這些合同尚待支付的金額截至2024年9月為美元17.2，截至2024年9月，我們應收的合同款項為美元0.5百萬和 無 ，分別為2024年9月30日和2023年12月31日，以及應收帳款提存款。庫存在履行這些合同時於購買當季被消耗，因此我們在每個報告期不記錄與這些合同有關的庫存。 no 應收帳款提存款。庫存在履行這些合同時於購買當季被消耗，因此我們在每個報告期不記錄與這些合同有關的庫存。
Linear generators present several advantages over conventional generators, with key benefits including reduced maintenance, attributable to their simplified design with few moving parts. Additionally, they exhibit high power density and higher efficiency by circumventing the mechanical losses linked to rotating components such as bearings and gears while producing less noise and vibration. In the case of KARNO, each shaft of the generator relies on a single moving part and utilizes a pressurized helium bearing system in place of oil-based lubricants.
Heat engines offer the advantages of fuel flexibility and high operating efficiency. The KARNO generator stands out for its ability to maximize heat transfer between components and working fluids. Enabled by advances in additive manufacturing systems, parts are designed with a large number of intricate flow channels for the movement of heat, cooling water, helium and exhaust gases such that contact surface areas for heat transfer are maximized. This enables the KARNO generator to achieve high levels of efficiency.
The KARNO generator is expected to surpass the efficiency of conventional generating systems when employing various fuel sources and even outperform fuel cells when using hydrogen. Notably, its high efficiency remains consistent across a broad range of output power levels. In contrast, fuel cells reach peak efficiency at low power levels but experience diminishing efficiency as output increases towards full power. Internal combustion engines typically achieve peak efficiency within a limited operational output range and may suffer increased wear at low power levels. The KARNO generator offers a distinct advantage in power adjustment by modulating the rate of heat introduction, enabling seamless power adjustments without compromising the generator’s efficiency.
We anticipate that the KARNO generator will achieve an electrical generating efficiency of nearly 50%, calculated by considering the usable output power in relation to the energy from the fuel source. High efficiency is expected to remain relatively consistent across a wide range of output power levels, spanning from tens of kilowatts to multiple megawatts. In contrast, internal combustion diesel generators typically operate within an efficiency range of 25% to 40% over a similar power spectrum, while the U.S. electrical power grid is estimated to operate at an efficiency between 33% and 40%. Notably, best-in-class grid-level gas turbine powerplants can obtain efficiencies ranging between 45% to 55%. However, they incur transmission and distribution losses between 5% and 10% which the KARNO generator can circumvent by being strategically located near the point of power consumption.
Conventional generators emit pollutants as a result of incomplete combustion of fuel-air mixtures, with the formation of NOx compounds being particularly prominent. Unlike conventional generators, which often employ internal combustion engines operating at high temperatures with rapid and incomplete fuel combustion, the KARNO generator is designed for continuous fuel oxidation at lower temperatures than internal combustion engines and extended burn times. This is achieved partly through
the recirculation of exhaust gases, which serves to prolong combustion duration and by pre-heating incoming air. As a result, the KARNO generator is anticipated to achieve low levels of emissions, with CO and NOx emissions expected to be reduced by over 95% compared to best-in-class diesel engines and targeting CARB 2027 standards without the need for aftertreatment.
One of the notable advantages of the KARNO generator, in comparison to traditional generating units, is the expected significant reduction in maintenance requirements and cost. Conventional generators typically incur periodic and usage-based maintenance expense that can range between 5% to 20% of their total operating cost throughout their lifespan, influenced by factors such as utilization and operating parameters. KARNO’s primary advantage arises from having only a single moving linear actuator per shaft (4 shafts per 200 kW generator), which glides linearly on low friction helium bearings. This innovative design significantly mitigates efficiency losses attributed to friction, enhances the system’s operational longevity and eliminates the need for oil-based lubricants commonly found in conventional generators. Furthermore, internal combustion engines require extensive overhauls after specific operating periods which are costly, require specialized expertise, and result in prolonged downtime. Conversely, the KARNO generator is projected to require less costly and simplified maintenance service than internal combustion engines, translating into both cost savings and reduced downtime.
The KARNO generator, functioning as a heat engine, derives advantages from its expected capability to operate across a diverse spectrum of over 20 available fuel sources and fuel mixtures. These include natural gas, propane, gasoline, jet fuel, and alternative fuels like bio-diesel, hydrogen and ammonia. Moreover, the generator can seamlessly transition between these fuels or fuel blends, requiring few or no physical modifications to its flameless oxidation system. This versatility enables a single generator to adapt to different use cases. For example, the generator may operate on natural gas for prime power generation when a pipeline connection is available and on waste gas near a landfill or dairy farm. Furthermore, as hydrogen becomes more widely available, the KARNO generator will be able to adapt to this cleaner fuel. As the energy landscape evolves, the KARNO generator’s fuel-agnostic nature positions it as a flexible solution to electricity generation needs.
