HYLN 10-K & 10-Q changes, risk factors and insider trading

The KARNO generator is still in the development and testing phase, and commercial deliveries are not expected to begin until 2025late 2026 or later, and may not occur at all. Initial deployments may not be recognized as revenue, or there may be a need to deploy units at a decreased price or for free for initial customers. Some of our target customers may be expecting to receive government incentives for deployments and may not purchase our KARNO generators in the event those incentives are delayed or not received. Any delay in the financing, design, production and launch of the KARNO generator would materially damage our brand, business, prospects, financial condition and operating results.

We substantially depend on government funding, which if lost or reduced, could have a material adverse effect on our research and development activities and our ability to begin recognizing revenue. Our largest contract iscontracts with ONR andare iscurrently the largest singleonly source of revenue for us. Our ONR contractcontracts may not be guaranteed to be extended beyond its current scope.

We have not made any commercial sales of our KARNO generatorPower Module to date and our ONR contractcontracts isare theour largest single source of revenue for us.revenue. In September 20242024, we were awarded a cost-plus-fixed-fee contractcontract, modified in March 2025, of up to $16 million by ONR to assess the suitability of our KARNO generator for Navy vessels and stationary power applications. In July 2025, we were further awarded a Phase II best effort cost-plus-fixed-fee contract of up to $1.5 million by ONR. We currently receive almost all of our revenue from fees and costs payable by ONR pursuant to oursuch R&Dcontracts, contracts.making Whileus wesubstantially believedependent weon havefunding afrom goodONR. workingAs relationship with ONR,such, the loss of our contracts with ONR may have an adverse impact on our business, prospects, results of operations and financial condition. While we expect to sell our KARNO generator to commercial customers beginning with initial deployments in 2025, for the time being we are substantially dependent on funding from ONR.

We require significant capital to develop and grow our business, including developing, producing and servicing KARNO generatorsPower Modules and our brand and investing in additive printing machines. We expect to continue to incur significant expenses, which will impact our profitability and available capital, including costs for R&D efforts, component and service procurement, sales, general and administrative costs, and production, distribution and support.

Our ability to become profitable in the future will require us to complete the design, development and testing of our KARNO generatorPower Module while achieving projected performance criteria. We must also successfully market our KARNO generatorPower Modules and related services to customers, sell our systems at prices needed to achieve positive gross margins, and reduce production costs. We may need to sell our products at a loss or discounted prices in the short term in order to win initial customer orders and gain the confidence of potential customers. If we are unable to efficiently design, produce, market, sell, distribute and service our KARNO generator,Power Modules, our margins, profitability, and long-term prospects will be materially and adversely affected.

We have no experience manufacturing the KARNO generatorPower Module on a large-scale basis and if we do not develop adequate manufacturing processes and capabilities to do so, or if we fail to identify qualified outsourced manufacturing partners, in a timely manner, we will be unable to achieve our growth and profitability objectives.

We have not yet manufactured the KARNO generatorPower Modules on a large scale but in order to produce the generatorKARNO Power Modules at affordable prices, we will have to manufacture at scale which may require future printer throughput increases, reduction of printer and material costs, and lower purchased component and services costs, enabled by volume-driven cost reductions and design changes for generator components. We do not know whether we will timely receive the printers we need to manufacture KARNO generatorsPower Modules at scale or whether the printers we intend to use will be able to adequately accommodate capacity needs. We do not know whether our plans to scale the productproducts will be implemented such that they will satisfy the requirements of our customers and the anticipated markets for the KARNO generator.Power Modules. If the Company is unable to develop these manufacturing capabilities internally, we may be unable to identify outsourced manufacturing partners who have the technical capability to produce KARNO generatorsPower Modules or who can do so on commercially acceptable terms. Our failure to develop manufacturing processes and capabilities in a timely manner could prevent us from achieving our growth and profitability objectives.

Significant markets for our KARNO generatorPower Modules may develop more slowly than we anticipate or may never develop at all. This would significantly harm our revenues and may cause us to be unable to recover the losses we have incurred and expect to incur in the development of our products.

The distributed power generation industry is still an emerging market in an otherwise mature and heavily regulated energy utility industry, and we cannot be sure that potential customers will accept distributed generation broadly, or stationary power generators including our KARNO generators,Power Modules, specifically. Significant markets for distributed power generation may never develop or they may develop more slowly than we anticipate. Enterprises may be unwilling to adopt our KARNO generatorPower Module technology over traditional or competing power sources like electricity from the grid, for any number of reasons, including the perception that our technology or our Company is unproven, lack of confidence in our business model, the unavailability of third-party service providers to operate and maintain KARNO generators,Power Modules, and lack of awareness of our productproducts or their perception of regulatory or political headwinds.

Market opportunity estimates and growth forecasts, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. In particular, estimates and forecasts relating to the size and expected growth of electricity demand in our target markets, our capacity to address this demand, the adoption of our KARNO generator technology, and our pricing may prove to be inaccurate. Any inaccuracies or errors in our estimates or third-party estimates of market opportunity may cause us to misallocate capital and other business resources, which could harm our business. The addressable market we estimate may not materialize for many years, if ever, and even if the markets in which we compete meet size estimates and growth forecasts, our business could fail to grow at similar rates, if at all.

