Acting Director of
the Division of Corporation Finance and Acting Chief Accountant of the Securities and Exchange Commission 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 in part on provisions in warrant agreements that provide for
potential changes to the settlement amounts dependent upon the characteristics of the warrant holder and because the holder of a warrant
is not an input into the pricing of a fixed-for-fixed option on equity shares, such provision would preclude the warrant from being classified
in equity and thus the warrant should be classified as a liability. As a result of the SEC Statement, the Company reevaluated the accounting
treatment of the Warrants issued in connection with the IPO of TortoiseCorp and recorded in equity on the Company’s consolidated
balance sheet as a result of the merger and reverse recapitalization occurring on October 1, 2020. The Company concluded that the Warrants
should have been recorded at fair value as a liability in the Company’s consolidated balance sheet.
All public and private warrants were exercised
by December 31, 2020, so the warrant liability on the Company’s consolidated balance sheet recorded on the date of the acquisition
has been extinguished, and the change in the fair value of the liability as of the exercise date was recognized as a gain in the Company’s
consolidated statement of operations.
While all warrants were exercised as of December
31, 2020, 371,535 warrants which were exercised on December 30, 2020 were broker protected, resulting in cash collection and share issuance
being delayed until January 4, 2021. Accounts receivable for the net amount due from investors of $4.3 million and an associated liability
for these common shares to be issued has been recognized at the balance sheet date and included below.
Immaterial Error Correction: Subsequent
to the filing of the Form 10K/A on May 17, 2020, the Company determined that in connection with the restatement for the changes in the
fair value warrant liability, the diluted earnings per share was improperly disclosed. The Company has corrected the immaterial error
in the previously restated financial statements to reflect the correct diluted net loss per share. This correction did not have any effect
on the Company’s cash position, loss from operations, net income or cashflows. This correction resulted in a diluted net loss per
share of $(0.35) compared to $2.93 as disclosed in the previously filed Form 10K/A.
The restatement and immaterial error
correction adjustments reflect the entries to record the initial warrant liability from the Warrants, to revalue the warrant
liability to the then fair value as of the exercise date, the subsequent extinguishment of the liability, and the accounts
receivable and associated liability arising from the broker protected warrants exercised but not settled. The following presents a
reconciliation of the consolidated balance sheet as previously reported to the restated amounts as of December 31, 2020 (in
thousands):
|
|
For the Year Ended
|
|
|
|
December 31, 2020
|
|
|
|
As Reported
|
|
|
Restatement Impact
|
|
|
As Restated
|
|
Consolidated Statement of Operations:
|
|
|
|
|
|
|
|
|
|
Change in fair value of warrant liabilities
|
|
$
|
—
|
|
|
$
|
363,299
|
|
|
$
|
363,299
|
|
Net income (loss)
|
|
$
|
(39,182
|
)
|
|
$
|
363,299
|
|
|
$
|
324,117
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.38
|
)
|
|
$
|
3.49
|
|
|
$
|
3.11
|
|
Earnings (loss) per share, diluted
|
|
$
|
2.93
|
|
|
$
|
(3.28
|
)
|
|
$
|
(0.35
|
)
|
Weighted-average shares outstanding, diluted
|
|
|
110,696,489
|
|
|
|
1,874,471
|
|
|
|
112,570,960
|
|
|
|
As of
|
|
|
|
December
31, 2020
|
|
|
|
As Reported
|
|
|
Restatement
Impact
|
|
|
As
Restated
|
|
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
$
|
16,408
|
|
|
$
|
4,282
|
|
|
$
|
20,690
|
|
Total current assets
|
|
$
|
608,086
|
|
|
$
|
4,282
|
|
|
$
|
612,368
|
|
Total assets
|
|
$
|
650,807
|
|
|
$
|
4,282
|
|
|
$
|
655,089
|
|
Warrant liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued expenses and other current liabilities
|
|
$
|
1,982
|
|
|
$
|
4,282
|
|
|
$
|
6,264
|
|
Total current liabilities
|
|
$
|
4,655
|
|
|
$
|
4,282
|
|
|
$
|
8,937
|
|
Total liabilities
|
|
$
|
10,639
|
|
|
$
|
4,282
|
|
|
$
|
14,921
|
|
Common Stock
|
|
$
|
17
|
|
|
$
|
2
|
|
|
$
|
19
|
|
Additional paid-in-capital
|
|
$
|
728,299
|
|
|
$
|
(363,301
|
)
|
|
$
|
364,998
|
|
Accumulated earnings
|
|
$
|
(88,148
|
)
|
|
$
|
363,299
|
|
|
$
|
275,151
|
|
Total equity (deficit)
|
|
$
|
640,168
|
|
|
$
|
—
|
|
|
$
|
640,168
|
|
|
|
As of
|
|
|
|
December 31, 2020
|
|
|
|
As Reported
|
|
|
Restatement Impact
|
|
|
As Restated
|
|
Consolidated Statement of Stockholders’ Equity (Deficit):
|
|
|
|
|
|
|
|
|
|
Common Stock Par Value
|
|
$
|
17
|
|
|
$
|
2
|
|
|
$
|
19
|
|
Additional paid-in-capital
|
|
$
|
728,299
|
|
|
$
|
(363,301
|
)
|
|
$
|
364,998
|
|
Accumulated earnings
|
|
$
|
(88,148
|
)
|
|
$
|
363,299
|
|
|
$
|
275,151
|
|
|
|
For the Year Ended
|
|
|
|
December 31, 2020
|
|
|
|
As Reported
|
|
|
Restatement Impact
|
|
|
As Restated
|
|
Consolidated Statement of Cash Flow:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(39,182
|
)
|
|
$
|
363,299
|
|
|
$
|
324,117
|
|
Change in fair value of warrant liability
|
|
$
|
—
|
|
|
$
|
(363,299
|
)
|
|
$
|
(363,299
|
)
|
Note
3. Summary of significant accounting policies
Emerging
Growth Company: Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth
companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that
have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities
Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides
that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth
companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period
which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard,
until such time the Company is no longer considered to be an emerging growth company. At times, the Company may elect to early adopt
a new or revised standard.
Use
of estimates and uncertainty of the coronavirus pandemic: The preparation of financial statements in conformity with U.S. GAAP
requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of expenses during the reporting period.
The Company’s most significant estimates and judgments involve valuation of share-based compensation, including the fair value
of common stock prior to the Business Combination, and the valuation of the convertible notes payable derivative liability. Management
bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the
basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates, and
such differences could be material to the Company’s consolidated financial statements.
On January 30, 2020, the World Health Organization
declared the coronavirus outbreak a “Public Health Emergency of International Concern” and on March 11, 2020, declared
the coronavirus outbreak a pandemic. In mid-March 2020, U.S. State Governors, local officials and leaders outside of the U.S. began ordering
various “shelter-in-place” orders, which have had various impacts on the U.S. and global economies. This has required greater
use of estimates and assumptions in the preparation of the unaudited consolidated financial statements.
As
the coronavirus pandemic continues to evolve, the Company believes the extent of the impact to its businesses, operating results, cash
flows, liquidity and financial condition will be primarily driven by the severity and duration of the coronavirus pandemic, the pandemic’s
impact on the U.S. and global economies and the timing, scope and effectiveness of federal, state and local governmental responses to
the pandemic. Those primary drivers are beyond the Company’s knowledge and control, and as a result, at this time the Company is
unable to predict the cumulative impact, both in terms of severity and duration, that the coronavirus pandemic will have on its business,
operating results, cash flows and financial condition, but it could be material if the current circumstances continue to exist for a
prolonged period. Although the Company has made its best estimates based upon current information, actual results could materially differ
from the estimates and assumptions developed by management. If so, the Company may be subject to future impairment charges as well as
changes to recorded reserves and valuations.
Segment
information: ASC 280, Segment Reporting, defines operating segments as components of an enterprise where discrete financial
information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate
resources and in assessing performance. The Company operates as a single operating segment. The Company’s chief operating decision
maker (“CODM”) is the chief executive officer, who has ultimate responsibility for the operating performance of the Company
and the allocation of resources. The CODM uses cash flows as the primary measure to manage the business and does not segment the business
for internal reporting or decision making.
Concentration
of supplier risk: The Company is dependent on certain suppliers, the majority of which are single source suppliers, and the inability
of these suppliers to deliver necessary components of the Company’s products in a timely manner at prices, quality levels and volumes
that are acceptable, or the Company’s inability to efficiently manage these components from these suppliers, could have a material
adverse effect on the Company’s business, prospects, financial condition and operating results.
Cash and cash equivalents: The
Company considers all highly liquid investments with a maturity date of 90 days or less at the time of purchase to be cash and cash equivalents
only if in checking, savings or money market accounts. Cash and cash equivalents include cash held in banks and money market accounts.
Cash equivalents are carried at cost, which approximates fair value.
The
Company maintains cash in excess of federally insured limits at financial institutions. The Company makes such deposits with entities
it believes are of high credit quality and has not incurred any losses related to these balances to date. Management believes its credit
risk, with respect to the financial institutions to be minimal.
Accounts
receivable: Accounts receivable are stated at a gross invoice amount, net of an allowance for doubtful accounts. The allowance
for doubtful accounts is maintained at a level considered adequate to provide for potential account losses on the balance based on management’s
evaluation of the anticipated impact of current economic conditions, changes in the character and size of the balance, past and expected
future loss experience, among other pertinent factors. As of December 31, 2020 and 2019, there was no allowance for doubtful accounts
required based on management’s evaluation.
Investments: The Company’s
investments consist of corporate bonds, treasury securities and commercial paper, all of which are classified as held-to-maturity, with
a maturity date of 36-months or less at the time of purchase. Management determines the appropriate classification of investments at
the time of purchase and re-evaluates such designation as of each balance sheet date. Investments are classified as held-to-maturity
when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized
cost, adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in investment income.
Interest on securities classified as held-to-maturity is included in investment income.
The
Company uses the specific identification method to determine the cost basis of securities sold.
Investments
are impaired when a decline in fair value is judged to be other-than-temporary. The Company evaluates an investment for impairment by
considering the length of time and extent to which market value has been less than cost or amortized cost, the financial condition and
near-term prospects of the issuer as well as specific events or circumstances that may influence the operations of the issuer and the
Company’s intent to sell the security or the likelihood that it will be required to sell the security before recovery of the entire
amortized cost. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to other income
(expense) and a new costs basis in the investment is established.
Fair
value measurements: ASC 820, Fair Value Measurements, clarifies that fair value is an exit price, representing the amount
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such,
fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing
an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value as follows:
Level
I: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company can access at the measurement
date.
Level
II: Significant other observable inputs other than level I prices such as quoted prices for similar assets or liabilities,
quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market
data.
Level
III: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants
would use in pricing an asset or liability.
An
asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input
that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize
the use of unobservable inputs.
Assets
and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in ASC 820:
|
●
|
Market
approach: Prices and other relevant information generated by market transactions involving
identical or comparable assets or liabilities.
|
|
●
|
Cost
approach: Amount that would be required to replace the service capacity of an asset (replacement
cost).
|
|
●
|
Income
approach: Techniques to convert future amounts to a single present value amount based upon
market expectations (including present value techniques, option pricing and excess earnings
models)
|
The
Company believes its valuation methods are appropriate and consistent with other market participants, however the use of different methodologies
or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the
reporting date.
The Company’s financial instruments
consist of cash and cash equivalents, accounts receivable, investments, accounts payable, accrued expenses, contingent consideration
liability, convertible notes payable derivative liability, warrant liabilities, and convertible notes payable. The carrying value
of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximates fair value because of the short-term
nature of those instruments. We estimate the fair value of our convertible notes payable using Level II and Level III inputs by discounting
the future cash flows using current interest rates at which we could obtain similar borrowings in consideration of the estimated enterprise
value of the Company. The fair value of corporate bonds, treasury securities and commercial paper are based on quoted prices for identical
or similar instruments in markets that are not active. As a result, corporate bonds, treasury securities and commercial paper are classified
within Level II of the fair value hierarchy. The fair value of the Company’s public warrant liabilities are based on
Level I inputs, while the fair value of the private warrants is determined using the trading price of the public warrants, a Level II
input.