Benefits of the KARNO Generator Versus Conventional Competitors
We believe the versatility and operating characteristics of the KARNO generator make it an effective system for a variety of conventional and emerging electrical generating applications. Key attributes of the KARNO generator distinguish it from its conventional generator counterparts, which may open new market opportunities:
•Generator Efficiency: The anticipated operating efficiency of the KARNO generator could result in lower cost of electricity versus conventional generating systems and, in many markets, grid power.
•Low Maintenance: With only a single moving part per shaft, the simplicity of the KARNO generator is expected to reduce both periodic maintenance expenses and expected overhaul costs.
•Fuel Agnostic: While many traditional generators operate on a single fuel source or require system modification to achieve fuel flexibility, the KARNO generator is truly fuel-agnostic, and can switch between fuel choices during operation with few or no modifications.
•Low Noise and Vibration: Unlike conventional generators, the KARNO generator operates without internal combustion, resulting in a significantly lower noise level of approximately 67 decibels at six feet, which is approximately equivalent to a typical conversation.
•Higher Power Density: The unique architecture and features of the KARNO generator that are enabled by advances in additive manufacturing, enable the generator to achieve a high level of power density. For example, a 200 kW generator occupies less than a cubic meter of volume, excluding balance-of-plant systems.
•Modularity: The power output of a KARNO generator can be modulated by changing the level of heat applied to the system. For larger power applications above 200 kW, multiple KARNO generators can be assembled to operate as a single unit and individual generators can be turned on or off to adjust the total power output of the system.
•Fast Startup Time: It is anticipated that the KARNO generator will be able to begin generating electricity from a cold start in approximately 30 to 60 seconds. Additionally, full power can be achieved in a matter of minutes. Conversely, some generating systems, such as solid oxide fuel cells, require a warm-up period of up to 30 minutes.
Key Factors Affecting Operating Results
We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including but not limited to economic uncertainties, supply chain disruptions, inflation and high interest rates as well as those discussed below and referenced in Part II, Item 1A “Risk Factors”.
Our focus is on continuing development and testing of our fuel-agnostic KARNO stationary generator and planning for the deployment of initial revenue-generating units with customers in late 2024. We anticipate that a substantial portion of our capital resources and efforts in the near future will be focused these activities. The amount and timing of our future funding requirements, if any, will depend on many factors, including but not limited to the pace of completing initial KARNO generator design, testing and validation, the pace at which we invest in generator additive printing capacity, our plans for manufacturing KARNO generator 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.
Key Components of Statements of Operations
Revenue
We historically generated revenues from sales of Hybrid systems for Class 8 semi-trucks and limited quantities of Class 8 semi-trucks outfitted with the Hybrid system. As a result of the discontinuation of the electrified powertrain systems business and the shift to focus on the development and commercialization of the Company’s fuel-agnostic KARNO generator technology, we anticipate generating revenue after commercialization of our KARNO generator. Additionally, we anticipate generating revenue from research and development services under the contracts described in Note 3 — “Summary of Significant Accounting Policies.”
Cost of Revenue
Cost of revenue includes all direct costs such as labor and materials, overhead costs, warranty costs and any write-down of inventory to net realizable value, and costs associated with research and development services revenue.
Research and Development Expense
Research and development expenses consist primarily of costs incurred for the discovery and development of our KARNO stationary generator and, prior to 2024, electrified powertrain solutions, which include:
•personnel-related expenses including salaries, benefits, travel and share-based compensation, for personnel performing research and development activities;
•fees paid to third parties such as contractors for outsourced engineering services and to consultants;
•expenses related to components for development and testing, materials, supplies and other third-party services;
•depreciation for equipment used in research and development activities; and
•allocation of general overhead costs.
We expect to continue to invest in research and development activities to achieve operational and commercial goals.
Selling, General and Administrative Expense
Selling, general and administrative expenses consist of personnel-related expenses for our corporate, executive, finance, sales, marketing and other administrative functions, expenses for outside professional services, including legal, audit and accounting services, as well as expenses for facilities, depreciation, amortization, travel, sales and marketing costs. Personnel-related expenses consist of salaries, benefits and share-based compensation. 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
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). Beginning in the quarter ending December 31, 2024, we expect to no longer record receipts associated with research and development activities as other income (expense).