Any such delay or failure in the development of potential markets would significantly harm our revenues and we may be unable to recover the losses we have incurred and expect to continue to incur in the acquisition and development of KARNO generator technology. If this were to occur, we may never achieve profitability and our business could fail. Whether or not end-users will want to implement and use stationary power generators and other distributed generation technologies may be affected by many factors, some of which are beyond our control, includingincluding, among others: the emergence of more competitive technologies and products; alternative technologies and products that could render our products obsolete; the future cost of fuels used by our products; the regulatory requirements of agencies with respect to energy products; government support by way of legislation, tax incentives, policies or otherwise, relating to our technology; the manufacturing and supply costs for components and systems for the KARNO generatorPower Module; the perceptions of consumers regarding the safety of our products; the willingness of consumers to try new technologies; and the continued development and improvement of existing power technologies.

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-stage products into meaningful orders in the future. If we are unable to meet our customers’ performance requirements or industry specifications, identify target customers or convert early-stage products into meaningful orders, our business, prospects, financial condition and operating results would be materially adversely affected. Moreover, if we or our customers find that our KARNO generatorPower doesModules do not perform as expected or if our orders for KARNO generatorsPower Modules do not materialize in large numbers, we may cease to distribute our KARNO generators,Power Modules, or recall some or all of our product, and future distributions may be delayed or cease for some period of time or indefinitely.

Our ability to generate revenue from ONR and other United States government contracts in the future could depend on the viability of our KARNO generatorPower Module in maritime and other applications for which they have not yet been tested. If we are unable to demonstrate the viability of the KARNO generatorPower Module for naval and stationary applications under our government research contracts, it may have a material effect on revenues and operations.

Demand for our products will ultimately depend on end userend-user customers, 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-user customers, some of whom operate in highly cyclical industries. 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. 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 production facilities, increasing our unit production cost and decreasing our operating margins. Additionally, our end userend-user customers may be required to obtain certifications for use of the KARNO generatorPower Module on their premises or other intended locations and the delay or failure of these customers to obtain such certifications could have a material impact on our business and operating results.

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 in future years. We also intend to continue to hire additional personnel, including engineers, design and production personnel and service technicians for our KARNO generator design, development, distribution and service support. Competition for individuals with experience in designing, producing and servicing distributed generators and their software is intense, and we may not be able to attract, integrate, train, motivate, or retain additional highly qualified personnel in the Austin, Texas and Cincinnati, Ohio areas where we are located. Due to the specific skills required and the strongcurrent job market nationally, we may experience increased compensation, recruiting and relocation expenses to achieve our hiring goals. The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm our business, prospects, financial condition and operating results.

We are dependent on our suppliers, somemany of which are single or limited-source suppliers, and the inability of these suppliers to deliver necessary components for our generatorproducts at prices, volumes, and performance 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, somemany of whom are single-source suppliers, for the provision and development of many of the key components and materials used in our KARNO generator system,products, such as linear electric machine component suppliers. 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 generator may 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 and pricing, which would impact our ability to achieve our product specifications and performance characteristics. 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 generator solution from our suppliers or if our suppliers decide to create or supply a competing product, our business could be adversely affected. While we believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable to do so in the short term (or at all) 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.

The manufacture and production of our KARNO GeneratorPower Module is heavily dependent on the use of state-of-the-art additive printers which are manufactured by a small number of specialized vendors. We currently purchase all of our additive printing machines from Colibrium Additive (formerly GE Additive). The partial or complete loss of these key manufacturers, or a significant adverse change in our relationship with Colibrium Additive or any other manufacturer, could have a material adverse effect on our ability to manufacture, test and deploy the KARNO generator.Power Module.

Once we begin commercial production of our KARNO generator,Power Modules, 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 onon, among other factors, market conditions and global demand and could adversely affect our business, prospects, financial condition and operating results.

If our KARNO generatorsPower Modules fail to perform as expected, our ability to develop, market and sell our products could be harmed.

Our KARNO generatorsPower Modules may contain defects in design and production that may cause them not to perform as expected or they may require repair or not achieve the expected low maintenance characteristics. There can be no assurance that we will be able to detect and fix any defects in our KARNO generators.Power Modules. Our products may not meet customers’ expectations or perform competitively with other distributed generators that may become available. Any product defects or any other failure of our KARNO generatorPower Modules 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.

We have limited experience servicing our KARNO generatorsPower Modules 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 KARNO generatorsproducts and expect to increase our servicing capabilities as we begin commercial production. Servicing distributed generatorsproducts requires specialized skills, including high voltage training and servicing techniques. We may partner withrequire one or more third-party service providers to perform some or all of the servicing on our generators,products, and there can be no assurance that we will be able to enter into an acceptable arrangement with any such third-party provider. 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 maintenance services and technical support. 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 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, includingincluding, among others:

Our KARNO generatorsPower willModule is intended to compete with a broad range of companies and technologies, including traditional energy suppliers, such as public utilities, and other energy providers utilizing traditional co-generation systems, nuclear, hydro, coal or geothermal power, companies utilizing intermittent solar or wind power paired with storage, and other commercially available stationary power generation technologies, including fuel cells and diesel generators.

Developments in alternative technology or improvements in distributed generation products may adversely affect the demand for our KARNO generators.products.

We are at risk for interruptions, outages and breaches of our operational systems, facility security systems, transmission control modules or other in-product technology; in each case owned by us or our third-party vendors or suppliers as well as the integrated software in our KARNO generators; or customer data that we process or our third-party vendors or suppliers process on our behalf. The techniques used by cyber attackers change frequently and may be difficult to detect for long periods of time. Although we believe that we maintain information technology measures designed to protect ourselves against intellectual property theft, data breaches and other cyber incidents, 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 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. Moreover, our proprietary information or intellectual property could be compromised or misappropriated. 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.

