hyln-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-38823

HYLIION HOLDINGS CORP.

(Exact Name of Registrant as Specified in Its Charter)


Delaware						83-2538002
(State or Other Jurisdiction of Incorporation)						(IRS Employer Identification No.)

1202 BMC Drive, Suite 100, Cedar Park, TX						78613
(Address of Principal Executive Offices)						(Zip Code)

(833) 495-4466

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐

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 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	x	Smaller reporting company	x
		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 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

HYLN

NYSE American LLC

As of November 7, 2024, 173,734,435 shares of common stock, par value $0.0001 per share, were issued and outstanding.

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HYLIION HOLDINGS CORP.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	25

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HYLIION HOLDINGS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands, except share data)


	September 30, 2024		December 31, 2023
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	28,065	$	12,881
Accounts receivable	1,257		40
Prepaid expenses and other current assets	5,678		18,483
Short-term investments	122,897		150,297
Assets held for sale	3,463		—
Total current assets	161,360		181,701

Property and equipment, net	17,428		9,987
Operating lease right-of-use assets	5,779		7,070
Other assets	1,173		1,439
Long-term investments	86,545		128,186
Total assets	$	272,285	$	328,383

Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	1,654	$	4,224
Current portion of operating lease liabilities	1,531		847
Accrued expenses and other current liabilities	5,975		10,051
Total current liabilities	9,160		15,122

Operating lease liabilities, net of current portion	4,997		6,792
Other liabilities	400		203
Total liabilities	14,557		22,117

Commitments and contingencies (Note 9)

Stockholders’ equity
Common stock, $0.0001 par value; 250,000,000 shares authorized; 184,335,183 and 183,071,317 shares issued at September 30, 2024 and December 31, 2023, respectively; 173,725,113 and 183,034,255 shares outstanding as of September 30, 2024 and December 31, 2023, respectively	18		18
Additional paid-in capital	407,259		404,045
Treasury stock, at cost; 10,610,070 and 37,062 shares as of September 30, 2024 and December 31, 2023, respectively	(14,135)		(33)
Accumulated deficit	(135,414)		(97,764)
Total stockholders’ equity	257,728		306,266
Total liabilities and stockholders’ equity	$	272,285	$	328,383

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HYLIION HOLDINGS CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollar amounts in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenues
Product sales and other	$	—	$	96	$	—	$	672
Total revenues	—		96		—		672
Cost of revenues
Product sales and other	—		677		—		1,675
Total cost of revenues	—		677		—		1,675
Gross loss	—		(581)		—		(1,003)
Operating expenses
Research and development	9,462		25,115		25,741		73,472
Selling, general and administrative	5,648		8,186		18,502		30,265
Exit and termination costs	(929)		—		2,946		—
Total operating expenses	14,181		33,301		47,189		103,737
Loss from operations	(14,181)		(33,882)		(47,189)		(104,740)

Interest income	2,979		3,534		9,504		10,345
Gain on disposal of assets	—		—		3		1
Other income, net	—		26		32		14
Net loss	$	(11,202)	$	(30,322)	$	(37,650)	$	(94,380)

Net loss per share, basic and diluted	$	(0.06)	$	(0.17)	$	(0.21)	$	(0.52)

Weighted-average shares outstanding, basic and diluted	173,612,768		181,641,060		175,302,069		180,914,250

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HYLIION HOLDINGS CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollar amounts in thousands, except share data)


	Nine Months Ended September 30, 2024
	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2023	183,071,317	$	18	(37,062)	$	(33)	$	404,045	$	(97,764)	$	306,266
Exercise of common stock options and vesting of restricted stock units, net	945,378	—		—	—		(247)		—		(247)
Share-based compensation	—	—		—	—		1,320		—		1,320
Repurchase of treasury stock	—	—		(8,675,395)	(11,337)		—		—		(11,337)
Net loss	—	—		—	—		—		(15,592)		(15,592)
Balance at March 31, 2024	184,016,695	$	18	(8,712,457)	$	(11,370)	$	405,118	$	(113,356)	$	280,410
Exercise of common stock options and vesting of restricted stock units, net	138,419	—		—	—		(68)		—		(68)
Share-based compensation	—	—		—	—		1,125		—		1,125
Repurchase of treasury stock	—	—		(1,897,613)	(2,771)		—		—		(2,771)
Net loss	—	—		—	—		—		(10,856)		(10,856)
Balance at June 30, 2024	184,155,114	$	18	(10,610,070)	$	(14,141)	$	406,175	$	(124,212)	$	267,840
Exercise of common stock options and vesting of restricted stock units, net	180,069	—		—	—		(12)		—		(12)
Share-based compensation	—	—		—	—		1,096		—		1,096
Repurchase of treasury stock	—	—		—	6		—		—		6
Net loss	—	—		—	—		—		(11,202)		(11,202)
Balance at September 30, 2024	184,335,183	$	18	(10,610,070)	$	(14,135)	$	407,259	$	(135,414)	$	257,728