The Company’s assets and liabilities
that are measured at fair value on a recurring basis include the Company’s contingent consideration liability, warrant liabilities,
and convertible notes payable derivative liabilities (See Note 5).
Prepaid expenses and other current assets:
Prepaid expenses and other current assets include prepaid insurance, prepaid rent, supplies, and amounts owed to the Company
from the Company’s transfer agent (see Note 8) which are expected to be recognized, received or realized within the next 12 months.
Property
and equipment, net: Property and equipment, net is stated at cost less accumulated depreciation, or if acquired in a business
combination, at fair value as of the date of acquisition. Depreciation is calculated using the straight-line method, based upon the following
estimated useful lives:
Production machinery and equipment
|
|
2 to 7 years
|
Vehicles
|
|
3 to 7 years
|
Leasehold improvements
|
|
shorter of lease term or 7 years
|
Demo fleet systems
|
|
2 to 3 years
|
Furniture and fixtures
|
|
3 years
|
Computers and related equipment
|
|
3 to 7 years
|
Major
renewals and improvements are capitalized, while replacements, maintenance and repairs, which do not improve or extend the lives of the
respective assets, are expensed as incurred. When property and equipment is retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the accounts, and any gain or loss on the disposition is recorded in the consolidated statement of operations
as a component of other (expense) income.
Intangible
assets, net: Intangible assets consist of developed technology and a non-compete agreement and are amortized over their estimated
useful life which range from three to six years.
Impairment
of long-lived assets: The Company reviews long-lived assets, including property and equipment and intangible assets with definite
lives, for impairment whenever events or changes in circumstances indicate that an asset group’s carrying amount may not be recoverable.
The Company conducts its long-lived asset impairment analysis in accordance with ASC 360-10, Impairment or Disposal of Long-Lived
Assets, which requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely
independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future
cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge
is measured as the amount by which the carrying amount of the asset group exceeds its fair value.
Revenue:
The Company follows the five steps to recognize revenue from contracts with customers under ASC 606, Revenue from Contracts
with Customers (“ASC 606”), which are:
|
●
|
Step
1: Identify the contract(s) with a customer
|
|
●
|
Step
2: Identify the performance obligations in the contract
|
|
●
|
Step
3: Determine the transaction price
|
|
●
|
Step
4: Allocate the transaction price to the performance obligations in the contract
|
|
●
|
Step
5: Recognize revenue when (or as) a performance obligation is satisfied
|
The
Company intends to generate revenue from the sale of its hybrid and electrified drive systems for the long haul “Class 8”
semi-tractors. However, since the Company is still in the pre-commercialization stage, it has not generated revenue from the sale of
the products.
The
Company did not enter into any agreement that meets the definition of a contract with a customer that would be accounted for under ASC
606 through December 31, 2020.
Leases:
Lessee:
The Company determines if an arrangement is a lease at inception of the contract. Operating leases are included in operating lease
right-of-use (“ROU”) assets, current portion of operating lease liabilities, and operating lease liabilities, net of current
portion in the accompanying consolidated balance sheets. Finance leases are included in property and equipment, net, current portion
of long-term debt, and long-term debt, net of current portion in the accompanying consolidated balance sheets.
ROU
assets represent the Company’s right to use underlying assets for the lease term, and lease liabilities represent the Company’s
obligation to make lease payments arising from the leases. ROU assets and lease liabilities are recognized at the commencement date based
on the present value of lease payments over the lease term. The discount rate used to calculate the present value for lease payments
is the Company’s incremental borrowing rate, which is determined based on information available at lease commencement and is equal
to the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term in an amount equal
to the lease payments in a similar economic environment. The Company uses the implicit rate when readily determinable.
The
Company has entered into operating leases for corporate offices having initial lease terms of one to eight years. The Company has entered
into finance leases primarily for vehicles and equipment, having initial terms of three years.
The
Company’s real estate leases may include one or more options to renew, with the renewal extending the lease term for an additional
one to five years. The exercise of lease renewal option is at the Company’s sole discretion. In general, the Company does not consider
renewal option to be reasonably likely to be exercised, therefore renewal option are generally not recognized as part of the ROU assets
and lease liabilities. Lease costs for lease payments are recognized on a straight-line basis over the lease term, unless there is a
transfer of title or purchase option reasonably certain to be exercised. The Company does not record operating leases with an initial
term of twelve months or less (“short-term leases”) in the consolidated balance sheets.
The
Company’s vehicle and equipment leases may include transfer rights or options to purchase at the end of the lease that the Company
is reasonably certain to exercise. Interest expense is recognized using the effective interest rate method, and the ROU asset is amortized
over the useful life of the underlying asset.
Lessor:
The Company also enters into arrangements whereby space within the real estate is subleased. At the lease commencement date these
subleases are recognized as operating leases. Operating leases are recognized on a straight-line basis over the lease term.
The
Company has entered into various trial and evaluation agreements that contain an operating lease component that is within the scope of
ASC 842, Leases (“ASC 842”). These agreements also contain non-lease components related to certain stand-ready services
where control transfers over time over the same period and based on the same pattern as the lease component. Because the Company has
determined the lease component is the most predominant component of the arrangement and the timing and pattern of transfer for the lease
and non-lease components associated with the lease component are the same, the Company has decided to elect the practical expedient not
to separate the lease and non-lease component and accounts for the entire arrangement under ASC 842.
The
trial and evaluation agreements contain only variable payments not based on an index or rate as a result of refund provisions within
those contracts. The Company records accounts receivable when the Company meets the criteria within the trial and evaluation agreements
to invoice the lessee. In accordance with ASC 842, the Company recognizes variable lease payments as profit or loss in the period in
which the changes in facts and circumstances on which the variable lease payments are based occur, which will generally be the end of
the trial period when the customer refund rights lapse. During the years ended December 31, 2020 and 2019, the Company has not recognized
any lease income related to these trial and evaluation agreements either because the Company has not received any consideration from
the lease contracts, or the uncertainty related to the consideration received has not been resolved.
Certain
of the Company’s lessee and lessor lease agreements contain both lease and non-lease components, which are generally accounted
for as a single lease component. Additionally, for certain vehicle leases, we apply a portfolio approach to effectively account for the
finance lease ROU assets and liabilities.
Income
taxes: The Company accounts for income taxes in accordance with ASC 740, Income Taxes, under which deferred tax liabilities
and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts
and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be realized.
Due
to the Company’s history of losses since inception, the net deferred tax assets have
been fully offset by a valuation allowance as of December 31, 2020 and 2019. Uncertain tax
positions taken or expected to be taken in a tax return are accounted for using the more
likely than not threshold for financial statement recognition and measurement. For the years
ended December 31, 2020 and 2019, there were no uncertain tax positions taken or expected
to be taken in the Company’s tax returns.
Share-based
compensation: The Company accounts for share-based compensation in accordance with ASC 718, Compensation – Stock Compensation,
under which shared based payments that involve the issuance of common stock to employees and nonemployees and meet the criteria for equity-classified
awards are recognized in the financial statements as share-based compensation expense based on the fair value on the date of grant. The
Company issues stock option awards and restricted stock awards to employees and nonemployees.
The
Company utilizes the Black-Scholes model to determine the fair value of the stock option awards, which requires the input of subjective
assumptions. These assumptions include estimating (a) the length of time grantees will retain their vested stock options before exercising
them for employees and the contractual term of the option for nonemployees (“expected term”), (b) the volatility of the Company’s
common stock price over the expected term, (c) expected dividends, and (d) the fair value of a share of common stock prior to the Business
Combination. After the closing of the Business Combination, the Company’s board of directors determined the fair value of each
share of common stock underlying stock-based awards based on the closing price of the Company’s common stock as reported by the
NYSE on the date of grant. The Company has elected to recognize the adjustment to share-based compensation expense in the period in which
forfeitures occur.
The
assumptions used in the Black-Scholes model are management’s best estimates, but the estimates involve inherent uncertainties and
the application of management judgment (see Note 9). As a result, if other assumptions had been used, the recorded share-based compensation
expense could have been materially different from that depicted in the financial statements.
Research
and development expense: Research and development costs did not meet the requirements to be recognized as an asset as the associated
future benefits were at best uncertain and there was no alternative future use at the time the costs were incurred. Research and development
costs include, but are not limited to, outsourced engineering services, allocated facilities costs, depreciation on equipment utilized
in research and development activities, internal engineering and development expenses, materials, and employee related expenses (including
salaries, benefits, travel, and share-based compensation) related to development of the Company’s products and services.
Net income (loss) per share: Basic
earnings (loss) per share (“EPS”) are computed by dividing net income (loss) (the numerator) by the weighted average number
of common shares outstanding for the period (the denominator). Diluted EPS attributable to common shareholders is computed by adjusting
net income (loss) by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period.
Potential common shares include shares issuable upon exercise of stock options and vesting of restricted stock awards (see Note 9). The
number of potential common shares outstanding are calculated using the treasury stock or if-converted method.
Recent
accounting pronouncements issued, not yet adopted:
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses of Financial
Instruments, which, together with subsequent amendments, amends the requirement on the measurement and recognition of expected credit
losses for financial assets held to replace the incurred loss model for financial assets measured at amortized cost and require entities
to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions,
and reasonable and supportable forecasts. ASU 2016-13 is effective for the Company beginning January 1, 2023, with early adoption
permitted. The Company is currently in the process of evaluating the effects of this pronouncement on the Company’s financial statements
and does not expect it to have a material impact on the consolidated financial statements.
In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended
to simplify various aspects related to accounting for income taxes. The pronouncement is effective for fiscal years, and for interim
periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. ASU 2019-12 is effective for
the Company beginning January 1, 2021, with early adoption permitted. The Company is currently in the process of evaluating the
effects of this pronouncement on the Company’s financial statements and does not expect it to have a material impact on the financial
statements.
Note
4. Reverse Recapitalization
On October 1, 2020, Legacy Hyliion and TortoiseCorp
consummated the merger contemplated by the Business Combination, with Legacy Hyliion surviving the merger as a wholly-owned subsidiary
of TortoiseCorp.
Upon
the closing of the Business Combination, TortoiseCorp’s certificate of incorporation was amended and restated to, among other things,
increase the total number of authorized shares of capital stock to 260,000,000 shares, of which 250,000,000 shares were designated common
stock, $.0001 par value per share, and of which 10,000,000 shares were designated preferred stock, $0.0001 par value per share.
Immediately
prior to the closing of the Business Combination, each
|
●
|
issued and
outstanding share of Legacy Hyliion’s redeemable, convertible preferred stock, was
converted into shares Legacy Hyliion common stock based on a one-to-one ratio (see Note 8).
The Business Combination is accounted for with a retrospective application of the Business
Combination that results in 34,799,813 shares of redeemable, convertible preferred stock
converting into the same number of shares of Legacy Hyliion common stock.
|
|
●
|
convertible
note payable, plus accrued paid-in-kind interest, was converted into an aggregate 2,336,235
shares of Legacy Hyliion common stock at the predetermined discount (see Note 4).
|
Upon the consummation of the Business Combination,
each share of Legacy Hyliion common stock issued and outstanding was cancelled and converted into the right to receive 1.45720232 shares
(the “Exchange Ratio”) of the Company’s common stock (the “Per Share Merger Consideration”).
Additionally,
Legacy Hyliion issued 1,000,000 shares of Legacy Hyliion common stock with an estimated grant date fair value of $10.00 per share to
one of the convertible noteholders in connection with the commercial matters agreement (“Commercial Matters Agreement”) that
was entered into in June 2020, that was not subject to the Exchange Ratio (see Note 15).
Outstanding
stock options, whether vested or unvested, to purchase shares of Legacy Hyliion common stock granted under the 2016 Plan (“Legacy
Options”) (see Note 9) converted into stock options for shares of the Company’s common stock upon the same terms and conditions
that were in effect with respect to such stock options immediately prior to the Business Combination, after giving effect to the Exchange
Ratio.
Outstanding
warrants to purchase shares of TortoiseCorp Class A common stock will remain outstanding at the Closing Date. The warrants will become
exercisable 30 days after the completion of the Business Combination and will expire five years after the completion of the Business
Combination or earlier upon redemption or liquidation. On November 30, 2020, the Company issued a notice of redemption to the warrant
holders and on December 31, 2020, it redeemed all outstanding public warrants. See Note 8 “Capital Structure” for more information.
