Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Plug Power Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Plug Power Inc. and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2018 due to the modified retrospective adoption of Accounting Standards Update 2016-02, Leases (Topic 842), as amended.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We have served as the Company’s auditor since 2001.
Albany, New York
March 9, 2020
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 2019 and 2018
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Assets
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
139,496
|
|
$
|
38,602
|
|
Restricted cash
|
|
|
54,813
|
|
|
17,399
|
|
Accounts receivable
|
|
|
25,448
|
|
|
37,347
|
|
Inventory
|
|
|
72,391
|
|
|
47,910
|
|
Prepaid expenses and other current assets
|
|
|
21,192
|
|
|
14,357
|
|
Total current assets
|
|
|
313,340
|
|
|
155,615
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
175,191
|
|
|
54,152
|
|
Property, plant, and equipment, net
|
|
|
14,959
|
|
|
12,869
|
|
Leased property, net
|
|
|
244,740
|
|
|
146,751
|
|
Goodwill
|
|
|
8,842
|
|
|
9,023
|
|
Intangible assets, net
|
|
|
5,539
|
|
|
3,890
|
|
Other assets
|
|
|
8,573
|
|
|
8,026
|
|
Total assets
|
|
$
|
771,184
|
|
$
|
390,326
|
|
|
|
|
|
|
|
|
|
Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
40,376
|
|
$
|
34,824
|
|
Accrued expenses
|
|
|
14,213
|
|
|
7,864
|
|
Deferred revenue
|
|
|
11,691
|
|
|
12,055
|
|
Finance obligations
|
|
|
49,507
|
|
|
74,264
|
|
Current portion of long-term debt
|
|
|
26,461
|
|
|
16,803
|
|
Other current liabilities
|
|
|
8,543
|
|
|
560
|
|
Total current liabilities
|
|
|
150,791
|
|
|
146,370
|
|
Deferred revenue
|
|
|
23,369
|
|
|
28,021
|
|
Common stock warrant liability
|
|
|
—
|
|
|
105
|
|
Finance obligations
|
|
|
265,228
|
|
|
118,076
|
|
Convertible senior notes, net
|
|
|
110,246
|
|
|
63,247
|
|
Long-term debt
|
|
|
85,708
|
|
|
133
|
|
Other liabilities
|
|
|
13
|
|
|
18
|
|
Total liabilities
|
|
|
635,355
|
|
|
355,970
|
|
|
|
|
|
|
|
|
|
Redeemable preferred stock:
|
|
|
|
|
|
|
|
Series C redeemable convertible preferred stock, $0.01 par value per share (aggregate involuntary liquidation preference $16,664); 10,431 shares authorized; Issued and outstanding: 2,620 at December 31, 2019 and 2018
|
|
|
709
|
|
|
709
|
|
Series E redeemable convertible preferred stock, $0.01 par value per share; Shares authorized: 35,000 at both December 31, 2019 and December 31, 2018; Issued and outstanding: 500 at December 31, 2019 and 35,000 at December 31, 2018
|
|
|
441
|
|
|
30,934
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
Common stock, $0.01 par value per share; 750,000,000 shares authorized; Issued (including shares in treasury): 318,637,560 at December 31, 2019 and 234,160,661 at December 31, 2018
|
|
|
3,186
|
|
|
2,342
|
|
Additional paid-in capital
|
|
|
1,507,116
|
|
|
1,289,714
|
|
Accumulated other comprehensive income
|
|
|
1,400
|
|
|
1,584
|
|
Accumulated deficit
|
|
|
(1,345,807)
|
|
|
(1,260,290)
|
|
Less common stock in treasury: 15,259,045 at December 31, 2019 and 15,002,663 at December 31, 2018
|
|
|
(31,216)
|
|
|
(30,637)
|
|
Total stockholders’ equity
|
|
|
134,679
|
|
|
2,713
|
|
Total liabilities, redeemable preferred stock, and stockholders’ equity
|
|
$
|
771,184
|
|
$
|
390,326
|
|
See notes to consolidated financial statements.