	Nine Months Ended September 30, 2023
	Common Stock			Treasury Stock			Additional Paid-In Capital		(Accumulated Deficit) Retained Earnings		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2022	179,826,309	$	18	—	$	—	$	397,810	$	25,746	$	423,574
Exercise of common stock options and vesting of restricted stock units, net	869,263	—		—	—		(176)		—		(176)
Share-based compensation	—	—		—	—		2,040		—		2,040
Net loss	—	—		—	—		—		(28,831)		(28,831)
Balance at March 31, 2023	180,695,572	$	18	—	$	—	$	399,674	$	(3,085)	$	396,607
Exercise of common stock options and vesting of restricted stock units, net	456,579	—		—	—		44		—		44
Share-based compensation	—	—		—	—		1,721		—		1,721
Net loss	—	—		—	—		—		(35,227)		(35,227)
Balance at June 30, 2023	181,152,151	$	18	—	$	—	$	401,439	$	(38,312)	$	363,145
Exercise of common stock options and vesting of restricted stock units, net	1,564,294	—		—	—		130		—		130
Share-based compensation	—	—		—	—		1,409		—		1,409
Net loss	—	—		—	—		—		(30,322)		(30,322)
Balance at September 30, 2023	182,716,445	$	18	—	$	—	$	402,978	$	(68,634)	$	334,362

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HYLIION HOLDINGS CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities
Net loss	$	(37,650)	$	(94,380)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,140		1,796
Amortization and accretion of investments, net	(2,489)		(1,821)
Noncash lease expense	1,291		1,072
Inventory write-down	—		992
Gain on disposal of assets, including assets held for sale	(2,109)		(1)
Share-based compensation	3,541		5,170
Carrying value adjustment to assets held for sale	5,564		—
Changes in operating assets and liabilities:
Accounts receivable	(580)		996
Inventory	—		(1,057)
Prepaid expenses and other assets	(5,215)		(1,200)
Accounts payable	(2,655)		555
Accrued expenses and other liabilities	(4,018)		(3,295)
Operating lease liabilities	(1,111)		(1,254)
Net cash used in operating activities	(43,291)		(92,427)

Cash flows from investing activities
Purchase of property and equipment	(10,548)		(6,755)
Proceeds from sale of property and equipment	4,110		2

Payments for security deposit, net	—		(45)
Purchase of investments	(55,383)		(170,197)
Proceeds from sale and maturity of investments	126,686		178,556
Net cash provided by investing activities	64,865		1,561

Cash flows from financing activities


Proceeds from exercise of common stock options	67		230
Taxes paid related to net share settlement of equity awards	(393)		(232)
Repurchase of treasury stock	(13,982)		—
Net cash used in financing activities	(14,308)		(2)

Net increase (decrease) in cash and cash equivalents and restricted cash	7,266		(90,868)
Cash and cash equivalents and restricted cash, beginning of period	21,464		120,133
Cash and cash equivalents and restricted cash, end of period	$	28,730	$	29,265

Supplemental disclosure of noncash investing and financing activities:
Repurchase of treasury stock included in accrued expenses	$	120	$	—
Acquisitions of property and equipment included in accounts payable and other	$	227	$	512
Right-of-use assets obtained in exchange for lease obligations	$	—	$	2,096

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HYLIION HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except as separately indicated)

Note 1. Overview

Hyliion Holdings Corp. is a Delaware corporation headquartered in Cedar Park, Texas, with research and development facilities near Cincinnati, Ohio, that designs and develops power generators for stationary and mobile applications and provides research and development services. References to the “Company,” “Hyliion,” “we,” or “us” in this report refer to Hyliion Holdings Corp. and its wholly owned subsidiary, unless expressly indicated or the context otherwise requires.