In
connection with the Business Combination,
|
●
|
certain
TortoiseCorp shareholders exercised their right to redeem certain of their outstanding shares
for cash, resulting in the redemption of 3,308 shares of TortoiseCorp common stock for gross
redemption payments of less than $0.1 million.
|
|
●
|
a
number of investors purchased from the Company an aggregate of 30,750,000 shares of common
stock (the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate
purchase price of $307.5 million pursuant to separate subscription agreements entered into
effective June 18, 2020 (the “PIPE”). The PIPE investment closed simultaneously
with the consummation of the Business Combination.
|
|
●
|
an
investor purchased 1,750,000 TortoiseCorp units (consisting of one share of common stock
and one half of one warrant, the “Forward Purchase Units”), consisting of 1,750,000
shares of common stock (“Forward Purchase Shares”) and warrants to purchase 875,000
shares of common stock (“Forward Purchase Warrants”) for an aggregate purchase
price of $17.5 million pursuant to a forward purchase agreement entered into effective February
6, 2019, as amended by the First Amendment to Amended and Restated Forward Purchase Agreement,
dated June 18, 2020.
|
The Business Combination is accounted for as
a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, TortoiseCorp was treated as the “acquired”
company for financial reporting purposes. See Note 1 “Description of business and basis of presentation” for further details.
Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Hyliion issuing stock for the
net assets of TortoiseCorp, accompanied by a recapitalization. The net assets of TortoiseCorp are stated at historical cost, with no
goodwill or intangible assets recorded.
Prior to the Business Combination, Legacy Hyliion
and TortoiseCorp filed separate standalone federal, state and local income tax returns. As a result of the Business Combination Legacy
Hyliion will file a consolidated income tax return. Although, for legal purposes, TortoiseCorp acquired Legacy Hyliion, and the transaction
represents a reverse acquisition for federal income tax purposes. TortoiseCorp will be the parent of the consolidated group with Legacy
Hyliion a subsidiary, but in the year of the closing of the Business Combination, Legacy Hyliion will file a full year tax return with
TortoiseCorp joining in the return the day after the Closing Date.
The following table reconciles the elements of
the Business Combination to the consolidated statements of cash flows and the consolidated statement of changes in stockholders’
equity (deficit) for the year ended December 31, 2020 (in thousands):
Cash - TortoiseCorp’s trust and cash (net of redemption)
|
|
$
|
236,484
|
|
Cash - PIPE
|
|
|
307,500
|
|
Cash - forward purchase units
|
|
|
17,500
|
|
Less: transaction costs and advisory fees paid
|
|
|
(45,030
|
)
|
Net Business Combination and PIPE financing
|
|
$
|
516,454
|
|
The
number of shares of common stock issued immediately following the consummation of the Business Combination were:
Common stock, outstanding prior to Business Combination
|
|
|
23,300,917
|
|
Less: redemption of TortoiseCorp shares
|
|
|
(3,308
|
)
|
Common stock of TortoiseCorp
|
|
|
23,297,609
|
|
TortoiseCorp founder shares
|
|
|
5,825,230
|
|
Shares issued in PIPE
|
|
|
30,750,000
|
|
Shares issued in connection with forward purchase agreement
|
|
|
1,750,000
|
|
Business Combination, PIPE, and forward purchase agreement financing shares
|
|
|
61,622,839
|
|
Legacy
Hyliion shares(1)
|
|
|
92,278,990
|
|
Total shares of common stock immediately after Business Combination
|
|
|
153,901,829
|
|
Hyliion Holdings Corp. exercise of warrants
|
|
|
15,414,592
|
|
Total shares of common stock at December 31, 2020
|
|
|
169,316,421
|
|
(1)
|
The
number of Legacy Hyliion shares was determined as follows:
|
|
|
Legacy Hyliion
shares
|
|
|
Legacy Hyliion
shares,
effected for
Exchange
Ratio
|
|
Balance at December 31, 2018
|
|
|
24,453,750
|
|
|
|
35,634,061
|
|
Recapitalization applied to Series A outstanding at December 31, 2018
|
|
|
34,799,813
|
|
|
|
50,710,369
|
|
Exercise of common stock options - 2019
|
|
|
286,874
|
|
|
|
418,033
|
|
Exercise of common stock options - 2020 (pre-Closing)
|
|
|
763,216
|
|
|
|
1,112,160
|
|
Conversion
of convertible notes payable to common stock(2)
|
|
|
2,336,235
|
|
|
|
4,404,367
|
|
|
|
|
|
|
|
|
92,278,990
|
|
(2)
|
The
number of shares issued for the conversion of convertible notes payable to common stock is
calculated by applying the Exchange Ratio to the Legacy Hyliion shares issued at the time
of conversion and adding 1,000,000 shares issued in connection with the Commercial Matters
Agreement. All fractions were rounded down.
|
Lock-Up
Arrangements
Certain
former stockholders of Legacy Hyliion and TortoiseCorp have agreed to lock-up restrictions regarding the future transfer shares of common
stock. Such shares may not be transferred or otherwise disposed of for a period of six months through April 1, 2021, subject to certain
exceptions.
Transaction
costs:
Transaction costs incurred in connection with
the Business Combination totaled approximately $45.0 million which were charged to additional paid-in capital for the year ended December
31, 2020.
Note 5. Debt
At December 31, 2020 and 2019, the carrying value
of debt was as follows:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
Convertible notes payable, net of unamortized
discount at December 31, 2020 and 2019 of $0 and $6,451, respectively
|
|
$
|
-
|
|
|
$
|
16,113
|
|
Paycheck Protection Program loan
|
|
|
908
|
|
|
|
-
|
|
Finance lease obligations
|
|
|
49
|
|
|
|
289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
957
|
|
|
|
16,402
|
|
|
|
|
|
|
|
|
|
|
Less current portion
|
|
|
49
|
|
|
|
6,720
|
|
|
|
|
|
|
|
|
|
|
Debt, net of current portion
|
|
$
|
908
|
|
|
$
|
9,682
|
|
During 2018, the Company issued a convertible
note payable in exchange for cash totaling $5.0 million (the “2018 Note”). The 2018 Note bears interest at 6% per annum and
matures in September 2020 (two years subsequent to its issuance date). The 2018 Note includes the following embedded features:
(a) Automatic conversion
upon the next equity financing of at least $5.0 million in proceeds. The conversion price is dependent upon the pre-money valuation of
the Company in connection with the next equity financing, with the conversion price set at a 35% discount on the next equity financing
price if the pre-money valuation is $100.0 million or less, or 35% multiplied by the quotient of $100.0 million divided by the pre-money
valuation if it is greater than $100.0 million.
(b) Optional conversion
upon a change in control. In the event of a change in control, the holder can elect to convert the 2018 Note into shares of common stock
at a conversion price equal to (i) the product of the change in control purchase price multiplied by 65%, divided by (ii) the total number
of outstanding shares of capital stock of the Company (on a fully diluted basis).
(c) Optional redemption
upon a change in control. In the event of a change in control, the holder can elect to request payment of all outstanding principal (with
no penalty) and unpaid accrued interest.
(d) Automatic or optional
redemption upon an event of default. Upon the occurrence of an event of default, the 2018 Note will either automatically become due and
payable or can become due and payable at the holder’s option (based on the nature of the event of default). Upon such acceleration,
all outstanding principal (with no penalty) and unpaid accrued interest will become payable.
(e) Additional interest
of 3% (or a total of 9%) upon an event of default.
In addition to the above embedded features,
the Company agreed that the holder of the 2018 Note would be the Company’s preferred supplier for certain components or products
that the holder sells. See Note 15 for further details on this related party agreement.
The Company assessed the embedded features within
the 2018 Note and determined that the automatic conversion feature upon next equity financing and optional conversion feature upon change
in control (share-settled redemption features) and the additional interest feature met the definition of a derivative and were not clearly
and closely related to the host contract and required separate accounting.
At issuance, the Company estimated the fair
value of the automatic and optional conversion features to be approximately $1.8 million. The Company’s fair value measurements
are more fully described in (Note 7).
At issuance, the Company concluded the fair value
of the additional interest feature was de minimis.
Between February and July 2019, the Company issued
a series of convertible notes payable in exchange for cash totaling $13.6 million (the “Initial 2019 Notes”). The Initial
2019 Notes bear interest at 6% per annum and mature two to five years after their respective issuance dates. The Initial 2019 Notes are
only prepayable with the consent of the holders. One of the Initial 2019 Notes (totaling $1.8 million) is secured by substantially all
of the assets of the Company, subordinate to the first priority, senior secured interest held by a note holder of a convertible note
issued in January 2020. The holder of this note has first priority secured interest in these assets.
The Initial 2019 Notes include the following
embedded features:
(a) Automatic or optional
(for one of the Initial 2019 Notes) conversion upon the next equity financing of at least $15.0 million in proceeds (the “Next
Equity Financing”). The conversion price is dependent upon the pre-money valuation of the Company in connection with the next equity
financing, with the conversion price set at a 25% discount on the next equity financing price if the pre-money valuation is $100.0 million
or less, or 25% multiplied by the quotient of $100.0 million divided by the pre-money valuation if it is greater than $100.0 million.
(b) Optional conversion
(for one of the Initial 2019 Notes) upon a subsequent equity financing if the holder did not elect to convert upon the Next Equity Financing,
at the price that is set by the subsequent equity financing (no discount).
(c) Optional conversion
upon a change in control. In the event of a change in control, the holder can elect to convert the Initial 2019 Notes into shares of
common stock at a conversion price equal to (i) the product of the change in control purchase price multiplied by 75%, divided by (ii)
the total number of outstanding shares of capital stock of the Company (on a fully diluted basis).
(d) Optional redemption
upon a change in control. In the event of a change in control, the holder can elect to request payment of all outstanding principal (with
no penalty) and unpaid accrued interest.
(e) Automatic or optional
redemption upon an event of default. Upon the occurrence of an event of default, the Initial 2019 Notes will either automatically become
due and payable or can become due and payable at the holder’s option (based on the nature of the event of default). Upon such acceleration,
all outstanding principal (with no penalty) and unpaid accrued interest will become payable.
(f) Additional interest
of 3% (or a total of 9%) upon an event of default.
In addition, the Company has the right to modify
one of the Initial 2019 Notes (totaling $1.8 million) in the event the holder does not convert upon next equity financing to adjust the
interest rate to 4% per annum.
The Company assessed the embedded features within
the Initial 2019 Notes and determined that the automatic or optional conversion feature upon next equity financing and the optional conversion
feature upon change in control (share-settled redemption features), the additional interest feature, and the interest rate adjustment
feature met the definition of a derivative and were not clearly and closely related to the host contract and required separate accounting.
At issuance, the Company estimated the fair
value of the automatic and optional conversion features to be approximately $6.0 million. The Company’s fair value measurements
are more fully described in (Note 7).
At issuance, the Company concluded the fair value
of the additional interest feature and the interest rate adjustment feature was de minimis.
In December 2019, the Company issued a convertible
note payable in exchange for cash totaling $3.2 million (the “December 2019 Note”). The December 2019 Note bears interest
at 6% per annum and matures in December 2020 (one year subsequent to its issuance date). The December 2019 Note is only prepayable with
the consent of the holder. The December 2019 Note is secured by substantially all of the assets of the Company, subordinate to the security
interest held by one of the Initial 2019 Note holders. The December 2019 Note includes the following embedded features:
(a) Automatic conversion
upon the next equity financing of at least $35.0 million in proceeds. The conversion price will be based on the next equity financing
per share price, with a 50% discount.
(b) Optional conversion
upon the next equity financing of at least $15.0 million in proceeds. The conversion price will be based on the next equity financing
per share price, with a 50% discount.
(c) Automatic conversion
upon a subsequent equity financing of at least $35.0 million if the holder did not elect to convert upon any previous equity financing,
at the price that is set by the subsequent equity financing (no discount).
(d) Optional conversion
upon a change in control. In the event of a change in control, the holder can elect to convert the December 2019 Note into shares of
common stock at a conversion price equal to (i) the product of the change in control purchase price multiplied by 50%, divided by (ii)
the total number of outstanding shares of capital stock of the Company (on a fully diluted basis).