Any unauthorized control or manipulation of the information technology systems in our KARNO generatorPower systemsModules could result in loss of confidence in us and our power generation solutions and harm our business.

Our KARNO generatorsPower Modules 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. Any unauthorized access to or control of our KARNO generatorPower systems,Modules, or any loss of customer data, could result in legal claims or proceedings and remediation of such problems could result in significant, unplanned expenditures.

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 KARNO generator and other products, 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 distributed generators 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 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 products. 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.

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; however, the measures we take to protect our intellectual property from unauthorized use by others may not be effective.

Contracts with governmental organizations, including the United States government, have not been a major source of our revenues in the past. However, we anticipate such sources becoming a more significant portion of our business in the future. Our ability to comply with governmental regulations applicable to United StatesU.S. defense contractors, including procurement procedures, could have a material impact on our future results of operations. In addition, as a provider for the United States government, we may be subject to numerous laws and regulations relating to the award, administration and performance of United StatesU.S. government contracts. Non-compliance found by any one agency could result in fines, penalties, debarment, or suspension from receiving additional contracts with all United StatesU.S. government agencies. Given our potentialsubstantial dependence on USU.S. government business, suspension or debarment could have a material adverse effect on our business and results of operations.

We, our outsourcing partners and our suppliers areare, or may be subject toto, substantial regulation and unfavorable changes to, or failure by us, our outsourcing partners or our suppliers to comply with,with these regulations could substantially harm our business and operating results.

We continue to evaluate requirements for licenses, approvals, certificates and governmental authorizations necessary to manufacture, sell, or service our KARNOproducts generatorin the jurisdictions in which we currently operate and in the jurisdictions in which we plan to operate andin intendthe to take such actions necessary to comply.future. 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.

We are exposed to risks related to tariffs, duties, and taxes that can significantly impact our global supply chains and operations, includingincluding, without limitation, the possibility of the increasing the costs of components that we purchasedpurchase from other countries or reducing the availabilityshortage ofof, or difficulty in obtaining, such components.

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, the California requiresConsumer connectedPrivacy devicesAct toand maintainthe minimumEuropean informationUnion’s securityGeneral requirements.Data Protection Regulation set strict rules and regulations regarding the handling and use of personal data and non-compliance could result in material fines or penalties. 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 generatorsproducts and harm to our reputation and brand.

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 ofof, and human exposure toto, hazardous materials. Environmental andEnvironmental, 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 andenvironmental, 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 and regulations 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.

The design, production, sale and servicing of our products is capital-intensive. On October 1, 2020, the Company raised net proceeds of $516.5 million. At 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. At December 31, 2024,2025, the Company had total equity of $244.4$192.0 million, inclusive of cash and cash equivalents of $9.2$22.9 million and total investments of $210.5$129.4 million. We may determine that additional funds are necessary earlier than anticipated. This capital may be necessary to fund our ongoing operations, purchase additive printing machines, continue research, development and design efforts, create new products and improve infrastructure. We may seek to raise additional funds through the issuance of equity, equity related or debt securities, leasing or through obtaining credit from government or financial institutions. We cannot be certain that these sources of additional fundscapital 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.

We may not be able to raise the capital we need to invest in additive manufacturing capacity, facilities and other equipment needed to manufacture and assemble KARNO generatorPower systems.Modules. If we cannot raise the investment capital we need on favorable terms, our business, prospects, financial condition and operating results could be negatively affected.

The production of key KARNO generatorPower Module parts at the scale we need to grow our business requires significant investment in modern additive printer technology as well as production facilities and other equipment needed to support printing and assembly operations. We intend to finance most of these capital investments through cash on hand, cash from operations, leases or through other forms of debt financing. The lease market for additive printer technology is immature and may not support the level of lease capital we need to grow our business. We cannot be certain that we can obtain lease or debt financing on favorable terms when required, or at all. If we cannot obtain equipment and other asset financing when we need it, our business prospects, financial condition and operating results could be materially adversely affected.

We have incurred losses during our history and do not expect to become profitable in the near future, and we 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, 2024,2025, we had U.S. federal net operating loss carryforwards of approximately $346.2$447.4 million.

Under Section 382 of the Internal Revenue 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. We could experience another ownership change that might limit our use of net operating loss and tax credits in the future. There is also a risk that due to regulatory changes, such as suspensions on the use of net operating loss, or other unforeseen reasons, our existing net operating loss could expire or otherwise be unavailable to offset future income tax liabilities. 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, or our potential customers, 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 which are applied for.incentives. As a result, our business, prospects, financial condition and operating results may be adversely affected.

We anticipate that we and our potential customers will apply for federal and state grants, loans and tax incentives under government programs designed to stimulate the economy and support the production of alternative energy systems and related technologies. We anticipate that in the future there may be new opportunities for us and our potential customers to apply for grants, loans and other incentives from federal, state and foreign governments. Our, and our potential customers’ ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of 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, or our potential customers, will be successful in obtaining any of these additional grants, loans and other incentives.incentives or that such grants, loans or other incentives will be made available or funded in the future.

As of December 31, 2024,2025, our executive officers, directors and their respective affiliates, as a group, beneficially owned approximately 19.6%21.8% 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 Second Amended and Restated 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.

We may issue additional shares of common stock or shares of preferred stock, including under our equity incentive plans. 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 plans. Any such issuances of additional shares of common or preferred stock may cause significant dilution, subordinate the rights toof holders of common stock to those of preferred stock, cause a change in control, and adversely affect prevailing market prices.prices of our securities.