Note 2. Disposals

Strategic Plan Wind Down

On November 7, 2023, the Board of the Company approved a strategic plan to wind down its powertrain business and preserve the related intellectual property (the “Plan”). We have not accounted for the impacts of the Plan as a discontinued operation through September 30, 2024 as we have not abandoned or sold the underlying intellectual property. We historically provided limited assurance-type warranties under our powertrain contracts and plan to continue to service such warranties through their remaining term, with the majority ending in 2024.

Total charges and expenses (income) related to the Plan of ($0.9) million and $2.9 million for the three and nine months, respectively, ended September 30, 2024, inclusive of recoveries from assets sold and charges to assets held for sale discussed below, are included in exit and termination costs in the condensed consolidated statements of operations. The change in total liabilities associated with the Plan is included within accrued expenses and other current liabilities as presented in Note 8, and accounts payable, and is summarized as follows (in millions):


	June 30, 2024		Charged to Expense		Costs Paid or Settled		September 30, 2024
Employee severance and retention	$	0.4	$	—	$	(0.1)	$	0.3
Contract terminations	1.0		—		(0.2)		0.8
Warranty obligations	0.1		—		—		0.1
	$	1.5	$	—	$	(0.3)	$	1.2


	March 31, 2024		Charged to Expense		Costs Paid or Settled		June 30, 2024
Employee severance and retention	$	0.7	$	—	$	(0.3)	$	0.4
Contract terminations	2.1		—		(1.1)		1.0
Warranty obligations	0.1		—		—		0.1
	$	2.9	$	—	$	(1.4)	$	1.5


	December 31, 2023		Charged to Expense		Costs Paid or Settled		March 31, 2024
Employee severance and retention	$	1.1	$	—	$	(0.4)	$	0.7
Contract terminations	6.5		(0.7)		(3.7)		2.1
Warranty obligations	0.4		(0.3)		—		0.1
	$	8.0	$	(1.0)	$	(4.1)	$	2.9

The above estimates of the cash expenditures and charges that the Company expects to incur in connection with the Plan, and the timing thereof, are subject to a number of assumptions and actual amounts may differ materially from estimates. In addition, the Company may incur other cash expenditures or charges not currently contemplated due to unanticipated events.

Assets Held for Sale

Through the quarter ended September 30, 2024, certain assets of our powertrain business, including Class 8 semi-trucks and capital equipment, were being actively marketed for sale, and we were actively locating buyers for these assets at prices that were reasonable in relation to their current fair value and the assets were available for immediate sale in their present condition. At the time of initial classification as held for sale, we estimated that the sale of these assets was expected to be completed within one year and it was unlikely that significant changes to the plan of sale would be made. We review assets held for sale each reporting period to determine whether the existing carrying amounts are fully recoverable in comparison to their estimated fair values less costs to sell.

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HYLIION HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except as separately indicated)

We had assets held for sale of $3.5 million consisting of property and equipment in connection with the Plan at their fair value less costs to sell at September 30, 2024. We used fair value hierarchy Level III inputs including comparable assets, adjusted for condition, and recorded charges of $0.0 million and $5.6 million included in exit and termination costs in the condensed consolidated statements of operations in the three and nine months, respectively, ended September 30, 2024. The estimates of fair value less costs to sell are subject to a number of assumptions and actual amounts may differ materially from estimates.

We recorded net benefits for recoveries related to asset sales of $0.9 million and $2.1 million included in exit and termination costs in the condensed consolidated statements of operations in the three and nine months, respectively, ended September 30, 2024 and included in gain on disposal of assets in the condensed consolidated statements of cash flows for the nine months ended September 30, 2024.

Note 3. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying condensed 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 condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”), which permit reduced disclosure for interim periods. The condensed consolidated balance sheet at December 31, 2023 was derived from audited financial statements for the fiscal year then ended, but does not include all necessary disclosures required with respect to annual financial statements. In the opinion of the Company, these 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 2023 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.

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 and has generated negative cash flows from operating activities since inception. At September 30, 2024, the Company had total equity of $257.7 million, inclusive of cash and cash equivalents of $28.1 million and total investments of $209.4 million. Based on this, the Company has sufficient funds to continue to execute its business strategy for the next twelve months from the issuance date of the financial statements included in this Quarterly Report on Form 10-Q.