(e) Optional redemption
upon a change in control. In the event of a change in control, the holder can elect to request payment of all outstanding principal (with
no penalty) and unpaid accrued interest.
(f) Automatic or optional
redemption upon an event of default. Upon the occurrence of an event of default, the December 2019 Note will either automatically become
due and payable or can become due and payable at the holder’s option (based on the nature of the event of default). Upon such acceleration,
all outstanding principal (with no penalty) and unpaid accrued interest will become payable.
(g) Additional interest
of 3% (or a total of 9%) upon an event of default.
In addition, in the event the holder does not
convert upon an equity financing, the maturity date of the December 2019 Note will automatically extend by one year. In such situation,
the holder also has the right to extend the maturity date for an additional two years beyond the modified maturity date.
The Company assessed the embedded features within
the December 2019 Note and determined that the automatic and optional conversion features upon next equity financing (share-settled redemption
features), the additional interest feature and the term extension feature met the definition of a derivative and were not clearly and
closely related to the host contract and required separate accounting. The Company also concluded that the conversion features did not
represent beneficial conversion features.
At issuance and at December 31, 2019,
the Company estimated the fair value of the automatic and optional conversion features to be approximately $1.4 million. The Company’s
fair value measurements are more fully described in (Note 7).
At issuance, the Company concluded the fair value
of the additional interest and term extension features was de minimis.
During January 2020, the Company issued a convertible
note payable in exchange for cash totaling $3.2 million (the “January 2020 Note”). The January 2020 Note bears interest at
6% per annum and matures in January 2025 (five years subsequent to its issuance date). The January 2020 Note is only prepayable with
the consent of the holder. The January 2020 Note is secured by a first priority, senior secured interest in substantially all of the
assets of the Company. The January 2020 Note includes the following embedded features:
(a) Optional conversion
upon the next equity financing of at least $15.0 million in proceeds. The conversion price will be based on the next equity financing
per share price, with a 50% discount.
(b) Optional conversion
upon a subsequent equity financing of at least $15.0 million if the holder did not elect to convert upon the next equity financing, at
the price that is set by the subsequent equity financing (no discount).
(c) Optional conversion
upon a change in control. In the event of a change in control, the holder can elect to convert the January 2020 Note into shares of common
stock at a conversion price equal to (i) the product of the change in control purchase price multiplied by 50%, divided by (ii) the total
number of outstanding shares of capital stock of the Company (on a fully diluted basis).
(d) Optional redemption
upon a change in control. In the event of a change in control, the holder can elect to request payment of all outstanding principal (with
no penalty) and unpaid accrued interest.
(e) Optional redemption
upon the Company obtaining at least $10.0 million in commercial debt which would result in the January 2020 Note having the same priority
or being treated as subordinate to the commercial debt. In such scenario, the holder can elect to request payment of all outstanding
principal (with no penalty) and unpaid accrued interest.
(f) Automatic or optional
redemption upon an event of default. Upon the occurrence of an event of default, the January 2020 Note will either automatically become
due and payable or can become due and payable at the holder’s option (based on the nature of the event of default). Upon such acceleration,
all outstanding principal (with no penalty) and unpaid accrued interest will become payable.
(g) Additional interest
of 3% (or a total of 9%) upon an event of default.
In addition, in the event the holder does not
convert upon an equity financing or change in control event, the noteholder may extend the maturity date of the January 2020 Note by
five years beyond the original maturity date.
In addition, in the event the holder does not
convert upon an equity financing, the interest rate on the January 2020 Note will automatically be adjusted to a rate of 4% per annum.
The Company assessed the embedded features within
the January 2020 Note and determined that the automatic and optional conversion features upon next equity financing (share-settled redemption
features), the additional interest feature and the term extension feature met the definition of a derivative and were not clearly and
closely related to the host contract and required separate accounting. The Company also concluded that the conversion features did not
represent beneficial conversion features.
At issuance, the Company estimated the fair
value of the automatic and optional conversion features to be approximately $2.7 million. The Company’s fair value measurements
are more fully described in (Note 7).
At issuance, the Company has concluded the fair
value of the additional interest and term extension features was de minimis.
The terms of the convertible notes payable include
certain restrictive covenants related to the Company’s ability to enter into certain transactions or agreements, pay dividends,
or take other similar corporate actions.
During June 2020, the holders of the convertible
notes executed amendments (the “Note Amendments”) to their respective convertible notes clarifying the planned Business Combination
would qualify as a next financing, as defined in the respective convertible notes. The convertible notes would either automatically convert
or convert at the holder’s option (the election of which was evidenced by entering into the Note Amendments) in connection with
such next financing (in this case the Business Combination). The convertible notes would convert into shares of common stock at a conversion
price equal to (i) the valuation of the Company established in connection with such next financing, divided by (ii) the total number
of shares of capital stock of the Company (on a fully diluted and as-converted basis), as established in the original respective convertible
notes. This conversion price would then be discounted based on the negotiated conversion discounts that were established in the
noteholders’ original convertible notes. The amended terms of the Note Amendments were determined to be clarifications of the existing
terms and did not result in substantially different terms. Accordingly, the Note Amendments were accounted for as modifications.
In connection with the reverse recapitalization
discussed in Note 4, immediately prior to the closing of the Business Combination, the convertible notes, plus accrued paid-in-kind interest,
totaling $26.8 million were converted into an aggregate of 2,336,235 shares of Legacy Hyliion common stock, which were then exchanged
for an aggregate of 3,404,367 shares of the Company’s common stock on the Closing Date (see Note 4). In addition, the Company issued
1,000,000 shares of Legacy Hyliion common stock to a noteholder of the 2018 Note, Initial 2019 Notes, and January 2020 Note, with a grant
date fair value of $10.00 per share in accordance with the Commercial Matters Agreement (see Note 15).
In connection with this conversion of the convertible
notes, the Company recorded a loss on extinguishment of $10.2 million included within other income (expense) on the accompanying consolidated
statements of operations.
Term Loan:
During August 2020, the Company issued a term loan (the “Term Loan”)
with a principal balance totaling $10.1 million that matured on the earlier of (i) December 15, 2020, (ii) the termination of the Business
Combination or, (iii) the consummation of the Business Combination as provided in the Business Combination. In connection with the Term
Loan, the Company paid $0.5 million of financing costs. The Term Loan bore interest at a rate equal to 6.5% plus the greater of (a) the
Federal Funds rate plus 0.5%, (b) LIBOR Rate for a one-month interest period plus 1.0%, and (c) Prime Rate in effect on such day. While
outstanding in 2020, the Term Loan bore interest at 8.5% per annum. The Term Loan plus accrued interest was repaid in full in October
2020.
Payroll Protection Program loan:
During May 2020, the Company received loan proceeds in the amount of $0.9 million under the Payroll Protection Program (the “PPP”).
The PPP was established as part of Coronavirus Aid, Relief, and Economic Security Act and provides for loans to qualifying businesses
for amounts up to 2.5 times the average monthly payroll expenses of the business, subject to certain limitations. The loans and accrued
interest are forgivable after eight weeks so long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits,
rent and utilities, and so long as the borrower maintains its pre-funding employment and wage levels. Although the Company used the PPP
loan proceeds for purposes consistent with the provisions of the PPP and that such usage met the criteria established for forgiveness
of the loan, the Company intends to repay the PPP loan plus accrued interest. The PPP loan matures in May 2022.
Finance Lease Obligations: The
Company’s debt arising from finance lease obligations primarily relates to vehicles and equipment. See Note 10 for future maturities
of finance lease obligations.
Note 6. Investments
The amortized cost, unrealized gains and losses,
and fair value of our investments at December 31, 2020 are summarized as follows:
|
|
|
|
|
Fair Value Measurements as of
December 31, 2020
|
|
|
|
Amortized Cost
|
|
|
Gross Unrealized Gains
|
|
|
Gross Unrealized Losses
|
|
|
Fair Value
|
|
|
|
(in thousands)
|
|
Held-to-maturity investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury securities
|
|
$
|
149,996
|
|
|
$
|
-
|
|
|
$
|
(1
|
)
|
|
$
|
149,995
|
|
Commercial paper
|
|
|
37,963
|
|
|
|
-
|
|
|
|
(15
|
)
|
|
|
37,948
|
|
Corporate bonds and notes
|
|
|
49,892
|
|
|
|
-
|
|
|
|
(63
|
)
|
|
|
49,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity investments
|
|
$
|
237,851
|
|
|
$
|
-
|
|
|
$
|
(79
|
)
|
|
$
|
237,772
|
|
|
|
December 31, 2020
|
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
|
(in thousands)
|
|
Due in one year or less
|
|
$
|
201,881
|
|
|
$
|
201,864
|
|
Due after one year through five years
|
|
|
35,970
|
|
|
|
35,908
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity securities
|
|
$
|
237,851
|
|
|
$
|
237,772
|
|
The Company did not have any investments at December
31, 2019.
Note 7. Fair Value Measurements –
As Restated
The convertible notes payable derivative liabilities
are considered a Level III measurement due to the utilization of significant unobservable inputs in the valuation. The Company utilized
a scenario-based with and without valuation model to estimate the fair value of the embedded derivative features requiring bifurcation
associated with the convertible notes payable at issuance, as of the December 31, 2019 reporting date, and upon the settlement of the
convertible notes payable derivative liabilities in connection with the extinguishment accounting applied to the convertible notes payable
(see Note 5). This valuation model is designed to utilize the Company’s best estimates of the timing and likelihood of the settlement
events that are related to the embedded derivative features in order to estimate the fair value of the respective convertible notes with
these embedded derivative features.
The fair value of the convertible notes with
the derivative features is compared to the fair value of a plain vanilla note (excluding the derivative features), which is calculated
based on the present value of the future cash flows. The difference between the two values represents the fair value of the bifurcated
derivative features as of each respective valuation date.
The key inputs to the valuation models that were
utilized to estimate the fair value of the convertible debt derivative liabilities include:
Input
|
|
October 1, 2020
|
|
Issuance of January 2020 Note
(January 2020)
|
|
Issuance of December 2019 Note and December 31,
2019
|
|
Issuances of Initial 2019 Notes
(July 2019)
|
|
Issuances of Initial 2019 Notes
(June 2019)
|
|
Issuances of Initial 2019 Notes
(February
2019)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Probability-weighted conversion discount
|
|
2.5 - 50.0%
|
|
50.0%
|
|
23.9 - 50.0%
|
|
24.1%
|
|
24.4%
|
|
24.4%
|
Remaining term (years)
|
|
0.0 - 4.3
|
|
5.0
|
|
0.7 - 4.5
|
|
5.0
|
|
2.0
|
|
2.0
|
Equity volatility
|
|
NA
|
|
NA
|
|
63.0 - 71.0%
|
|
74.0%
|
|
78.0%
|
|
75.0%
|
Risk rate1
|
|
19.6 - 57.7%
|
|
50.0%
|
|
27.2 - 50.0%
|
|
29.0%
|
|
26.6%
|
|
34.2%
|
Probability of next financing event1
|
|
100.0%
|
|
70.0%
|
|
70.0%
|
|
50.0%
|
|
50.0%
|
|
50.0%
|
Timing of next financing event1
|
|
10/1/2020
|
|
9/30/2020
|
|
9/30/2020
|
|
3/31/2020
|
|
3/31/2020
|
|
9/30/2019
|
Probability of default event1
|
|
0.0%
|
|
30.0%
|
|
25.0 - 30.0%
|
|
50.0%
|
|
50.0%
|
|
50.0%
|
Timing of default event1
|
|
NA
|
|
9/30/2020
|
|
9/30/2020
|
|
3/31/2020
|
|
3/31/2020
|
|
9/30/2019
|
Probability of sale event1
|
|
0.0%
|
|
0.0%
|
|
0.0 - 5.0%
|
|
0.0%
|
|
0.0%
|
|
0.0%
|
Timing of sale event1
|
|
NA
|
|
NA
|
|
9/30/2020
|
|
NA
|
|
NA
|
|
NA
|
Negotiation discount1 2
|
|
0.0 - 0.1%
|
|
24.2%
|
|
21.7%
|
|
0.0%
|
|
0.0%
|
|
0.0%
|
1
|
Represents a Level III unobservable input
|
2
|
Based on the terms and provisions of the December 2019 and January
2020 Notes, the valuation model incorporated this additional assumption
|
The key inputs to the valuation models are defined
as follows:
|
●
|
The
probability-weighted conversion discount is based on the contractual terms of the convertible
note agreement and the expectation of the pre-money valuation of the Company as of the estimated
date that the next equity financing event occurs.
