Forward-Looking Statements
The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included within this Annual Report on Form 10-K. In addition to historical information, this Annual Report on Form 10-K and the following discussion contain statements that are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements contain projections of our future results of operations or of our financial position or state other forward-looking information. In some cases you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “continue,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” “would,” “plan,” “potential,” “project,” or the negative of such words or other similar words or phrases. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Investors are cautioned not to unduly rely on forward-looking statements because they involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including, but not limited to:
| ● | the risk that we continue to incur losses and might never achieve or maintain profitability; |
| ● | the risk that we will need to raise additional capital to fund our operations and such capital may not be available to us, or if received, may not be available to us on favorable terms; |
| ● | the risk that we may not be able to expand our business or manage our future growth effectively; |
| ● | our ability to maintain an effective system of internal control over financial reporting; |
| ● | the risk that delays in or not completing our product development and hydrogen plant construction goals may adversely affect our revenue and profitability; |
| ● | the risk that we may not be able to obtain from our hydrogen suppliers a sufficient supply of hydrogen at competitive prices or the risk that we may not be able to produce hydrogen internally at competitive prices; |
| ● | our ability to achieve the forecasted revenue and costs on the sale of our products; |
| ● | the risk that we may not be able to convert all of our estimated future revenue into revenue and cash flows; |
| ● | the risk that purchase orders may not ship, be commissioned or installed and/or converted to revenue, in whole or in part; |
| ● | the risk that some or all of the recorded goodwill, intangible assets and property, plant, and equipment could be subject to impairment; |
| ● | the anticipated benefits and actual savings and costs resulting from the implementation of cost-reduction measures that include workforce reductions and limits on discretionary spending, inventory and capital expenditures; |
| ● | the risks associated with global economic uncertainty, including inflationary pressures, fluctuating interest rates, currency fluctuations, and supply chain disruptions; |
| ● | the risk of elimination, reduction of, or changes in qualifying criteria for government subsidies and economic incentives for alternative energy products, or the nonrenewal of such subsidies and incentives; |
| ● | the risk that the Department of Energy loan may be delayed, or that we may not be able to satisfy all of the technical, legal, environmental or financial conditions acceptable to the Department of Energy to receive the loan; |
| ● | the risks, liabilities, and costs related to environmental, health, and safety matters; |
| ● | the risk that our lack of extensive experience in manufacturing and marketing of certain of our products may impact our ability to manufacture and market said products on a profitable and large-scale commercial basis; |
| ● | the risk that a sale or issuance of a significant number of shares of stock could depress the market price of our common stock; |
| ● | the risk of dilution to our stockholders and/or impact to our stock price should we need to raise additional capital; |
| ● | the risk that negative publicity related to our business or stock could result in a negative impact on our stock value and profitability; |
| ● | our ability to leverage, attract and retain key personnel; |
| ● | the risk related to increased scrutiny and changing expectations from regulators, investors, and others regarding our environmental, social and governance practices and reporting, including those related to workplace diversity, equity and inclusion; |
| ● | the risk of increased costs associated with legal proceedings and legal compliance; |
| ● | the risk that a loss of one or more of our major customers, or the delay in payment or the failure to pay receivables by one of our major customers, could have a material adverse effect on our financial condition; |
| ● | the risk of potential losses related to any contract disputes; |
| ● | the risk of potential losses related to any product liability claims; |
| ● | the cost and timing of developing, marketing, and selling our products; |
| ● | the risks involved with participating in joint ventures, including our ability or inability to execute our strategic growth plan through joint ventures; |
| ● | our ability to obtain arrangements to support the sale or leasing of our products and services to customers, or our power purchase agreements with such customers; |
| ● | the risk that we may not be able to maintain a sufficient level of liquidity to achieve our business objectives or meet our obligations; |
| ● | the cost and availability of fuel and fueling infrastructures for our products; |
| ● | the risk that our convertible senior notes, if settled in cash, could have a material adverse effect on our financial results; |
| ● | the risk that our convertible note hedges may affect the value of our convertible senior notes and our common stock; |
| ● | the risks related to the use of flammable fuels in our products; |
| ● | market acceptance of our products and services; |