Use of Estimates

The preparation of financial statements in conformity with 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 assets held for sale, income taxes and valuation of share-based compensation. 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.

Concentration of Supplier Risk

The Company is dependent on certain suppliers, many 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 and are carried at cost, which approximates fair value. The Company maintains cash in excess of federally insured limits at financial institutions which it believes are of high credit quality and has not incurred any losses related to these balances to date. The Company believes its credit risk, with respect to these financial institutions to be minimal.

Restricted Cash

The Company provided a supplier with a letter of credit for $7.9 million in the fourth quarter of 2023 to secure the performance of the Company’s obligations to purchase semi-trucks related to the Founders Program, backed by a restricted cash deposit to pay any draws on the letter of credit by the supplier. The Company was released from this letter of credit in the first quarter of 2024.

The Company has provided its corporate headquarters lessor with a letter of credit for $0.7 million to secure the performance of the Company’s lease obligations, backed by a restricted cash deposit to pay any draws on the letter of credit by the lessor. Total cash and cash equivalents and restricted cash as presented in the condensed consolidated statements of cash flows is summarized as follows:


	September 30, 2024		December 31, 2023		September 30, 2023		December 31, 2022
Cash and cash equivalents	$	28,065	$	12,881	$	28,600	$	119,468
Restricted cash included in prepaid expenses and other current assets	—		7,918		—		—
Restricted cash included in other assets	665		665		665		665
	$	28,730	$	21,464	$	29,265	$	120,133

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 the Company’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 and other pertinent factors. At September 30, 2024 and December 31, 2023, there were no accounts receivable due from customers or allowances for doubtful accounts. Accounts receivable consisted of amounts due from performance of government contracts for which the Company was a prime and subcontractor and for sales of equipment associated with the wind down of the powertrain business.

Investments

The Company’s investments consist of corporate bonds, U.S. treasury and agency securities, state and local municipal bonds 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. The Company 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, along with interest, is included in interest 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 investments 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 cost 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; and

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.

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 and restricted cash, accounts receivable, investments, accounts payable and accrued expenses. The carrying value of cash and cash equivalents and restricted cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short-term nature of those instruments. The fair value of investments is based on quoted prices for identical or similar instruments in markets that are not active. As a result, investments are classified within Level II of the fair value hierarchy.

Inventories

Through September 30, 2024, we have not yet commercialized the KARNO generator. Costs incurred for components acquired prior to our determination of reaching a commercial stage are expensed as research and development costs, resulting in zero cost basis for those components. As a result, moving-average prices for inventory that is capitalized in future periods may be significantly affected by those zero cost items.

Revenue

The Company has been performing under two contracts as both a prime and subcontractor to the United States government to provide research and development services in contractual amounts up to $2.4 million. The larger of these two contracts was modified and will be accounted for as a new contract in the quarter ending December 31, 2024. These contracts were not accounted for as revenue as they were not made in the ordinary course of business and the counterparties were not customers under GAAP. In September 2024, the Company was awarded a cost-plus-fixed fee contract up to $16.0 million by the United States Department of the Navy’s Office of Naval Research (“ONR”) to research the applicability of its KARNO generator for navy ships and stationary power applications. Under the agreement, the Company will provide up to seven KARNO generators and related research and development services through September 2026. The ONR contract represented a significant change in business strategy toward providing research and development activities in the ordinary course of business in addition to designing and developing power generators for stationary and mobile applications. The Company will account for all three contracts under ASC 606 beginning in the quarter ending December 31, 2024.

The amounts remaining to be billed on these contracts was up to $17.2 million as of September 30, 2024. We had accounts receivable due on these contracts of $0.5 million and nil at September 30, 2024 and December 31, 2023, respectively, and no allowance for doubtful accounts. Inventory is consumed in the performance of these contracts in the quarter in which it is purchased and we therefore do not record inventory at each reporting period pertaining to these contracts.

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, internally developed software and employee related expenses (including salaries, benefits, travel, and share-based compensation) related to development of the Company’s products and services.

Recent Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), to enable investors to better understand the major components of an entity’s income statement. The pronouncement is effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027 and we expect a material impact to our disclosures as a result of adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), to enhance transparency and decision usefulness of income tax disclosures. The pronouncement is effective for fiscal years beginning after December 15, 2024 and we expect a material impact to our disclosures as a result of adoption.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to improve the disclosures about a public entity’s reportable segments. The pronouncement is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024 and we expect a material impact to our disclosures as a result of adoption.