|
|
●
|
The
remaining term was determined based on the remaining time period to maturity of the related
convertible note with embedded features subject to valuation (as of the respective valuation
date).
|
|
●
|
The
Company’s equity volatility estimate was based on the re-levered historical equity
volatility of a selection of the Company’s comparable guideline public companies, based
on the remaining term of the respective convertible notes.
|
|
●
|
The
risk rate was the discount rate utilized in the valuation and was determined based on reference
to market yields for debt instruments with similar credit ratings and terms.
|
|
●
|
The
probabilities and timing of the next financing event and default event are based on management’s
best estimate of the future settlement of the respective convertible notes.
|
|
●
|
The
negotiation discount utilized was calculated in order to further discount the specified instruments
in order to agree to the principal value of the convertible notes at issuance. The utilization
of the negotiation discount reflects the fact that there was a significant need for new investment
and limited availability of market participants who have interest in making investments in
such companies. The presence of the additional discount reflects the higher rate of return
that these investors would seek in making such investments.
|
The convertible notes payable derivative liabilities
were settled upon the conversion of the related convertible notes during the year ended December 31, 2020 (see Note 5). The following
table shows the fair value measurements of the Company’s assets and liabilities that are measured at fair value on a recurring
basis at December 31, 2020 and 2019:
|
|
Fair Value Measurements as of December
31, 2020
|
|
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Total
|
|
Assets
|
|
(in thousands)
|
|
Cash and cash equivalents
|
|
$
|
389,705
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
389,705
|
|
Held-to-maturity investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury securities
|
|
|
-
|
|
|
|
149,995
|
|
|
|
-
|
|
|
|
149,995
|
|
Commercial paper
|
|
|
-
|
|
|
|
37,948
|
|
|
|
-
|
|
|
|
37,948
|
|
Corporate bonds and notes
|
|
|
-
|
|
|
|
49,829
|
|
|
|
-
|
|
|
|
49,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
389,705
|
|
|
$
|
237,772
|
|
|
$
|
-
|
|
|
$
|
627,477
|
|
|
|
Fair Value Measurements as of December
31, 2019
|
|
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Total
|
|
Liabilities
|
|
(in thousands)
|
|
Convertible notes payable derivative liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,351
|
|
|
$
|
8,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,351
|
|
|
$
|
8,351
|
|
The following is a rollforward of the Company’s
Level III instruments (in thousands):
Balance, December 31, 2018
|
|
$
|
2,068
|
|
Issuance of convertible notes payable derivative liabilities
|
|
|
7,428
|
|
Fair value adjustments
|
|
|
(1,145
|
)
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
8,351
|
|
Issuance of convertible note payable derivative liability
|
|
|
2,656
|
|
Fair value adjustments
|
|
|
1,358
|
|
Settlement of convertible notes payable derivative liabilities
|
|
|
(12,365
|
)
|
|
|
|
|
|
Balance, December 31, 2020
|
|
$
|
-
|
|
Note 8. Capital Structure
As discussed in Note 1 and Note 4, on October
1, 2020, the Company consummated the Business Combination, which has been accounted for as a reverse recapitalization. Pursuant to the
Certificate of Incorporation as amended on October 1, 2020 and as a result of the reverse recapitalization, the Company has retrospectively
adjusted the Legacy Hyliion preferred shares and Legacy Hyliion common shares issued and outstanding prior to October 1, 2020 to give
effect to the Exchange Ratio used to determine the number of shares of common stock of the combined entity into which they were converted.
Preferred Stock: The Company is
authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share. The Company’s board of directors
is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, option or other special
rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. As of December 31, 2020
and 2019, there were no shares of preferred stock issued and outstanding.
Common Stock: The Company is authorized
to issue 250,000,000 shares of common stock with a par value of $0.0001 per share, of which 169,316,421 and 86,762,463 shares were
issued and outstanding at December 31, 2020 and 2019, respectively.
The following shares of common stock are reserved
for future issuance:
Stock options issued and outstanding
|
|
|
6,982,497
|
|
Authorized for future grant under 2020 Equity Incentive Plan
|
|
|
12,937,713
|
|
|
|
|
19,920,210
|
|
Warrants:
Public Warrants: On
March 4, 2019, TortoiseCorp completed an initial public offering that included warrants for shares of common stock (the “Public
Warrants”). Each Public Warrant entitles the holder to the right to purchase one share of common stock at an exercise price of
$11.50 per share. No fractional shares will be issued upon exercise of the Public Warrants. The Company may elect to redeem the Public
Warrants, in whole and not in part, at a price of $0.01 per Public Warrant if (i) 30 days’ prior written notice of redemption is
provided to the holders, and (ii) the last reported sale price of the Company’s common stock equals or exceeds $18.00 per share
(as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading
day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders.
Upon issuance of a redemption notice by the Company, the warrant holders have a period of 30 days to exercise for cash, or on a cashless
basis. On the Closing Date, there were 11,650,458 Public Warrants issued and outstanding.
Private Placement Warrants:
Simultaneous with TortoiseCorp’s initial public offering in March 2019, Tortoise Borrower purchased warrants at a purchase
price of $1.00 per warrant in a private placement (the “Private Placement Warrants”). The Private Placement Warrants may
not be redeemed by the Company so long as the Private Placement Warrants are held by the initial purchasers, or such purchasers’
permitted transferees. The Private Placement Warrants have terms and provisions identical to those of the Public Warrants, including
as to exercise price, exercisability and exercise period, except if the Private Placement Warrants are held by someone other than the
initial purchasers’ permitted transferees, then the Private Placement Warrants are redeemable by the Company and exercisable by
such holders on the same basis as the Public Warrants. On the Closing Date, there were 6,660,183 Private Warrants issued and outstanding.
Forward Purchase Warrants:
Simultaneous with the consummation of the Business Combination in October 2020, 875,000 Forward Purchase Warrants to purchase shares
of common stock were issued in connection with the forward purchase agreement (See Note 4). The Forward Purchase Warrants have terms
and provisions identical to those of the Public Warrants, including as to exercise price, exercisability and exercise period, except
that the Forward Purchase Warrants are subject to transfer restrictions and certain registration rights.
Because the Company’s Warrants
contain provisions whereby the settlement amount varies depending upon the characteristics of the warrant holder, all warrants were determined
to have liability classification at issuance, and as such, were recorded at fair value as a warrant liability in the Company’s
consolidated balance sheet at the date of the merger.
On November 30, 2020, the Company issued a notice
of redemption of all its outstanding Public Warrants and Forward Purchase Warrants which was completed in December 2020. However, the
Private Warrants held by the initial holders thereof or permitted transferees of the initial holders were not subject to this redemption.
As of December 31, 2020, all outstanding Public Warrants and Forward Purchase Warrants were either exercised or redeemed by the holder.
As of December 31, 2020, the Company’s transfer agent received gross proceeds of $140.8 million corresponding to the exercise of
15,786,127 warrants. However, due to the timing of the receipt of the warrant exercise and the cash, the Company’s transfer agent
issued 15,414,592 shares of common stock as of December 31, 2020. The remaining 371,535 shares of common stock were issued in January
2021. Additionally, as of December 31, 2020, the Company’s transfer agent had not yet remitted $12.0 million of the gross proceeds
associated with the shares of issued common stock to the Company and is included within prepaid expenses and other current assets on
the accompanying consolidated balance sheets as of December 31, 2020. There were 281,065 warrants not exercised by the end of the redemption
period that were redeemed for a price of $0.01 per warrant, and subsequently cancelled by the Company. The Company made the redemption
payment on these cancelled warrants in January 2021. Certain holders of the warrants elected a cashless exercise, resulting in the forfeiture
of 3,118,445 shares.
Note 9. Share-based Compensation
2016 Equity Incentive Plan
For periods prior to the reverse recapitalization
(See Note 4), the Hyliion Inc. 2016 Equity Incentive Plan (the “2016 Plan”), as amended in August 2017 and approved by the
board of directors (the “Board”), permitted the granting of various awards including stock options (including both nonqualified
options and incentive options), stock appreciation rights (“SARs”), stock awards, phantom stock units, performance awards,
and other share-based awards to employees, outside directors and consultants and advisors of the Company. Only stock options have been
awarded to employees, consultants and advisors under the 2016 Plan.
Legacy Options converted into an option to purchase
a number of shares of common stock equal to the product of the number of shares of Legacy Hyliion common stock and the Exchange Ratio
at an exercise price per share equal to the exercise price of the Legacy Option divided by the Exchange Ratio. Each exchanged option
is governed by the same terms and conditions applicable to the Legacy Option prior to the Business Combination. No further grants can
be made under the 2016 Plan.
The option exercise price for all grantees equals
the stock’s estimated fair value on the date of the grant, after giving effect to the Exchange Ratio. The Board determined the
fair value of common stock at the time of grant by considering a number of objective and subjective factors, including independent third-party
valuations of the Company’s common stock, operating and financial performance, the lack of liquidity of capital stock, and general
and industry-specific economic outlook, amongst other factors. The Company believes the fair value of the stock options granted to nonemployees
is more readily determinable than the fair value of the services received.
The fair value of each option is estimated on
the date of the grant using the Black-Scholes option-pricing model in order to measure the compensation cost associated with the award.
This model incorporates certain assumptions for inputs including an expected volatility in the market value of the underlying common
stock, expected term, a risk-free interest rate, and the expected dividend yield of the underlying common stock.
The following assumptions were used for options
issued in the following periods:
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Expected volatility
|
|
70.0%
|
|
70.0%
|
Expected term (in years)
|
|
6.1
|
|
6.1 - 10
|
Risk-free interest rate
|
|
1.7%
|
|
1.4 - 3.0%
|
Expected dividend yield
|
|
0.0%
|
|
0.0%
|
|
●
|
Expected
volatility: The expected volatility was determined by examining the historical volatilities
of a group of industry peers, as the Company did not have any trading history for the Company’s
common stock.
|
|
●
|
Expected
term: For employees, the expected term is determined using the “simplified”
method, as prescribed by the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment,
to estimate on a formula basis the expected term of the Company’s employee stock options
which are considered to have “plain vanilla” characteristics. For nonemployees,
the expected term represents the contractual term of the option.
|
|
●
|
Risk-free
interest rate: The risk-free interest rate was based upon quoted market yields for
the United States Treasury instruments with terms that were consistent with the expected
term of the Company’s stock options.
|
|
●
|
Expected
dividend yield: The expected dividend yield was based on the Company’s history
and management’s current expectation regarding future dividends.
|
Employee and nonemployee stock options generally
vest over four years, with a maximum term of ten years from the date of grant. These awards become available to the recipient upon the
satisfaction of a vesting condition based on a period of service, which may be accelerated at the discretion of the Board. Share-based
compensation expense is recognized on a straight-line basis over the applicable vesting period.
A summary of the status of the 2016 Plan at December
31, 2020 and 2019, and changes during the same periods is presented below:
Options
|
|
Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual
Term
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
|
5,508,031
|
|
|
$
|
0.11
|
|
|
|
8.7
|
|
Granted
|
|
|
3,213,131
|
|
|
|
0.16
|
|
|
|
|
|
Exercised
|
|
|
(418,033
|
)
|
|
|
0.14
|
|
|
|
|
|
Cancelled or forfeited
|
|
|
(1,715,847
|
)
|
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
6,587,282
|
|
|
|
0.13
|
|
|
|
8.2
|
|
Granted
|
|
|
2,797,828
|
|
|
|
0.23
|
|
|
|
|
|
Exercised
|
|
|
(1,112,960
|
)
|
|
|
0.11
|
|
|
|
|
|
Cancelled or forfeited
|
|
|
(1,289,653
|
)
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020
|
|
|
6,982,497
|
|
|
$
|
0.16
|
|
|
|
7.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2019
|
|
|
2,482,987
|
|
|
$
|
0.10
|
|
|
|
7.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2020
|
|
|
3,851,486
|
|
|
$
|
0.13
|
|
|
|
7.1
|
|
As of December 31, 2020, the options outstanding
and exercisable have an intrinsic value of $113.8 million and $62.8 million, respectively. There were no options with an exercise price
greater than the market price on December 31, 2020 to exclude from the intrinsic value computation. The intrinsic value of options exercised
during the years ended December 31, 2020 and 2019 was $18.4 million and less than $0.1 million, respectively.