Comparison of Three Months Ended September 30, 2024 to Three Months Ended September 30, 2023
Our results of operations for the three months ended September 30, 2024 (the “current quarter”) and 2023 on a consolidated basis are summarized as follows (in thousands, except share and per share data):
Three Months Ended September 30,
2024
2023
$ Change
% Change
Revenues
Product sales and other
$
—
$
96
$
(96)
(100.0)
%
Total revenues
—
96
(96)
(100.0)
%
Cost of revenues
Product sales and other
—
677
(677)
(100.0)
%
Total cost of revenues
—
677
(677)
(100.0)
%
Gross loss
—
(581)
581
(100.0)
%
Operating expenses
Research and development
9,462
25,115
(15,653)
(62.3)
%
Selling, general and administrative expenses
5,648
8,186
(2,538)
(31.0)
%
Exit and termination costs
(929)
—
(929)
N/A
Total operating expenses
14,181
33,301
(19,120)
(57.4)
%
Loss from operations
(14,181)
(33,882)
19,701
(58.1)
%
Interest income
2,979
3,534
(555)
(15.7)
%
Other income, net
—
26
(26)
(100.0)
%
Net loss
$
(11,202)
$
(30,322)
$
19,120
(63.1)
%
Net loss per share, basic and diluted
$
(0.06)
$
(0.17)
$
0.11
(64.7)
%
Weighted-average shares outstanding, basic and diluted
173,612,768
181,641,060
(8,028)
(4.4)
%
Revenue and Cost of Revenues
Revenue associated with our Hybrid products decreased $0.1 million and associated cost of revenues decreased $0.7 million as a result of our strategic review and decision to discontinue our powertrain business.
Research and Development
Research and development expenses decreased $15.7 million due to:
•A decrease of $22.5 million for the design and testing of our Hypertruck ERX system; offset by
•An increase of $6.8 million for the design and testing of our KARNO stationary generator.
Selling, General and Administrative
Selling, general, and administrative expenses decreased $2.5 million primarily due to wind down of our powertrain business:
•A decrease of $1.1 million in personnel and benefits;
•A decrease of $0.7 million in professional services;
•A decrease of $0.4 million in insurance; and
•A decrease of $0.1 million in marketing.
Exit and Termination Costs
Exit and termination benefit was $0.9 million as a result of the adoption of the Plan and items discussed in Note 2 of the notes to the consolidated financial statements, including recoveries from assets sold.
Interest Income
Interest income decreased $0.6 million primarily due to the decline in investment balance.
Comparison of Nine Months Ended September 30, 2024 to Nine Months Ended September 30, 2023
The following table summarizes our results of operations on a consolidated basis for the nine months ended September 30, 2024 (the “current nine months”) and 2023 (in thousands, except share and per share data):
Nine Months Ended September 30,
2024
2023
$ Change
% Change
Revenues
Product sales and other
$
—
$
672
$
(672)
(100.0)
%
Total revenues
—
672
(672)
(100.0)
%
Cost of revenues
Product sales and other
—
1,675
(1,675)
(100.0)
%
Total cost of revenues
—
1,675
(1,675)
(100.0)
%
Gross loss
—
(1,003)
1,003
(100.0)
%
Operating expenses
Research and development
25,741
73,472
(47,731)
(65.0)
%
Selling, general and administrative expenses
18,502
30,265
(11,763)
(38.9)
%
Exit and termination costs
2,946
—
2,946
N/A
Total operating expenses
47,189
103,737
(56,548)
(54.5)
%
Loss from operations
(47,189)
(104,740)
57,551
(54.9)
%
Interest income
9,504
10,345
(841)
(8.1)
%
Gain on disposal of assets
3
1
2
200.0
%
Other income, net
32
14
18
128.6
%
Net loss
$
(37,650)
$
(94,380)
$
56,730
(60.1)
%
Net loss per share, basic and diluted
$
(0.21)
$
(0.52)
$
0.31
(59.6)
%
Weighted-average shares outstanding, basic and diluted
175,302,069
180,914,250
(5,612)
(3.1)
%
Revenue and Cost of Revenues
Revenue associated with our Hybrid products decreased $0.7 million and associated cost of revenues decreased $1.7 million as a result of our strategic review and decision to discontinue our powertrain business.
Research and Development
Research and development expenses decreased $47.7 million due to:
•A decrease of $63.6 million for the design and testing of our Hypertruck ERX system; offset by
•An increase of $15.9 million for the design and testing of our KARNO stationary generator.
Selling, General and Administrative
Selling, general, and administrative expenses decreased $11.8 million primarily due to wind down of our powertrain business:
•A decrease of $7.0 million in personnel and benefits;
•A decrease of $2.4 million in professional services;
•A decrease of $0.9 million in marketing; and
•A decrease of $0.7 million in insurance.
Exit and Termination Costs
Exit and termination costs increased by $2.9 million as a result of the adoption of the Plan and items discussed in Note 2 of the notes to the consolidated financial statements, including recoveries from assets sold.
Interest Income
Interest income decreased $0.8 million primarily due to the decline in investment balance.