TheThere is no guarantee that we will continue to meet the NYSE American listing requirements in the future. In addition, the perception among investors that we are at a heightened risk of delisting could negatively affect the market price and trading volume of our common stock. Our continued eligibility for listing may depend on, among other things, the amount of “public float” (equity held by non-affiliates), value of stockholders’ equity and minimum share price of $3.00 per share. There is no guarantee that we will continue to meet the NYSE American listing requirements in the future. If our common stock is delisted from the NYSE American, the delisting could: substantially decrease trading in our common stock; adversely affect the market liquidity of our common stock; adversely affect our ability to issue additional securities or obtain additional financing in the future on acceptable terms, if at all; result in the potential loss of confidence by investors, suppliers, partners and employees and fewer business development opportunities; and result in limited or unfavorable news and analyst coverage. Additionally, the market price of our common stock may decline further, and stockholders may lose some or all of their investment.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Form 10-K. Dollar amounts in this discussion are expressed in millions, except as otherwise noted. The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside of our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed elsewhere in this Form 10-K, particularly in Part I, Item 1A, “Risk Factors.” We do not undertake, and expressly disclaim, any obligation to publicly update any forward-looking statements, whether as a result of new information, new developments or otherwise, except to the extent that such disclosure is required by applicable law.

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 current economic uncertainties anduncertainties, supply chain disruptions, asinflation, wellhigh asinterest thoserates, and other risks discussed below and referenced in Part I, Item 1A “Risk Factors.”

Commercialization of KARNO GeneratorPower Module

Our focus is on continuing development and testing of our fuel-agnostic KARNO stationaryPower generatorModule and planning for the deployment of initial units with customers in 2025.customers. We anticipate that a substantial portion of our capital resources and efforts in the near future will be focused on these activities. The amount and timing of our future funding requirements, if any,requirements will depend on many factors, including but not limited to the pace of completing initial KARNO generatorPower Module testing and validation, the timing of KARNO Power Module commercialization, the pace at which we invest in generatorKARNO Core additive printing capacity, our plans for manufacturing KARNO generatorPower Module components (whether in-house or through outsourcing to third parties), the range of product offerings we plan to bring to market and external market factors beyond our control.

R&D expenses consist primarily of costs incurred for the discovery and development of our KARNO stationaryPower generator,Module, which include:

Selling, general and administrative expenses consist of personnel-related expenses for our corporate, executive, finance, information technology, sales, marketing and other administrative functions, expenses for outside professional services, including legal, audit and accounting services, as well as expenses for facilities, software licenses, depreciation, amortization, travel, sales and marketing costs. Personnel-related expenses consist of salaries, benefits and share-based compensation. Factors that also affect selling, general and administrative expense include the total number of employees, costs incurred as a result of operating as a public company, including compliance with the rules and regulations of the U.S. Securities and Exchange Commission, legal, audit, insurance, investor relations activities and other administrative and professional services.

Exit and termination costs consist of employee severance and retention payments, accelerated non-cash stock-based compensation expense, contract termination and other cancellation costs, non-cash charges including accelerated depreciation and amortization, carrying value adjustment to assets held for sale, and recoveries from resale of assets. These costs are a result of the plan approved on November 7, 2023 to wind down our powertrain business.

Other Income (Expense)

Other income currently consists primarily of interest income earned on our investments. Since the acquisition of our KARNO generator technology, we have continued to perform as a subcontractor on a contract with the ONR and recorded such amounts, net of costs incurred, as other income (expense).income. Beginning in the quarter ending December 31, 2024, we no longer record amounts received for the performance of R&D services as other income (expense) and now record such amounts received as revenue.

In the fourth quarter of 2024, we began recognizing revenue for R&D services performed as both a prime and subcontractor to the United StatesU.S. government. Revenue for R&D services increased $1.5$2.0 million and associated cost of revenues increased $1.4$1.9 million.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses decreased $18.2$1.6 million primarily due to wind down of our powertrain business:

•a decrease of $1.1$0.9 million in marketingfacilities costs; and

•a decrease of $1.1$0.7 million in insurance.insurance; partially offset by

On November 7, 2023, the Board approved a strategic plan to wind down its powertrain business and preserve technology relating to the powertrain business, to better align its workforce with the Company’s future needs, and to reduce the Company’s operating costs (the “Plan”). Exit and termination costs decreased by $8.5$2.5 million as a result of the adoption of the Plan and items discussed in Note 22, “Disposals” of the notesNotes to theConsolidated consolidatedFinancial financialStatements statements,in Part II, Item 8 of this Form 10-K, including recoveries from assets sold.

Interest income decreased $1.6$3.9 million primarily due to the decline in our investment balance.balance and lower interest rates.

Net cash, cash equivalents and restricted cash provided by or used in operating activities, investing activities and financing activities is summarized as follows for the periods indicated and should be read in conjunction with our consolidated financial statements and the notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K (in thousands):

At December 31, 2024,2025, our current assets were $131.0$98.6 million, consisting primarily of cash and cash equivalents of $9.2$22.9 million, short-term investments of $110.9$69.4 million, and prepaid expenses of $6.4$4.6 million. Our total current liabilities were $14.3$9.9 million primarily and were comprised of accounts payable, accrued expenses and operating lease liabilities. We also had $99.6$60.0 million of investments in longer-term liquid securities which we maintain to generate higher income on capital that we do not expect to spend in the next 12 months.