Share-based compensation expense for the years
ended December 31, 2020 and 2019 was $0.3 million and $0.1 million, respectively. As of December 31, 2020, there was $0.4 million of
unrecognized compensation cost related to share-based payments, which is expected to be recognized over the remaining vesting periods,
with a weighted-average period of 2.6 years.
2020 Equity Incentive Plan
On October 1, 2020, the Company’s shareholders
approved a new long-term incentive award plan (the “2020 Plan”) in connection with the Business Combination. The 2020 Plan
is administered by the Board and the compensation committee. The selection of participants, allotment of shares, determination of price
and other conditions are approved by the Board and the compensation committee at its sole discretion in order to attract and retain personnel
instrumental to the success of the Company. Under the 2020 Plan, the Company may grant an aggregate of 12,937,713 shares of common stock
in the form of nonstatutory stock options, incentive stock options, SARs, restricted stock awards, performance awards, and other awards.
No grants have been authorized to date by the Company’s Board and the compensation committee under the 2020 Plan.
Note 10. Leases
The Company has operating and finance leases
for its corporate office, temporary office, vehicles and equipment. In addition, the Company enters into arrangements whereby portions
of the leased premises are subleased to third parties and are classified as operating leases. The following table provides a summary
of the components of lease income, costs and rent, which are included within research and development and selling, general and administrative
on the accompanying consolidated statements of operations:
|
|
Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Operating lease costs:
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
1,389
|
|
|
$
|
1,908
|
|
Short-term lease cost
|
|
|
42
|
|
|
|
4
|
|
Variable lease cost
|
|
|
(14
|
)
|
|
|
(140
|
)
|
Sublessor income
|
|
|
(326
|
)
|
|
|
(421
|
)
|
|
|
|
|
|
|
|
|
|
Total operating lease costs
|
|
$
|
1,091
|
|
|
$
|
1,351
|
|
|
|
|
|
|
|
|
|
|
Finance lease costs:
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
|
$
|
112
|
|
|
$
|
112
|
|
Interest on lease liabilities
|
|
|
21
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Total finance lease costs
|
|
$
|
133
|
|
|
$
|
162
|
|
Finance lease ROU assets were $0.3 million and
$0.7 million as of December 31, 2020 and 2019 and accumulated amortization was $0.1 million and $0.2 million as of December 31, 2020
and 2019, respectively.
The following table provides the weighted-average
lease terms and discount rates used for the Company’s operating and finance leases:
|
|
December 31,
2020
|
|
Weighted-average remaining lease term (in years):
|
|
|
|
Operating leases
|
|
|
5.0
|
|
Finance leases
|
|
|
0.3
|
|
|
|
|
|
|
Weighted-average discount rate:
|
|
|
|
|
Operating leases
|
|
|
9.9
|
%
|
Finance leases
|
|
|
14.2
|
%
|
The following table provides a summary of lease
liability maturities for the next five years and thereafter:
|
|
Operating
|
|
|
Finance
|
|
|
|
Leases
|
|
|
Leases
|
|
|
|
(in thousands)
|
|
2021
|
|
$
|
1,269
|
|
|
$
|
49
|
|
2022
|
|
|
1,441
|
|
|
|
-
|
|
2023
|
|
|
1,484
|
|
|
|
-
|
|
2024
|
|
|
1,529
|
|
|
|
-
|
|
2025
|
|
|
1,575
|
|
|
|
-
|
|
Thereafter
|
|
|
133
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total lease payments
|
|
|
7,431
|
|
|
|
49
|
|
Less: Imputed interest
|
|
|
(1,621
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total lease obligations
|
|
$
|
5,810
|
|
|
$
|
49
|
|
Note 11. Property and Equipment, net
Property and equipment, net consisted of the
following at December 31, 2020 and 2019:
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Production machinery and equipment
|
|
$
|
1,751
|
|
|
$
|
1,751
|
|
Vehicles
|
|
|
712
|
|
|
|
727
|
|
Leasehold improvements
|
|
|
749
|
|
|
|
670
|
|
Demo fleet systems
|
|
|
263
|
|
|
|
263
|
|
Office furniture and fixtures
|
|
|
64
|
|
|
|
28
|
|
Computers and related equipment
|
|
|
195
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,734
|
|
|
|
3,463
|
|
|
|
|
|
|
|
|
|
|
Less accumulated depreciation
|
|
|
(2,563
|
)
|
|
|
(1,828
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
1,171
|
|
|
$
|
1,635
|
|
Depreciation expense for the years ended December
31, 2020 and 2019 totaled approximately $0.8 million and $0.9 million, respectively. For the year ended December 31, 2020, less than
$0.1 million and $0.7 million is included within selling, general and administrative expenses and research and development expenses on
the accompanying consolidated statements of operations, respectively. For the year ended December 31, 2019, $0.1 million and $0.8 million
is included within selling, general and administrative expenses and research and development expenses on the accompanying consolidated
statements of operations, respectively.
Note 12. Intangible assets, net
The gross carrying amount and accumulated amortization
of separately identifiable intangible assets at December 31, 2020 and 2019 are as follows:
|
|
|
|
December 31, 2020
|
Intangible Asset
|
|
Useful Life
|
|
Weighted Average Remaining Life
|
|
Gross Carrying Value
|
|
|
Accumulated Amortization
|
|
|
Net
|
|
|
|
|
|
|
|
(in thousands)
|
|
Developed technology
|
|
6 years
|
|
3.4 years
|
|
$
|
578
|
|
|
$
|
(247
|
)
|
|
$
|
331
|
|
Non-compete
|
|
3 years
|
|
0.4 years
|
|
|
5
|
|
|
|
(4
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
583
|
|
|
$
|
(251
|
)
|
|
$
|
332
|
|
|
|
December 31, 2019
|
|
Intangible Asset
|
|
Gross Carrying Value
|
|
|
Accumulated Amortization
|
|
|
Net
|
|
|
|
(in thousands)
|
|
Developed technology
|
|
$
|
578
|
|
|
$
|
(151
|
)
|
|
$
|
427
|
|
Non-compete
|
|
|
5
|
|
|
|
(3
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
583
|
|
|
$
|
(154
|
)
|
|
$
|
429
|
|
Total amortization expense was $0.1 million for
each of the years ended December 31, 2020 and 2019 and is included within selling, general and administrative expenses on the accompanying
consolidated statements of operations.
Total future amortization expense for the finite-lived
intangible assets is estimated as follows (in thousands):
2021
|
|
$
|
97
|
|
2022
|
|
|
97
|
|
2023
|
|
|
97
|
|
2024
|
|
|
41
|
|
|
|
|
|
|
|
|
$
|
332
|
|
Note 13. Accrued Expenses and Other Current
Liabilities – As Restated
Accrued expenses and other current liabilities
consisted of the following at December 31, 2020 and 2019:
|
|
December 31,
|
|
|
|
2020 as restated
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Accrued professional services
|
|
$
|
1,032
|
|
|
$
|
120
|
|
Accrued compensation and related benefits
|
|
|
615
|
|
|
|
-
|
|
Refundable grant
|
|
|
175
|
|
|
|
175
|
|
Accrued liability for warrants exercised but not settled
|
|
|
4,282
|
|
|
|
-
|
|
Other accrued liabilities
|
|
|
160
|
|
|
|
205
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,264
|
|
|
$
|
500
|
|
The accrued liability totaling $4.3 million
for warrants exercised but not settled represents all warrants that were exercised as of December 31, 2020 under broker protects resulting
in cash collection and share issuance being delayed until January 4, 2021.
Note 14. Income Taxes – As Restated
The income tax provision consists of the following:
|
|
Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Current tax expense (benefit):
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
State
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total current tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred tax expense (benefit):
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(8,952
|
)
|
|
$
|
(2,788
|
)
|
State
|
|
|
(291
|
)
|
|
|
-
|
|
Valuation allowance
|
|
|
9,243
|
|
|
|
2,788
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax expense (benefit)
|
|
$
|
-
|
|
|
$
|
-
|
|
The components of deferred taxes as of December
31, 2020 and 2019 are as follows:
|
|
Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Federal net operating loss carryforwards
|
|
$
|
17,265
|
|
|
$
|
9,083
|
|
State net operating loss carryforwards
|
|
|
984
|
|
|
|
825
|
|
Operating lease obligation
|
|
|
1,009
|
|
|
|
1,209
|
|
R&D tax credit
|
|
|
481
|
|
|
|
-
|
|
Other
|
|
|
224
|
|
|
|
-
|
|
Property and equipment, net
|
|
|
29
|
|
|
|
-
|
|
Total deferred tax assets
|
|
|
19,992
|
|
|
|
11,117
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Operating lease right of use asset, net
|
|
|
854
|
|
|
|
1,045
|
|
Intangible assets, net
|
|
|
70
|
|
|
|
90
|
|
Property and equipment, net
|
|
|
-
|
|
|
|
18
|
|
Other
|
|
|
-
|
|
|
|
139
|
|
Total deferred tax liabilities
|
|
|
924
|
|
|
|
1,292
|
|
|
|
|
|
|
|
|
|
|
Total net deferred tax assets (liabilities)
|
|
|
19,068
|
|
|
|
9,825
|
|
|
|
|
|
|
|
|
|
|
Less valuation allowance
|
|
|
(19,068
|
)
|
|
|
(9,825
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
-
|
|
|
$
|
-
|
|
The
reconciliation of taxes at the federal statutory rate to the Company’s provision for income taxes for the years ended December
31, 2020, and 2019 was as follows:
|
|
Years
Ended December 31,
|
|
|
|
2020
as restated
|
|
|
2019
|
|
|
|
(in
thousands)
|
|
Provision at
statutory rate of 21%
|
|
$
|
68,069
|
|
|
$
|
(2,964
|
)
|
Non-deductible convertible
debt interest expense
|
|
|
227
|
|
|
|
152
|
|
Non-deductible gain related
to warrant conversions
|
|
|
(76,293
|
)
|
|
|
|
|
State tax expense
|
|
|
(158
|
)
|
|
|
|
|
Stock options
|
|
|
54
|
|
|
|
15
|
|
Transaction costs
|
|
|
(2,947
|
)
|
|
|
-
|
|
Shares
issued in connection with Commercial Matters Agreement (see Notes 4, 5, and 15)
|
|
|
2,100
|
|
|
|
-
|
|
Other
|
|
|
(102
|
)
|
|
|
9
|
|
R&D tax credit
|
|
|
(193
|
)
|
|
|
-
|
|
Change
in valuation allowance
|
|
|
9,243
|
|
|
|
2,788
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The net change in the total valuation allowance
for the year ended December 31, 2020, was an increase of $9.2 million, (compared to an increase of $2.8 million in 2019). In assessing
the realizability of deferred tax assets, management considered whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become deductible. Management considered the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical
taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management
believes it is more likely than not that the Company will not realize the benefits of these deductible differences at December 31, 2020.
The Company has federal net operating loss carryforwards
of approximately $82.2 million and $43.3 million at December 31, 2020 and 2019, respectively. $10.5 million of this amount will begin
to expire in 2036. The remaining $71.7 million has an indefinite carryforward period. The Company also has state net operating loss carryforwards
of approximately $12.5 million and $10.5 million at December 31, 2020 and 2019. They will expire beginning in 2036. The Company also
has R&D credits of $0.3 million that begin to expire in 2037. The Company’s ability to utilize a portion of its net operating
loss carryforwards and credits to offset future taxable income, and tax, respectively, is subject to certain limitations under section
382 of the Internal Revenue Code upon changes in equity ownership of the Company. Due to such limitation, $2.0 million of the Company’s
net operating loss and less than $0.1 million of the Company’s R&D credits will expire unused, regardless of taxable income
in future years.
The Company files a United States federal income
tax return, as well as income tax returns in various states. The tax returns for years 2016 and thereafter remain open for examination.