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2019, 2018 and 2017
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Net revenue:
|
|
|
|
|
|
|
|
|
|
|
Sales of fuel cell systems and related infrastructure
|
|
|
$
|
149,884
|
|
$
|
107,292
|
|
$
|
62,631
|
Services performed on fuel cell systems and related infrastructure
|
|
|
|
25,217
|
|
|
22,002
|
|
|
16,202
|
Power Purchase Agreements
|
|
|
|
25,853
|
|
|
22,869
|
|
|
12,869
|
Fuel delivered to customers
|
|
|
|
29,099
|
|
|
22,469
|
|
|
8,167
|
Other
|
|
|
|
186
|
|
|
—
|
|
|
284
|
Net revenue
|
|
|
|
230,239
|
|
|
174,632
|
|
|
100,153
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
Sales of fuel cell systems and related infrastructure
|
|
|
|
96,859
|
|
|
84,439
|
|
|
54,815
|
Services performed on fuel cell systems and related infrastructure
|
|
|
|
28,801
|
|
|
23,698
|
|
|
19,814
|
Power Purchase Agreements
|
|
|
|
40,056
|
|
|
36,161
|
|
|
31,292
|
Fuel delivered to customers
|
|
|
|
36,357
|
|
|
27,712
|
|
|
22,013
|
Other
|
|
|
|
200
|
|
|
—
|
|
|
308
|
Total cost of revenue
|
|
|
|
202,273
|
|
|
172,010
|
|
|
128,242
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
|
27,966
|
|
|
2,622
|
|
|
(28,089)
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
33,675
|
|
|
33,907
|
|
|
28,693
|
Selling, general and administrative
|
|
|
|
44,333
|
|
|
38,198
|
|
|
45,010
|
Total operating expenses
|
|
|
|
78,008
|
|
|
72,105
|
|
|
73,703
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
|
(50,042)
|
|
|
(69,483)
|
|
|
(101,792)
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other expense, net
|
|
|
|
(35,502)
|
|
|
(22,135)
|
|
|
(10,100)
|
Change in fair value of common stock warrant liability
|
|
|
|
79
|
|
|
4,286
|
|
|
(15,188)
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
$
|
(85,465)
|
|
$
|
(87,332)
|
|
$
|
(127,080)
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
|
|
|
—
|
|
|
9,217
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the Company
|
|
|
$
|
(85,465)
|
|
$
|
(78,115)
|
|
$
|
(127,080)
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends declared and accretion of discount
|
|
|
|
(52)
|
|
|
(52)
|
|
|
(3,098)
|
Net loss attributable to common stockholders
|
|
|
$
|
(85,517)
|
|
$
|
(78,167)
|
|
$
|
(130,178)
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
$
|
(0.36)
|
|
$
|
(0.36)
|
|
$
|
(0.60)
|
Weighted average number of common stock outstanding
|
|
|
|
237,152,780
|
|
|
218,882,337
|
|
|
216,343,985
|
See notes to consolidated financial statements.
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the years ended December 31, 2019, 2018 and 2017
(In thousands)
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the Company
|
$
|
(85,465)
|
|
$
|
(78,115)
|
|
$
|
(127,080)
|
Other comprehensive (loss) income - foreign currency translation adjustment
|
|
(184)
|
|
|
(610)
|
|
|
1,947
|
Comprehensive loss
|
$
|
(85,649)
|
|
$
|
(78,725)
|
|
$
|
(125,133)
|
See notes to consolidated financial statements.