Based on our past performance, we believe our current and long-term assets will be sufficient to continue andto execute on our business strategy and meet our capital requirements for the next twelve months. Our primary short-term cash needs are costs associated with KARNO generatorPower Module development, building our initial deployment units and capital investments for additive printer acquisitions.acquisitions and other assets. Longer term, our capital needs will be determined by our go-to-market strategy as well as governmental R&D, which may include development of our own KARNO generatorPower Module manufacturing capacity or outsourcing this work to third parties or business partners. InWe Decemberhave 2023,up weto announced$6.1 anmillion remaining authorized for repurchases under our $20 million share repurchase program to repurchase up to $20 million of our outstanding common stock. We repurchased $14.0 million in common stock during the year ended December 31, 2024 but have currently paused any additional repurchases under this program.repurchases. Based on current projections of operating expenses, capital spending, working capital growth and historical share repurchases, we expect to have approximately $160$100 million in cash, short-term and long-term investments remaining on our balance sheet at the end of 2025.2026. This projection assumes the completion of about $10 million in equipment-backed financing or debt. It is possible that this financing could be delayed or may not occur at all if acceptable terms cannot be obtained.

We expect to continue to incur net losses in the short term,term as we continue to execute on our strategic initiatives by completing the development and commercialization of the KARNO generatorPower Module with anticipated initial customer deployments inanticipated 2025.to continue throughout 2026. However, actual results could vary materially and adversely as a result of a number of factors including, but not limited to, those discussed in Part I, Item 1A. “Risk Factors.”

The amount and timing of our future funding requirements, if any,requirements will depend on many factors, including the scope and results of our R&D efforts, the breadth of product offerings we plan to commercialize, the growth of sales, working capital needs, and our long-term manufacturing plan for the KARNO generatorPower Module including the pace of investments in additive manufacturing assets, methods of financing these investments, as well as factors that are outside of our control. We regularly evaluate our funding needs and sources of capital and may seek external funding in the appropriate circumstances. While we expect that we have sufficient capital to get through commercialization of the KARNO Power Module, we do anticipate that, at some time, we will seek additional sources of capital to accelerate investments in assets needed for growth following commercialization, primarily additive printing machines and related assets. With our current cash and investments, we believe we are well positioned to be deliberate and opportunistic in determining the timing and structure of a capital raise.

•Leases — Refer to Note 88, “Leases” of the notesNotes to theConsolidated consolidatedFinancial financialStatements statementsin Part II, Item 8 of this Form 10-K for further information of our obligations and the timing of expected payments.

•Purchase Commitments — Purchase obligations include primarily non-cancelable purchase commitments related to materials purchase agreements and volume commitments whichthat are entered into from time to time. As of December 31, 2024,2025, there were no such non-cancelable purchase commitments. Refer to Note 2 of the notes to the consolidated financial statements for further information on our exit obligations and the timing of expected payments.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of AmericaU.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.

While our significant accounting policies are described in the notes to our financial statements (see Note 33, “Summary of Significant Accounting Policies” in the accompanyingNotes auditedto consolidatedConsolidated financialFinancial statementsStatements in Part II, Item 8 of this Form 10-K), 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.

The Company performs under three contracts as both a prime and subcontractor to the United States government to provide R&D services, primarily to research the suitability of its KARNO generator for Navy ships and stationary power applications on a best effort cost-plus-fixed fee basis. The transaction price allocated to the remaining unsatisfied performance obligations under these contracts was up to $15.7$13.7 million as of December 31, 2024,2025, which is expected to be recognized primarily in 2025 and 2026. There is a single research and development services performance obligation in each of these contracts that is measured over time as the services are performed. The Company generally invoices monthlymonthly, which corresponds directly with the value to the customers of the performance completed to date, and recognizes revenue in the amount that it has a right to invoice. Payment is ordinarily due within 90 days of invoice submission.

Through December 31, 2024,2025, we have not yet commercialized the KARNO generator.Power Module. Costs incurred for components acquired prior to our determination of reaching a commercial stage are expensed as R&D 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. Inventory is consumed in the performance of R&D revenue contracts in the quarter in which it is purchasedpurchased, and we therefore do not record inventory at each reporting period pertaining to these contracts.

We account for share-based payments that involve the issuance of shares of our common stock to employees and nonemployeesnon-employees and meet the criteria for share-based awards as share-based compensation expense based on the grant-date fair value of the award. The Company has elected to recognize the adjustment to share-based compensation expense in the period in which forfeitures occur. We recognize compensation expense for awards with only service conditions on a straight-line basis over the requisite service period for the entire award.

If factorswe change,were and weto utilize different assumptionsassumptions, including the probabilityestimate of achievingunderlying performanceshare conditions,volatility of our market-conditioned awards, share-based compensation cost oncould futurebe awardunder grantsor may differ significantly from share-based compensation cost recognized on past award grants.overstated. 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 R&Dresearch and development and selling, general and administrative expenses.

WeThe Company granted 2.7 million restricted stock units in 20242025 that willare subject to vest between February 13,18, 20252026 and December 31, 20262027 contingent upon achieving time-basedunderlying requirements.closing stock price thresholds. Through December 31, 2025, there was no achievement of underlying closing stock price thresholds on these awards. These awards were valued at $0.83$1.46 per unit using faira valueMonte hierarchyCarlo Level III inputssimulation including ana underlyingblend of historical and implied share volatility of 90% and a risk-free rate of 4.35%.4.23%.