Note 15. Commitments and Contingencies
Economic Incentive Agreement: During
2018, the Company entered into an agreement with the Cedar Park Economic Development Corporation (EDC), whereby the Company will receive
grants from the EDC contingent upon the Company fulfilling and maintaining certain corporate office lease and employment requirements.
The specified requirements must be met on or before specific measurement dates and maintained throughout the term of the agreement, which
expires effective December 31, 2024.
Should the Company fail to meet and maintain
any performance requirements, all amounts received from the EDC are subject to refund. During 2018, the Company achieved the first performance
requirement and received a payment of $0.2 million. During 2019, the Company continued maintaining the employment level of the first
performance requirement but failed to meet the second performance requirement. As a result, the Company did not receive any additional
grant funding in 2019, the agreement is subject to termination by the EDC and all amounts received are subject to refund.
As the terms of the EDC grant agreement require
the Company to meet and maintain all of the performance requirements throughout the term of the agreement, the Company has not substantially
met all the conditions for the grant funding received. Accordingly, the grant funding of $0.2 million received in 2018 is recorded as
part of accrued expenses and other current liabilities as of December 31, 2020 and 2019 and will continue to be reflected as a currently
liability until all related performance requirements have been met through the end of the agreement on December 31, 2024.
Under the agreement, the EDC has the right to
file a security interest to all assets of the Company. This security interest is subordinate to the holders of the convertible notes
payable with security interests.
Preferred Sourcing Arrangement and Commercial
Matters Agreement: During 2018, the Company entered into a preferred sourcing arrangement, as amended (the “PSA”), with
a noteholder of the 2018 Note, Initial 2019 Notes, and January 2020 Note (the “PSA Partner”). Under the terms of the PSA,
so long as the PSA Partner is one of the Company’s stockholders or debtholders and for a period of five years following a change
of control affecting the Company, the Company will treat the PSA Partner as the Company’s preferred source for any products that
the PSA Partner manufactures or sells in preference to other competing products as long as the PSA Partner’s products meet the
technical criteria established by the Company and on reasonably competitive terms. Under
the PSA, the Company is allowed to purchase competing products upon the request of any customer.
In June 2020 and in conjunction with the Business
Combination, the Company entered into a Commercial Matters Agreement with the PSA Partner pursuant to which, among other things, contingent
and effective upon the execution of the Business Combination, the Company issued to the PSA Partner $10.0 million worth of Legacy Hyliion’s
Common Stock, immediately prior to the effective time of the merger in consideration for the Note Amendments and for any future services
to be provided pursuant to the terms of a services agreement to provide engineering or operational services to the Company that was entered
into in June 2020. The terms of the services agreement are yet to, and may ultimately not, be negotiated and the PSA Partner is under
no obligation to enter into such services agreement.
As a result, immediately prior to the consummation
of the Business Combination discussed in Note 4, the Company issued 1,000,000 shares of Legacy Hyliion common stock with a fair value
of $10.00 per share in exchange for future services to the Company.
Legal Proceedings: The Company
is periodically involved in legal proceedings, legal actions and claims arising in the normal course of business, including proceedings
relating to product liability, intellectual property, safety and health, employment and other matters. Management believes that the outcome
of such legal proceedings, legal actions and claims will not have a significant adverse effect on the Company’s financial position,
results of operations or cash flows.
Note 16. Net Income (Loss) Per Share –
As Restated
As a result of the reverse recapitalization
(see Note 4), the Company has retroactively adjusted the weighted average shares outstanding prior to October 1, 2020 to give effect
to the Exchange Ratio used to determine the number of shares of common stock into which they were converted.
The following table sets forth the computation
of basic and diluted net income (loss) per share of common stock for the years ended December 31, 2020, and 2019:
|
|
Years Ended December 31,
|
|
|
|
2020 as restated
|
|
|
2019
|
|
|
|
(in thousands, except share and per share data)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders - basic
|
|
$
|
324,117
|
|
|
$
|
(14,113
|
)
|
Less: gain from change in fair value of warrant liabilities
|
|
|
(363,299
|
)
|
|
|
-
|
|
Net loss attributable to common shareholders – diluted
|
|
$
|
(39,182
|
)
|
|
$
|
(14,113
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic
|
|
|
104,324,059
|
|
|
|
86,643,714
|
|
Weighted average shares outstanding, diluted
|
|
|
112,570,960
|
|
|
|
86,643,714
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share, basic
|
|
$
|
3.11
|
|
|
$
|
(0.16
|
)
|
Net loss per share, diluted
|
|
$
|
(0.35
|
)
|
|
$
|
(0.16
|
)
|
The Company included the following weighted
average potential common shares in the computation of diluted net income per share for the years ended December 31, 2020, but not for
the years ended December 31, 2019 because including them would have had an anti-dilutive effect:
|
|
Years Ended December 31,
|
|
|
|
2020 as restated
|
|
|
2019
|
|
|
|
|
|
|
|
|
Stock options, including incentive stock options and non-qualified
|
|
|
6,326,479
|
|
|
|
3,772,368
|
|
Common shares issuable from the exercise of warrants
|
|
|
1,920,426
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,246,905
|
|
|
|
3,772,368
|
|
Note 17. Supplemental Cash Flow Information
The following table provides supplemental cash flow
information for the years ended December 31, 2020 and 2019:
|
|
Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Cash paid for interest
|
|
$
|
(144
|
)
|
|
$
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
Cash paid for taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
(1,446
|
)
|
|
$
|
(1,255
|
)
|
|
|
|
|
|
|
|
|
|
Operating cash flows from finance leases
|
|
$
|
(29
|
)
|
|
$
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for lease obligations
|
|
$
|
1,007
|
|
|
$
|
21
|
|
The following table provides supplemental disclosures
of noncash financing activities for the year ended December 31, 2020 and 2019:
|
|
Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(in thousands)
|
|
Warrants exercised where proceeds are included within prepaid expenses and other current assets
|
|
$
|
11,978
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Settlement of convertible notes payable and convertible note payable derivative liabilities
|
|
$
|
44,039
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Redemption of unexercised warrants included within prepaid expenses and other current assets
|
|
$
|
(3
|
)
|
|
$
|
-
|
|
Note 18. Retirement Plan
The Company has adopted a 401(k) plan to provide
all eligible employees a means to accumulate retirement savings on a tax-advantaged basis. The 401(k) plan requires participants to be
at least 20 years old. Plan participants may make before tax elective contributions up to the maximum percentage of compensation and
dollar amount allowed under the Internal Revenue Code and are always 100% vested in their elective contributions. The Company makes discretionary
employer contributions at its election. Plan participants must be employed on the last day of the year to be eligible for the employer
match. Participants may defer specified portions of their compensation. The Company did not provide a match of the employee’s contribution
for the years ended December 31, 2020 and 2019.
PART
II
Information Not Required in Prospectus
Item
13. Other Expenses of Issuance and Distribution.
The
following is an estimate of the expenses (all of which are to be paid by the registrant) that we may incur in connection with the securities
being registered hereby.
|
|
Amount
|
|
SEC registration fee
|
|
$
|
366,418.72
|
|
FINRA filing fee
|
|
|
225,000
|
|
Legal fees and expenses
|
|
|
250,000
|
|
Accounting fees and expenses
|
|
|
52,500
|
|
Miscellaneous
|
|
|
11,081.28
|
|
Total
|
|
$
|
905,000
|
|
Item
14. Indemnification of Directors and Officers.
Section
145(a) of the DGCL provides, in general, that a corporation may indemnify any person who was or is a party to or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation), because he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding, if he or she acted
in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Section
145(b) of the DGCL provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor
because the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses
(including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests
of the corporation, except that no indemnification shall be made with respect to any claim, issue or matter as to which he or she shall
have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court
determines that, despite the adjudication of liability but in view of all of the circumstances of the case, he or she is fairly and reasonably
entitled to indemnity for such expenses that the Court of Chancery or other adjudicating court shall deem proper.
Section
145(g) of the DGCL provides, in general, that a corporation may purchase and maintain insurance on behalf of any person who is or was
a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation
would have the power to indemnify the person against such liability under Section 145 of the DGCL.
Additionally,
our Certificate of Incorporation eliminates our directors’ liability to the fullest extent permitted under the DGCL. The DGCL provides
that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors,
except for liability:
|
●
|
for
any transaction from which the director derives an improper personal benefit;
|
|
●
|
for
any act or omission not in good faith or that involves intentional misconduct or a knowing
violation of law;
|
|
●
|
for
any unlawful payment of dividends or redemption of shares; or
|
|
●
|
for
any breach of a director’s duty of loyalty to the corporation or its stockholders.
|
If
the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability
of the Company’s directors will be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
In
addition, we have entered into separate indemnification agreements with our directors and officers. These agreements, among other things,
require us to indemnify our directors and officers for certain expenses, including attorneys’ fees, judgments, fines, and settlement
amounts incurred by a director or officer in any action or proceeding arising out of their services as one of our directors or officers
or any other company or enterprise to which the person provides services at our request.
We
maintain a directors’ and officers’ insurance policy pursuant to which our directors and officers are insured against liability
for actions taken in their capacities as directors and officers.
Item 15. Recent Sales of Unregistered Securities.
Class
B Common Stock
In
November 2018, Tortoise Sponsor paid $25,000 in offering expenses on our behalf in exchange for the issuance of 5,750,000 shares of Class
B Common Stock. In February 2019, we effected a stock dividend of 718,750 shares of Class B Common Stock, resulting in Tortoise Sponsor
holding an aggregate of 6,468,750 shares Class B Common Stock (up to 843,750 shares of which were subject to forfeiture to the extent
the underwriters of the IPO did not exercise their over-allotment option). Also in February 2019, Tortoise Sponsor transferred 1,265,625
shares of Class B Common Stock to Tortoise Borrower, an affiliate of Tortoise Sponsor. On March 4, 2019, the underwriters of the IPO
partially exercised their over-allotment option and on March 7, 2019, the underwriters waived the remainder of their over-allotment option.
In connection therewith, Tortoise Sponsor forfeited 643,520 shares of Class B Common Stock for cancellation by TortoiseCorp. On March
4, 2019, Tortoise Borrower transferred 1,265,625 shares of Class B Common Stock to Atlas Point Fund, which is a fund managed by CIBC
National Trust but is not affiliated with TortoiseCorp or Tortoise Sponsor, pursuant to the Forward Purchase Agreement and Tortoise Sponsor
transferred 40,000 shares of Class B Common Stock to each of TortoiseCorp’s independent directors in connection with the closing
of the IPO. The shares of Class B Common Stock are identical to the shares of Class A Common Stock included in the units sold in the
IPO except that the shares of Class B Common Stock which automatically converted into shares of Class A Common Stock at Closing and were
subject to certain transfer restrictions, as described in more detail below. These shares of Class B Common Stock were issued in connection
with the organization of TortoiseCorp pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities Act.
Pursuant
to the Amended and Restated Certificate of Incorporation of TortoiseCorp, each share of Class B Common Stock converted into one share
of Class A Common Stock at the Closing. After the Closing and following the effectiveness of our Certificate of Incorporation, each share
of Class A Common Stock was automatically reclassified, redesignated and changed into one validly issued, fully paid and non-assessable
share of Common Stock, without any further action by the Company or any stockholder thereof. The issuance of Class A Common Stock upon
automatic conversion of Class B Common Stock at the Closing has not been registered under the Securities Act in reliance on the exemption
from registration provided by Section 3(a)(9) of the Securities Act.
Private
Placement Warrants
Simultaneously
with the consummation of the IPO, Tortoise Borrower purchased from us an aggregate of 6,660,183 Private Placement Warrants (for a purchase
price of approximately $6.66 million). Each Private Placement Warrant entitles the holder thereof to purchase one share of our Common
Stock at an exercise price of $11.50 per share. The sale of the Private Placement Warrants was made pursuant to an exemption from registration
contained in Section 4(a)(2) of the Securities Act.
Forward
Purchase Agreement
On
October 1, 2020, Atlas Point Fund purchased 1,750,000 Forward Purchase Units, consisting of 1,750,000 shares of Common Stock and Forward
Purchase Warrants to purchase 875,000 shares of Common Stock, for an aggregate purchase price of $17,500,000, and transferred 894,375
shares of Common Stock to Tortoise Borrower pursuant to the Forward Purchase Agreement. The securities issued in connection with the
Forward Purchase Agreement was made pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities Act.