At September 30, 2024, our current assets were $161.4 million, consisting primarily of cash and cash equivalents of $28.1 million, short-term investments of $122.9 million and prepaid expenses of $5.7 million. Our current liabilities were $9.2 million primarily comprised of accounts payable, accrued expenses and operating lease liabilities. We also had $86.5 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 September 30, 2024 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 and execute on our business strategy and meet our capital requirements for the next twelve months. We do not expect to need to raise additional equity capital for the foreseeable future. Our primary short-term cash needs are costs associated with KARNO generator development and building of our initial deployment units. Longer term, our capital needs will be determined by our go-to-market strategy, which may include development of our own KARNO generator manufacturing capacity or outsourcing this work to third parties or business partners. In December 2023, we announced an authorized share repurchase program to repurchase up to $20 million of our outstanding common stock. We repurchased $14.0 million in common stock during the six months ended June 30, 2024 but have currently paused any additional repurchases under this program. Based on current projections of operating expenses, capital spending, working capital growth and historical share repurchases, we expect to have between $220 and $230 million in cash, short-term and long-term investments remaining on our balance sheet at the end of 2024.
We expect to continue to incur net losses in the short term, as we continue to execute on our strategic initiatives by completing the development and commercialization of the KARNO generator with anticipated initial customer deployments in late 2024. 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 II, Item 1A. “Risk Factors.”
The amount and timing of our future funding requirements, if any, will depend on many factors, including the scope and results of our research and development efforts, the breadth of product offerings we plan to commercialize, the growth of sales, and our long-term plan manufacturing plan for the KARNO generator including the pace of investments in additive manufacturing assets, methods of financing these investments, as well as factors that are outside of our control.
During the periods presented, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.
Net cash, cash equivalents and restricted cash provided by or used in operating activities, investing activities and financing activities for the nine months ended September 30, 2024 and 2023 is summarized as follows (in thousands):
Nine Months Ended September 30,
2024
2023
Cash from operating activities
$
(43,291)
$
(92,427)
Cash from investing activities
64,865
1,561
Cash from financing activities
(14,308)
(2)
$
7,266
$
(90,868)
Cash from Operating Activities
For the nine months ended September 30, 2024, cash flows used in operating activities were $43.3 million. Cash used primarily related to a net loss of $37.7 million, adjusted for a $13.6 million change in working capital accounts and $7.9 million in non-cash expenses (including $6.7 million related to accounts payable, accrued expenses and other liabilities, $5.2 million related to prepaid expenses and other current assets, and $2.1 million related to gain on asset sales, partially offset by $5.6 million in assets held for sale carrying value adjustments and $3.5 million related to share-based compensation).
For the nine months ended September 30, 2023, cash flows used in operating activities were $92.4 million. Cash used primarily related to a net loss of $94.4 million, adjusted for a $5.3 million change in working capital accounts and $7.2 million in certain non-cash expenses (including $5.2 million related to share-based compensation, partially offset by $2.7 million related to accounts payable, accrued expenses and other liabilities and $1.2 million related to prepaid expenses and other assets).
Cash from Investing Activities
For the nine months ended September 30, 2024, cash flows provided by investing activities were $64.9 million. Cash provided related to the sale or maturity of investments of $126.7 million and the proceeds from sale of assets of $4.1 million, partially offset by the purchase of investments of $55.4 million and acquired property and equipment of $10.5 million.
For the nine months ended September 30, 2023, cash flows provided by investing activities were $1.6 million. Cash provided related to the sale or maturity of investments of $178.6 million, partially offset by the purchase of investments of $170.2 million and acquired property and equipment of $6.8 million.
Cash from Financing Activities
For the nine months ended September 30, 2024, cash flows used in financing activities were $14.3 million, primarily due to treasury stock repurchases.
For the nine months ended September 30, 2023, cash flows used in financing activities were nil.
Critical Accounting Policies and Estimates
In preparing our condensed consolidated financial statements, we applied the same critical accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, supplemented by those described below, that affect judgments and estimates of amounts recorded for certain assets, liabilities, revenues and expenses.
Share-Based Compensation
We account for share-based payments that involve the issuance of shares of our common stock to employees and nonemployees and meet the criteria for share-based awards as share-based compensation expense based on the grant-date fair value of the award. 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.
In the first quarter of 2024, we granted 2.7 million market-conditioned restricted stock units that may vest between February 13, 2025 and December 31, 2026 contingent upon achieving underlying closing stock price thresholds. These awards were valued at $0.83 per unit using fair value hierarchy Level III inputs including an underlying share volatility of 90% and a risk-free rate of 4.35%.
If we were to utilize different assumptions including the estimate of underlying share volatility of our market-conditioned awards, share-based compensation cost could be under or 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 research and development and selling, general and administrative expenses.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined in Rule 12b-2 under the Exchange Act. As a result, pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information required by this Item.