See Recent Accounting Pronouncements under Note 33, – “Summary of Significant Accounting Policies” in the notesNotes to theConsolidated 2024Financial consolidatedStatements financialin statementsPart II, Item 8 of this Form 10-K 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.

References to the “Company,” “Hyliion,” “we,” “our,” or “us” in this report refer to Hyliion Holdings Corp. and its wholly-ownedwholly owned subsidiary Hyliion Inc., unless expressly indicated or the context otherwise requires. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report and our audited consolidated financial statements and related notes thereto in our 2025 Annual Report.

Hyliion is committed to creating innovative solutions that enable clean, efficient, and flexible electricity production while contributing positively to the environment in the energy economy. Hyliion’s primary product offering, the KARNO Power Module, is a modular, fully enclosed, fuel-agnostic and fully integrated power generating solution. The KARNO Power Module is powered by the KARNO Core, a heat powered linear generator, to produce electricity with significant improvements in efficiency, emissions and lifecycle cost compared to conventional generation technologies. Hyliion’s KARNO Power Modules enable effective power generation using a wide range of fuel sources, including conventional fuels such as natural gas, propane or diesel, waste fuels such as landfill gas, wellhead gas, and zero carbon fuels such as renewable hydrogen and ammonia. Hyliion is initially targeting the datacenter,data center, defense, commercial, industrial, and defenseindustrial sectors with a locally-deployable generator designed to meet a wide range of power generation needs. The Company plansintends to scale up its KARNO Power Module solution to address larger utility-scale power needs and plans to develop future variants for industrial waste heat, nuclear, household use and e-mobility applications such as vehicles and marine vessels. Additionally, the KARNO Power Module technology is well-suited to provide combined heat and power in various stationary applications.

Conventional generators emit pollutants because of incomplete combustion of fuel-air mixtures and sub-optimal operating conditions, with the formation of nitrous-oxide (“NOx”) and carbon monoxide (“CO”) compounds being particularly prominent. Unlike conventional generators, the KARNO Power Module is designed for continuous flameless oxidation of the fuel at lower temperatures and extended reaction times. This is achieved partly through the recirculation of exhaust gases, which serves to prolong oxidation, and by pre-heating incoming air. As a result, the KARNO Power Module is anticipated to achieve ultra-low levels of emissions, with NOx and CO emissions expected to be reduced by over 95% compared to best-in-class diesel or natural gas engines and meeting South Coast Air Quality Management District (“SCAQMD”) Rule 1110.3 emission standards without the need for aftertreatment.

We believe the versatility and operating characteristics of the KARNO Power Module make it an effective system for a variety of conventional and emerging electricity generating applications. Key attributes of the KARNO Power Module distinguish it from its conventional generator counterparts, which may open new market opportunitiescounterparts:

•Low Noise and Vibration: Unlike conventional generators, the KARNO Power Module operates without internal combustion, resulting in a significantly lower noise level under normal operating conditions of approximately 67 decibels at six feet.

•HigherHigh Power Density: The unique architecture and features of the KARNO Power Module that are enabled by advances in additive manufacturing are expected to enable the KARNO Power Module to achieve a high power density relative to competing power generation technologies.

Beyond the 200 kW variant, Hyliion is advancing the development of a larger Multi-MW (2 MW+) KARNO system, which integrates multiple 200 kW KARNO Core units operating in tandem in a compact containerized footprint. The Multi-MW KARNO (2 MW+) system will target key market segments such as data centers and industrial prime power applications. We are also developing a modular 800 kW system consisting of four KARNO Core units that is planned to be delivered to the U.S. Navy in 2026 as part of our project with ONR. We believe that this modular and scalable approach enables seamless power expansion while maintaining high efficiency and reliability. By utilizing multiple 200 kW generating blocks, the system offers built-in redundancy and the flexibility for customers to customize capacity to match their power needs.

•Data Centers: As cloud computing, artificial intelligence, machine learning, and edge computing continue to expand, data centers are projected to grow rapidly, consumingconsume an increasing share of global energy demand. Onsite power generation is an emerging solution to powerfor new data center installations.developments, although conventional generating technologies often face local resistance due to noise or emissions concerns. Hyliion’s Multi-MW (2MW+) KARNO system is being designed to addressmeet the needs of data center developers by providing a scalable, fuel-flexible onsite power solution with best-in-classsignificantly powerreduced densitylevels of noise and versatility.emissions than conventional diesel or natural gas generators. Capable of operating on more than 20 different fuels, the KARNO Power Module enables data center developers to minimize onsite generation infrastructure. Its ability to easily transition between pipeline-supplied fuels, such as hydrogen or natural gas, and onsite stored fuels, like methanol or diesel, eliminates the need for separate backup generation systems, reducing capital and operational costs. AsAdditionally, datacenteras data center rack power densities rise to support increased AI workloads, Hyliion’s KARNO Power Module’s native 800V DC architecture simplifies power system design and enhances site resiliency.