Subscription
Agreements
On
October 1, 2020, the Subscribers purchased from the Company an aggregate of 30,750,000 shares of Common Stock, for a purchase price of
$10.00 per share and an aggregate purchase price of $307.5 million, pursuant to Subscription Agreements entered into effective as of
June 18, 2020. The securities issued in connection with the Forward Purchase Agreement was made pursuant to an exemption from registration
contained in Section 4(a)(2) of the Securities Act.
Business
Combination Agreement
At
the Effective Time, each share of Legacy Hyliion Common Stock was converted into and exchanged for 1.45720232 shares of our Common Stock.
The securities issued in connection with the Business Combination Agreement was made pursuant to an exemption from registration contained
in Section 4(a)(2) of the Securities Act.
Warrant
Redemption
On
November 30, 2020, the Company issued a notice of redemption of all the outstanding Public Warrants and Forward Purchase Warrants which
was completed in December 2020. However, the Private Warrants held by the initial holders thereof or permitted transferees of the initial
holders were not subject to this redemption. As of December 31, 2020, all outstanding Public Warrants and Forward Purchase Warrants were
either exercised or redeemed by the holder. Prior to the redemption date, a total of 15,786,127 Warrants were exercised and the Company
issued an equivalent number of shares of Common Stock to the exercising holders. Such shares of Common Stock were issued pursuant to
an exemption from registration contained in Section 4(a)(2) of the Securities Act.
Item
16. Exhibits.
Exhibit
|
|
|
Number
|
|
Description
|
2.1+
|
|
Business Combination Agreement and Plan of Reorganization, dated June 18, 2020, by and among TortoiseCorp., Merger Sub and the Company (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 001-38823) filed on June 19, 2020).
|
|
|
|
3.1
|
|
Second Amended and Restated Certificate of Incorporation of the Company, dated October 1, 2020 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-38823) filed on October 7, 2020).
|
|
|
|
3.2
|
|
Amended and Restated Bylaws of the Company, dated October 1, 2020 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K (File No. 001-38823) filed on October 7, 2020).
|
|
|
|
4.1
|
|
Form of Common Stock Certificate of the Company (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-38823) filed on October 7, 2020).
|
|
|
|
4.2
|
|
Amended and Restated Registration Rights Agreement, dated October 1, 2020, by and among TortoiseCorp and certain stockholders of TortoiseCorp (incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K (File No. 001-38823) filed on October 7, 2020).
|
|
|
|
4.3
|
|
Form of Warrant Certificate of the Company (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K (File No. 001-38823) filed with the SEC on October 7, 2020).
|
|
|
|
4.4
|
|
Form of Lock-Up Agreement (incorporated by reference to Exhibit 4.5 to the Current Report on Form 8-K (File No. 001-38823) filed on October 7, 2020).
|
|
|
|
4.5
|
|
Lock-Up Agreement, dated October 1, 2020, by and between the Company and Thomas Healy (incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K (File No. 001-38823) filed on October 7, 2020).
|
|
|
|
4.6
|
|
Warrant
Agreement, dated February 27, 2019, between the Company and Continental Stock Transfer & Trust Company, as warrant agent
(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-38823) filed on March 5, 2019).
|
|
|
|
5.1
|
|
Opinion of Vinson & Elkins L.L.P.
|
|
|
|
10.1#
|
|
Form of Indemnification Agreement by and between the Company and its directors and officers (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K (File No. 001-38823) filed on October 7, 2020).
|
|
|
|
10.2#
|
|
Hyliion
Holdings Corp. 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K (File No.
001-38823) filed on October 7, 2020).
|
|
|
|
10.3#
|
|
Hyliion 2020 Equity Incentive Plan, Form of Stock Option Agreement (incorporated by reference to Exhibit 99.3 to the Company’s Registration Statement on Form S-8 (File No. 333-251328) filed with the SEC on December 14, 2020).
|
|
|
|
10.4#
|
|
Hyliion 2020 Equity Incentive Plan, Form of RSU Award Agreement (incorporated by reference to Exhibit 99.4 to the Company’s Registration Statement on Form S-8 (File No. 333-251328) filed with the SEC on December 14, 2020).
|
|
|
|
10.5#
|
|
Employment Agreement, dated December 2, 2020, by and between Hyliion Holdings Corp. and Thomas Healy (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-38823) filed on December 7, 2020).
|
|
|
|
10.6#
|
|
Employment Agreement, dated December 2, 2020, by and between Hyliion Holdings Corp. and Patrick Sexton (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-38823) filed on December 7, 2020).
|
|
|
|
10.7#
|
|
Employment Agreement, dated January 8, 2021, by and between Hyliion Holdings Corp. and Sherri Baker (incorporated by reference to Exhibit 10.18 to the Annual Report on Form 10-K (File No. 001-38823) filed on February 25, 2021).
|
|
|
|
10.8
|
|
Lease Agreement, dated February 5, 2018, by and between IGX Brushy Creek, LLC and Hyliion Inc. (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K (File No. 001-38823) filed on October 7, 2020).
|
Exhibit
|
|
|
Number
|
|
Description
|
10.9
|
|
Stockholder Support Agreement, dated as of June 18, 2020, by and among Tortoise Acquisition Corp. and the stockholders of the Company named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-38823) filed with the SEC on June 19, 2020).
|
|
|
|
10.10
|
|
Stockholders Rights Agreement, dated as of June 18, 2020, by and among Tortoise Acquisition Corp., Vincent T. Cubbage, Stephen Pang and the stockholders of the Company named therein (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-38823) filed with the SEC on June 19, 2020).
|
|
|
|
10.11
|
|
Form of Subscription Agreement (incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K (File No. 001-38823) filed on June 19, 2020).
|
|
|
|
10.12#
|
|
Hyliion 2020 Equity Incentive Plan, Form of PSU Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2021).
|
|
|
|
10.13#
|
|
Hyliion 2020 Equity Incentive Plan, Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2021).
|
|
|
|
10.14
|
|
Forward Purchase Agreement, dated November 21, 2018, among Tortoise Acquisition Corp., Tortoise Sponsor LLC and Atlas Point Energy Infrastructure Fund, LLC (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 (File No. 333-229537) filed with the SEC on February 6, 2019).
|
|
|
|
10.14(a)
|
|
First Amendment to Amended and Restated Forward Purchase Agreement, dated as of June 18, 2020, by and among Tortoise Acquisition Corp., Tortoise Sponsor LLC and Atlas Point Energy Infrastructure Fund, LLC (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 001-38823) filed with the SEC on June 19, 2020).
|
|
|
|
10.15
|
|
Amended and Restated Forward Purchase Agreement, dated February 6, 2019, among Tortoise Acquisition Corp., Tortoise Sponsor LLC and Atlas Point Energy Infrastructure Fund, LLC (incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1 (File No. 333-229537) filed with the SEC on February 6, 2019).
|
|
|
|
10.16
|
|
Letter Agreement, dated February 27, 2019, among Tortoise Acquisition Corp., its officers and directors, Tortoise Sponsor LLC, Tortoise Borrower LLC and Atlas Point Energy Infrastructure Fund, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-38823) filed with the SEC on March 5, 2019).
|
|
|
|
10.17
|
|
Investment Management Trust Agreement, dated February 27, 2019, between Tortoise Acquisition Corp. and Continental Stock Transfer & Trust Company, as trustee (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-38823) filed with the SEC on March 5, 2019).
|
Exhibit
|
|
|
Number
|
|
Description
|
10.18
|
|
Administrative Services Agreement, dated February 27, 2019, between Tortoise Acquisition Corp. and Tortoise Sponsor LLC (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 001-38823) filed with the SEC on March 5, 2019).
|
|
|
|
10.19
|
|
Private Placement Warrants Purchase Agreement, dated February 27, 2019, between Tortoise Acquisition Corp. and Tortoise Borrower LLC (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (File No. 001-38823) filed with the SEC on March 5, 2019).
|
|
|
|
10.20
|
|
Registration Rights Agreement, dated February 27, 2019, among Tortoise Acquisition Corp., its officers and directors, Tortoise Sponsor LLC, Tortoise Borrower LLC and Atlas Point Energy Infrastructure Fund, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 001-38823) filed with the SEC on March 5, 2019).
|
|
|
|
10.21#
|
|
Employment Agreement, dated October 23, 2020, by and between the Company and Greg Van de Vere (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 (File No. 333-249649) filed with the SEC on October 23, 2020).
|
|
|
|
21.1
|
|
List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Annual Report on Form 10-K filed on February 25. 2021).
|
|
|
|
23.1
|
|
Consent of Grant Thornton LLP
|
+
|
The schedules and exhibits
to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will
be furnished to the SEC upon request.
|
#
|
Indicates
management contract or compensatory plan or arrangement.
|
Item
17. Undertakings.
(a)
|
The
undersigned registrant hereby undertakes:
|
|
(1)
|
To
file, during any period in which offers or sales are being made, a post-effective amendment
to this registration statement:
|
|
|
|
|
(i)
|
to
include any prospectus required by Section 10(a)(3) of the Securities Act;
|
|
(ii)
|
to
reflect in the prospectus any facts or events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Securities and Exchange Commission
(the “Commission”) pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than 20 percent change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective
registration statement; and
|
|
(iii)
|
to
include any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such information in the
registration statement;
|
provided,
however, that: Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), that
are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that
is part of the registration statement.
|
(2)
|
That,
for the purpose of determining any liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
|
|
(3)
|
To
remove from registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
|
|
(4)
|
That,
for the purpose of determining liability under the Securities Act to any purchaser:
|
|
(i)
|
Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part
of the registration statement as of the date the filed prospectus was deemed part of and
included in the registration statement; and
|
|
(ii)
|
Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a
registration statement in reliance on Rule 430B relating to an offering made pursuant to
Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by
Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration
statement as of the earlier of the date such form of prospectus is first used after effectiveness
or the date of the first contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person
that is at that date an underwriter, such date shall be deemed to be a new effective date
of the registration statement relating to the securities in the registration statement to
which that prospectus relates, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof. Provided, however, that no statement
made in a registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such effective date, supersede or modify any statement
that was made in the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such effective date.
|
|
(5)
|
That,
for the purpose of determining liability of the registrant under the Securities Act to any
purchaser in the initial distribution of the securities, the undersigned registrant undertakes
that in a primary offering of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to the purchaser,
if the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such purchaser:
|
|
(i)
|
Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering
required to be filed pursuant to Rule 424;
|
|
(ii)
|
Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned
registrant or used or referred to by the undersigned registrant;
|
|
(iii)
|
The
portion of any other free writing prospectus relating to the offering containing material
information about the undersigned registrant or its securities provided by or on behalf of
the undersigned registrant; and
|
|
(iv)
|
Any
other communication that is an offer in the offering made by the undersigned registrant to
the purchaser.
|
|
(b)
|
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this Post-Effective Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Cedar Park, State of Texas on July
8, 2021.
|
HYLIION HOLDINGS CORP.
|
|
|
|
|
/s/ Thomas Healy
|
|
|
Name: Thomas Healy
|
|
|
Title: Chief Executive Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities and on July 8, 2021.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Thomas Healy
|
|
Chief Executive Officer and Director
|
|
July 8, 2021
|
Thomas Healy
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Sherri Baker
|
|
Chief Financial Officer (Principal Financial
|
|
July 8, 2021
|
Sherri Baker
|
|
Officer and Principal Accounting Officer)
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
July 8, 2021
|
Andrew H. Card, Jr.
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
July 8, 2021
|
Vincent T. Cubbage
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
July 8, 2021
|
Howard Jenkins
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
July 8, 2021
|
Edward Olkkola
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
July 8, 2021
|
Stephen Pang
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
July 8, 2021
|
Robert M. Knight, Jr.
|
|
|
|
|
|
|
|
|
|
*By: /s/ Thomas Healy
|
|
|
|
|
Thomas Healy
|
|
Attorney-in-Fact
|
|
July 8, 2021
|
II-9
Hyliion (NYSE:HYLN)
Historical Stock Chart
From Aug 2024 to Sep 2024
Hyliion (NYSE:HYLN)
Historical Stock Chart
From Sep 2023 to Sep 2024