Note 4. Investments

The amortized cost, unrealized gains and losses, fair value and maturities of our held-to-maturity investments at September 30, 2024 and December 31, 2023 are summarized as follows:


			Fair Value Measurements at September 30, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Commercial paper	$	3,444	$	7	$	—	$	3,451
U.S. government agency bonds	19,674		13		(28)		19,659
State and municipal bonds	10,885		32		—		10,917
Corporate bonds and notes	175,439		1,016		(15)		176,440
	$	209,442	$	1,068	$	(43)	$	210,467


			Fair Value Measurements at December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Commercial paper	$	35,218	$	18	$	(10)	$	35,226
U.S. government agency bonds	27,602		56		(186)		27,472
State and municipal bonds	15,262		1		(48)		15,215
Corporate bonds and notes	200,401		515		(255)		200,661
	$	278,483	$	590	$	(499)	$	278,574


	September 30, 2024				December 31, 2023
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	122,897	$	123,220	$	150,297	$	149,934
Due after one year through five years	86,545		87,247		128,186		128,640
	$	209,442	$	210,467	$	278,483	$	278,574

Note 5. Fair Value Measurements

The fair value measurements of our financial assets at September 30, 2024 and December 31, 2023 are summarized as follows:


	Fair Value Measurements at September 30, 2024
	Level I		Level II		Level III		Total
Cash and cash equivalents	$	28,065	$	—	$	—	$	28,065
Restricted cash	665		—		—		665
Held-to-maturity investments:
Commercial paper	—		3,451		—		3,451
U.S. government agency bonds	—		19,659		—		19,659
State and municipal bonds	—		10,917		—		10,917
Corporate bonds and notes	—		176,440		—		176,440
	$	28,730	$	210,467	$	—	$	239,197


	Fair Value Measurements at December 31, 2023
	Level I		Level II		Level III		Total
Cash and cash equivalents	$	12,881	$	—	$	—	$	12,881
Restricted cash	8,583		—		—		8,583
Held-to-maturity investments:
Commercial paper	—		35,226		—		35,226
U.S. government agency bonds	—		27,472		—		27,472
State and municipal bonds	—		15,215		—		15,215
Corporate bonds and notes	—		200,661		—		200,661
	$	21,464	$	278,574	$	—	$	300,038

Note 6. Property and Equipment, Net

Property and equipment, net at September 30, 2024 and December 31, 2023 is summarized as follows:


	September 30, 2024		December 31, 2023
Production machinery and equipment	$	18,734	$	10,376
Vehicles	912		2,013
Leasehold improvements	4,074		2,236
Office furniture and fixtures	248		223
Computers and related equipment	2,086		1,963
	26,054		16,811
Less: accumulated depreciation	(8,626)		(6,824)
Total property and equipment, net	$	17,428	$	9,987

We began placing new additive manufacturing equipment into service in our Cedar Park facility during the current quarter, with useful lives up to 12 years, included in production machinery and equipment.

Note 7. Share-Based Compensation

During the nine months ended September 30, 2024 and 2023, the Company granted 6.1 million and 2.2 million, respectively, restricted stock units which will vest over a period of one to three years. During the nine months ended September 30, 2024 and 2023, 1.2 million and 0.6 million, respectively, of restricted stock units and options were forfeited. Share-based compensation expense for the three and nine months ended September 30, 2024 was $1.1 million and $3.5 million, respectively. Share-based compensation expense for the three and nine months ended September 30, 2023 was $1.4 million and $5.2 million, respectively.

In May 2024, stockholders of the Company approved the Hyliion Holdings Corp. 2024 Equity Incentive Plan which allows issuance of up to 8,000,000 shares, subject to certain adjustments.

Of the restricted stock units granted in the first quarter of 2024, 2.7 million units may vest between February 13, 2025 and December 31, 2026 contingent upon achieving underlying closing stock price thresholds. These awards were valued at $0.83 per unit using fair value hierarchy Level III inputs including an underlying share volatility of 90% and a risk-free rate of 4.35%. There were no material amounts of market-conditioned awards granted after the first quarter of 2024.

Note 8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities at September 30, 2024 and December 31, 2023 are summarized as follows:

SEC Form 10-Q filed by Hyliion Holdings Corp.