Since acquiring the KARNO technology from GE in September 2022, Hyliion has made significant R&Dinvestments investmentsin research and development to support a commercial launch ofcommercialize the 200 kW KARNO Power Module.Module while simultaneously developing an 800 kW system for the U.S. Navy. This 800 kW platform is also intended to serve as the foundational building block for future multi-megawatt KARNO systems targeting data centers and other large scale applications. Early efforts focused on the development of a 125 kW KARNO Core, which was successfully operated in our Ohio facility and utilized for extensive testing and further advancements. Through this system, we validated the ability of the KARNO Core’s fuel oxidation system to operate on a wide range of fuel sources, including natural gas, hydrogen, gas mixtures, and untreated landfill and Permian Basin well gas. Additionally, testing of the oxidation system demonstrated very low levels of pollutant emissions in the exhaust stream. The 125 kW KARNO Core also served as a platform for developing and validating key components that are now incorporated into the higher-power 200 kW KARNO Power Module slated for market launch. These advancements include improved helium gas bearings for greater durability, a magnetic encoder for precise shaft position detection and optimized printed components to increase KARNO Core power, efficiency and manufacturing speed. The 200 kW KARNO Core also incorporates a larger Hyliion-designed linear electric motor. Recent R&D activities included developing production processes for this new motor as well as testing and validation of system design parameters.

We have completed the design and sourcing of initial components for the balance-of-plant systems that support KARNO Core operation for the 200 kW system, including the system enclosure. The balance-of-plant includes cooling, pressure control, fuel, battery, high and low voltage, inlet air and exhaust systems. Development work also includes control software, safety systems, the human-to-machine interface and the physical integration of systems. Validation of essential operating parameters, including efficiency, emissions and reliability, are also part of R&D activities.

In 2025, we delivered two early adopter customerKARNO unitsPower Modules to the U.S. NavyNavy, asalong well aswith two additional KARNO Power Modules that we are usingunits for internal testing and Underwriters Laboratories (“UL”) certification. The twoNavy units are currently undergoing testing under our R&D contract with ONR and are performing in accordanceline with expectationsexpectations. mechanicallyWe whilehave wealso enhancecompleted development work enabling the abilityNavy ofPower the unitsModules to operate on liquid diesel fuel.fuel, a key requirement for shipboard applications, and to seamlessly switch between liquid and gaseous fuels under operation. We believe that initial KARNO Power Module deployments, along with our ongoing testing and development efforts, will validate critical design specifications, including projected operating life, maintenance requirements and durability.

InAlso mid-2025,in 2025, we insourced linear electric motor production following earlieran unsuccessful effortseffort to outsource this work to a contract manufacturer. This transition is accelerating the ramp-up in motor production capacity and enabling greater control over manufacturing quality.

We provide R&D services to third parties, including the ONR. In September 2024, Hyliion was awarded a cost-plus-fixed-fee contract of up to $16.0 million by the ONR to assess the suitability of the KARNO Power Module for Navy vessels and stationary power applications. The contract aligns with ONR’s objective of leveraging advanced technology to reduce its carbon footprint while enhancing operating capabilities. Upon successful validation and demonstration, the KARNO Power Module could be used as an electric power system in future platforms and for stationary power needs. In 2025, we delivered two KARNO Cores under this contract which we have been testing at our R&D facility in Cincinnati. In 2026, we expect to deliver additional KARNO Cores, including a four-core 800 kW KARNO Power Module system,system. The U.S. Navy has identified its USX-1 Defiant vessel as the platform for KARNO Core sea trials, supporting both ship propulsion and 200auxiliary power. The 800 kW KARNO Power Modules.Module being built for the vessel under this contract is in assembly, with completion expected during 2026. We will also expand testing to include long duration operation, diesel fuel integration, simulation of ship motion and the ability of the system to operate in extreme temperature environments.

We will continue to provide R&D services to third parties under existing contracts and anticipate entering into additional R&D agreements in 2026 and 2027 with ONR and other government customers. Customers engage Hyliion to explore and validate the KARNO Power Module’s capabilities tailored to their specific requirements. Key areas of interest include testing its low-emissions flameless oxidation system and evaluating applications that leverage the KARNO Power Module’s high power output, compact configuration and versatility, including the ability to easily transition between fuels. R&D services may also involve testing the KARNO Power Module under various operating conditions, including harsh environments, and in mobile applications to assess its performance. Certain customers seek to measure and validate the KARNO Power Module’s low emissions profile and test different power configurations to ensure the technology aligns with their operational and environmental needs.

Our focus isremains on continuingthe continued development and testing of our fuel-agnostic KARNO Power ModuleModule, andtogether with the deployment of initial units with early adopter customers. We are targeting commercialization byof yearthe end,200 subjectkW KARNO Power Module following completion of these initial deployments and once sufficient testing and operating experience has been obtained to thevalidate timingreliable operation and achievement of developmentour anddesign deployments.criteria. We anticipate that a substantial portion of our capital resources and efforts in the near future will be focused on these activities. The amount and timing of our future funding requirements will depend on many factors, including but not limited to the pace of completing initial KARNO Power Module testing and validation, the timing of KARNO Power Module commercialization, the pace at which we invest in KARNO Core additive printing capacity, our plans for manufacturing KARNO Power Module components (whether in-house or through outsourcing to third parties), the range of product offerings we plan to bring to market and external market factors beyond our control.

Comparison of Three Months Ended MarchJune 31,30, 2026 to Three Months Ended MarchJune 31,30, 2025

Our results of operations for the three months ended MarchJune 31,30, 2026 (the “current quarter”) and 2025 on a consolidated basis are summarized as follows (in thousands, except share and per share data):

Revenue for R&D services increased $2.3$3.4 million and associated cost of revenues increased $2.1$3.2 million due to the timing of performance of the R&D services. The remaining amountsamount of revenue that we may recognize under these contracts was up to $11.2$5.7 million as of MarchJune 31,30, 2026,2026. whichWe ismay expectedincur to primarily be recognizedlosses in 2026. These contracts can be cancelled by the Unitedperformance Statesof governmentthese at any time for, among other reasons, convenience.contracts.