| ● | our ability to establish and maintain relationships with third parties with respect to product development, manufacturing, distribution, and servicing, and the supply of key product components; |
| ● | the cost and availability of components and parts for our products; |
| ● | the risk that possible new tariffs could have a material adverse effect on our business; |
| ● | our ability to develop commercially viable products; |
| ● | our ability to reduce product and manufacturing costs; |
| ● | our ability to successfully market, distribute and service our products and services internationally; |
| ● | our ability to improve system reliability for our products; |
| ● | competitive factors, such as price competition and competition from other traditional and alternative energy companies; |
| ● | our ability to protect our intellectual property; |
| ● | the risks related to our operational dependency on information technology and the risk of the failure of such technology, including failure to effectively prevent, detect, and recover from security compromises or breaches, including cyber-attacks; |
| ● | the cost of complying with current and future federal, state and international governmental regulations; |
| ● | the risks associated with past and potential future acquisitions; |
| ● | the risks associated with geopolitical instability, including the conflicts in the Middle East and between Russia and Ukraine as well as tensions between U.S. and China and neighboring regions; and |
| ● | the volatility of our stock price. |
The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in other sections of this Annual Report on Form 10-K, including under Item 1A, “Risk Factors”. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from these contained in any forward-looking statements. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. These forward-looking statements speak only as of the date on which the statements were made. Except as may be required by applicable law, we do not undertake or intend to update any forward-looking statements after the date of this Annual Report on Form 10-K*.*
Summary of Risk Factors
The risk factors detailed in Item 1A, “Risk Factors”, in this Annual Report on Form 10-K are the risks that we believe are material to our investors and a reader should carefully consider them. Those risks are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur. The following is a summary of the risk factors detailed in Item 1A:
| ● | We have incurred losses and anticipate continuing to incur losses; |
| ● | We will have to raise additional capital through public or private equity or debt transactions and/or complete one or more strategic transactions to continue our business and such capital may not be available to us or, if received, may not be available to us on favorable terms; |
| ● | Our ability to achieve our business objectives and to continue to meet our obligations is dependent upon our ability to maintain a sufficient level of liquidity; |
| ● | We may not be able to expand our business or manage our future growth effectively; |
| ● | If we fail to maintain effective internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner or prevent fraud and may be subject to fines, penalties or judgments, which can harm our reputation or otherwise cause a decline in investor confidence; |
| ● | We may be unable to successfully execute and operate our hydrogen production projects and such projects may cost more and take longer to complete than we expect; |
| ● | The DOE funding of the loan may be delayed, and we may not be able to satisfy all of the technical, legal, environmental or financial conditions acceptable to the DOE to receive the loan; |
| ● | Delays in or not completing our product and project development goals may adversely affect our revenue and profitability; |
| ● | Our products and performance depend largely on the availability of hydrogen and recent insufficient supplies of hydrogen could negatively affect our sales and deployment of our products and services; |
| ● | Our estimated future revenue may not be indicative of actual future revenue or profitability; |
| ● | Our purchase orders may not ship, be commissioned or installed, or convert to revenue, which could have an adverse impact on our revenue and cash flow; |
| ● | Inflationary trends, economic uncertainty, market trends, political instability and other conditions affecting the profitability and financial stability of us and our customers could negatively impact our sales growth and results of operations; |
| ● | Volatile commodity prices and shortages may adversely affect our gross margins and financial results; |
| ● | The funding of the loan guarantee from the Department of Energy may be delayed, and we may not be able to satisfy all of the technical, legal, environmental or financial conditions acceptable to the Department of Energy to receive the loan guarantee; |
| ● | The reduction or elimination of government subsidies and economic incentives for alternative energy technologies, or the failure to renew such subsidies and incentives, could reduce demand for our products, lead to a reduction in our revenues, and adversely impact our operating results and liquidity; |
| ● | Our future plans could be harmed if we are unable to leverage, attract or retain key personnel; |
| ● | We are subject to legal proceedings and legal compliance risks that could harm our business; |
| ● | Our ability to source parts and raw materials from our suppliers could be disrupted or delayed in our supply chain which could adversely affect our results of operations; |
| ● | We face risks associated with our plans to market, distribute and service our products internationally; |