R&D expenses decreased $4.6$0.6 million due to significant efforts toward performance of our contracts with the ONR, including the production of capitalized inventory that may either be utilized for future revenue generation under these contracts or for R&D activities.ONR.

Selling, general, and administrative expenses wereincreased relatively flat with an increase of $0.2$0.5 million attributable primarily to personnel expense, offset by other smaller changes.

Exit and Termination (Benefits) Costs

Exit and termination costsbenefits decreased by $1.8$0.1 million as a result of the adoption of the Plan and items discussed in Note 2, “Disposals” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q, including recoveries from assets sold.

At MarchJune 31,30, 2026, our total current assets were $81.4$71.6 million, consisting primarily of cash and cash equivalents of $20.3$13.2 million, short-term investments of $52.2$51.0 million, accounts receivable of $2.7 million and prepaid expenses of $4.0$3.6 million. Our total current liabilities were $8.1$9.4 million and were primarily comprised of accounts payable, accrued expenses and operating lease liabilities. We also had $66.9$68.2 million of investments in longer-term liquid securities which we maintain to generate higher income on capital that we do not expect to spend in the next 12 months.

We believe the credit quality and liquidity of our investment portfolio at MarchJune 31,30, 2026 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 rate environment and supply and 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 of 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 any realized losses that we would recognize prior to maturity. 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 and long-term assets will be sufficient to continue to execute on our business strategy and meet our capital requirements for the next twelve months. Our primary short-term cash needs are costs associated with KARNO Power Module development, building our initial deployment units and capital investments for additive printer acquisitions and other assets. Longer term, our capital needs will be determined by our go-to-market strategy as well as governmental R&D, which may include development of our own KARNO Power Module manufacturing capacity or outsourcing this work to third parties or business partners. We have up to $6.1 million remaining authorized for repurchases under our $20 million share repurchase program but have currently paused any additional repurchases. Based on current projections of operating expenses, capital spending, working capital growth and historical share repurchases, we expect to have approximately $100$115 million to $120 million in cash, short-term and long-term investments remaining on our balance sheet at the end of 2026. This projection assumes the completion of aboutapproximately $10 million into equipment-backed$15 million of equipment financing orduring debt.2026 Itunder isthe possibleproposed thatarrangement thisdescribed below, and does not assume any sales of common stock under our at-the-market offering program. The equipment financing couldremains subject to credit approval and agreement execution, and the amount and timing of any fundings will depend on equipment delivery and acceptance. The financing may be delayeddelayed, completed for a lesser amount, or may not occurcompleted at all if acceptable terms cannot be obtained.all.

The amount and timing of our future funding requirements will depend on many factors, including the scope and results of our R&D efforts, the breadth of product offerings we plan to commercialize, the growth of sales, working capital needs, and our long-term manufacturing plan for the KARNO Power ModuleModule, including the pace of investments in additive manufacturing assets,assets and the methods of financing thesethose investments, as well as factors that are outside of our control. We regularly evaluate our funding needs and sources of capital and may seek external funding in the appropriate circumstances. While we expectbelieve that we have sufficient capital to commercializesupport the anticipated commercialization of the KARNO Power Module, we do anticipate that, at some time, we will seek additional sources offurther capital to accelerate investments in assets needed forthese growth followinginvestments, commercialization,whether primarilythrough additivesales printingunder machinesour at-the-market program or other financing sources. Any such financing may include equity or debt securities and relatedmay assets.not be available on acceptable terms, or at all. With our current cash and investments, we believe we are well positioned to be deliberate and opportunistic in determining the timing and structure of aany additional capital raise.

Net cash, cash equivalents and restricted cash provided by or used in operating activities, investing activities and financing activities for the threesix months ended MarchJune 31,30, 2026 and 2025 is summarized as follows (in thousands):

For the threesix months ended MarchJune 31,30, 2026, cash flows used in operating activities were $12.7$19.8 million. Cash used primarily related to a net loss of $11.7$25.7 million, adjusted for a $4.4$1.7 million change in working capital accounts and $3.4$7.6 million in non-cash expenses (including $1.5$3.2 million related to share-based compensation, $2.1$4.2 million related to depreciation and amortization, $0.9$1.3 million related to prepaid expenses and other current assets, and $1.6 million related to accounts payable, accrued expenses and other current liabilities, partially offset by $2.5$2.2 million related to accounts receivable and $1.9$1.2 million related to inventory).

For the threesix months ended MarchJune 31,30, 2025, cash flows used in operating activities were $14.0$24.0 million. Cash used primarily related to a net loss of $17.3$30.7 million, adjusted for a $0.4$0.6 million change in working capital accounts and $3.7$6.1 million in non-cash expenses (including $1.6$2.7 million related to share-based compensation, $2.4 million related to depreciation and amortization, $1.9 million related to prepaid expenses and other current assets, and $1.6 million in assets held for sale carrying value adjustments, and $1.3 million related to share-based compensation, partially offset by $1.5$0.9 million related to accounts payable, accrued expenses and other liabilities and $0.3$0.6 million related to gain on asset sales).

For the threesix months ended MarchJune 31,30, 2026, cash flows provided by investing activities were $10.1$10.0 million. Cash provided related to the sale or maturity of investments of $25.5$45.0 million and the proceeds from sale of assets of $1.6$1.9 million, offset by the purchase of investments of $15.2$34.7 million and acquired property and equipment of $1.9$2.1 million.