| ● | Changes in U.S. or foreign trade policies, treaties, tariffs and taxes as well as geopolitical conditions and other factors could have a material adverse effect on our business; |
| ● | Our investments in joint ventures may involve numerous risks that may affect the ability of such joint ventures to make distributions to us; |
| ● | If we cannot obtain financing to support the sale of our products and service to customers or our power purchase agreements with customers, such failure may adversely affect our liquidity and financial position; |
| ● | Our indebtedness could adversely affect our liquidity, financial condition, and our ability to fulfill our obligations and operate our business; |
| ● | The accounting method for convertible debt securities that may be settled in cash could have a material effect on our reported financial results; |
| ● | The convertible note hedges may affect the value of our common stock; |
| ● | We are subject to counterparty risk with respect to the convertible note hedge transactions; |
| ● | Unfavorable developments affecting the banking and financial services industry could adversely affect our business, liquidity and financial condition, and overall results of operations; |
| ● | Certain component quality issues have resulted in adjustments to our warranty accruals and the accrual for loss contracts; |
| ● | We are dependent on information technology in our operations and the failure of such technology may adversely affect our business. Security breaches of our information technology systems, including cyber-attacks, ransomware attacks, or use of malware or phishing or other malicious techniques by threat actors, have in the past, and could in the future impact our operations or lead to liability, or damage our reputation and financial results; |
| ● | The delays in the implementation of a new enterprise resource planning system could cause disruption to our operations; |
| ● | Our products and services face intense competition; |
| ● | We may not be able to protect important intellectual property and we could incur substantial costs defending against claims that our products infringe on the proprietary rights of others; |
| ● | Our financial results may be adversely affected by changes in accounting principles generally accepted in the United States; |
| ● | If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below expectations of investors, resulting in a decline in our stock price; |
| ● | Our products use, or generate, flammable fuels that are inherently dangerous substances, which could subject our business to product safety, product liability, other claims, product recalls, negative publicity, or heightened regulatory scrutiny of our products; |
| ● | Our success depends on our ability to improve our financial and operational performance and execute our business strategy; |
| ● | We are subject to various federal, state, local and non-U.S. environmental and human health and safety laws and regulations that could impose significant costs and liabilities on us and impact our business practices, including climate change and environmental, social and governance (“ESG”) reporting requirements; |
| ● | Our business is subject to government regulation; |
| ● | Changes in tax laws or regulations or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our operating results and financial condition; |
| ● | The changes in the carryforward/carryback periods as well as the new limitations on use of net operating losses may significantly impact our valuation allowance assessments for net operating losses; |
| ● | We will continue to be dependent on certain third-party key suppliers for components of our products, hydrogen generation projects, and manufacturing facilities, and failure of a supplier to develop and supply components on mutually agreeable terms or at all, or our inability to substitute sources of these components on a timely basis or on terms acceptable to us, could impair our ability to manufacture our products, increase our cost of production, or affect our ability to generate hydrogen, which would in turn negatively affect our sales and deployment of our products and services; |
| ● | We may be unable to establish or maintain relationships with third parties for certain aspects of continued product developments, manufacturing, distribution, sale, servicing, and supply components for our products; |
| ● | We may be unable to make attractive acquisitions or successfully integrate acquired businesses, assets, or properties, and any inability to do so may disrupt our business and hinder our ability to grow, divert the attention of key personnel, disrupt our business, and impair our financial results; |
| ● | Our stock price and stock trading volume have been and could remain volatile, and the value of your investment could decline and if securities analysts do not maintain coverage of us or if they publish unfavorable or inaccurate research or reports about our business, our stock, or our industry, the price of our stock and the trading volume could decline; |
| ● | Sales of substantial amounts of our common stock in the public markets, or the perception that such sales might occur, could reduce the price that our common stock might otherwise attain and may dilute your voting power and your ownership interest in us; |
| ● | Provisions in our governing documents and Delaware law may discourage or delay an acquisition of the Company by a third party that stockholders may consider favorable and may limit a stockholder’s ability to bring a claim in a forum a stockholder finds favorable; |
| ● | We do not anticipate paying any dividends on our common stock; |
| ● | We are exposed to fluctuations in currency exchange rates, which could negatively affect our operating results. |