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the years ended December 31, 2019, 2018 and 2017
(In thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Common Stock
|
|
Paid-in
|
|
Comprehensive
|
|
Treasury Stock
|
|
Accumulated
|
|
Stockholders’
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Income
|
|
Shares
|
|
Amount
|
|
Deficit
|
|
Equity
|
December 31, 2016
|
|
191,723,974
|
|
$
|
1,917
|
|
$
|
1,137,482
|
|
$
|
247
|
|
|
582,328
|
|
$
|
(3,091)
|
|
$
|
(1,051,467)
|
|
$
|
85,088
|
Net loss attributable to the Company
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(127,080)
|
|
|
(127,080)
|
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,947
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,947
|
Stock-based compensation
|
|
148,077
|
|
|
1
|
|
|
9,208
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,209
|
Stock dividend
|
|
54,130
|
|
|
1
|
|
|
88
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(89)
|
|
|
—
|
Public offerings, common stock, net
|
|
10,170,759
|
|
|
102
|
|
|
22,890
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22,992
|
Conversion of preferred stock, Series D
|
|
9,548,393
|
|
|
95
|
|
|
7,683
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,778
|
Conversion of preferred stock, Series C
|
|
2,772,518
|
|
|
28
|
|
|
416
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
444
|
Stock option exercises
|
|
154,166
|
|
|
2
|
|
|
106
|
|
|
—
|
|
|
4,823
|
|
|
(11)
|
|
|
—
|
|
|
97
|
Exercise of warrants, net of warrants issued
|
|
14,501,500
|
|
|
145
|
|
|
39,713
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,858
|
Provision for common stock warrants
|
|
—
|
|
|
—
|
|
|
36,322
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36,322
|
Accretion of discount
|
|
—
|
|
|
—
|
|
|
(3,009)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,009)
|
December 31, 2017
|
|
229,073,517
|
|
$
|
2,291
|
|
$
|
1,250,899
|
|
$
|
2,194
|
|
|
587,151
|
|
$
|
(3,102)
|
|
$
|
(1,178,636)
|
|
$
|
73,646
|
Net loss attributable to the Company
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(78,115)
|
|
|
(78,115)
|
Cumulative effect from adoption of ASC 842
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,487)
|
|
|
(3,487)
|
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(610)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(610)
|
Stock-based compensation
|
|
741,216
|
|
|
8
|
|
|
8,763
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,771
|
Stock dividend
|
|
29,762
|
|
|
—
|
|
|
52
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(52)
|
|
|
—
|
Public offerings, common stock, net
|
|
3,804,654
|
|
|
38
|
|
|
6,978
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,016
|
Stock option exercises
|
|
511,412
|
|
|
5
|
|
|
168
|
|
|
—
|
|
|
17,606
|
|
|
(35)
|
|
|
—
|
|
|
138
|
Equity component of convertible senior notes, net of issuance costs and income tax benefit
|
|
—
|
|
|
—
|
|
|
28,664
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,664
|
Purchase of capped call
|
|
—
|
|
|
—
|
|
|
(16,000)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,000)
|
Purchase of common stock forward
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,397,906
|
|
|
(27,500)
|
|
|
—
|
|
|
(27,500)
|
Exercise of warrants
|
|
100
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
Provision for common stock warrants
|
|
—
|
|
|
—
|
|
|
10,190
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,190
|
December 31, 2018
|
|
234,160,661
|
|
$
|
2,342
|
|
$
|
1,289,714
|
|
$
|
1,584
|
|
|
15,002,663
|
|
$
|
(30,637)
|
|
$
|
(1,260,290)
|
|
$
|
2,713
|
Net loss attributable to the Company
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(85,465)
|
|
|
(85,465)
|
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(184)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(184)
|
Stock-based compensation
|
|
1,876,503
|
|
|
19
|
|
|
10,871
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,890
|
Stock dividend
|
|
19,286
|
|
|
—
|
|
|
52
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(52)
|
|
|
—
|
Public offerings, common stock, net
|
|
62,333,585
|
|
|
622
|
|
|
157,807
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
158,429
|
Stock option exercises
|
|
1,151,307
|
|
|
12
|
|
|
1,784
|
|
|
—
|
|
|
256,382
|
|
|
(579)
|
|
|
—
|
|
|
1,217
|
Exercise of warrants
|
|
5,250,750
|
|
|
53
|
|
|
14,099
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,152
|
Provision for common stock warrants
|
|
—
|
|
|
—
|
|
|
6,513
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,513
|
Accretion of discount, preferred stock
|
|
—
|
|
|
—
|
|
|
(1,978)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,978)
|
Conversion of preferred stock
|
|
13,845,468
|
|
|
138
|
|
|
28,254
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,392
|
December 31, 2019
|
|
318,637,560
|
|
$
|
3,186
|
|
$
|
1,507,116
|
|
$
|
1,400
|
|
|
15,259,045
|
|
$
|
(31,216)
|
|
$
|
(1,345,807)
|
|
$
|
134,679
|
See notes to consolidated financial statements.
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2019, 2018 and 2017
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the Company
|
|
$
|
(85,465)
|
|
$
|
(78,115)
|
|
$
|
(127,080)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment, and leased property
|
|
|
11,989
|
|
|
11,014
|
|
|
9,190
|
Amortization of intangible assets
|
|
|
698
|
|
|
693
|
|
|
593
|
Stock-based compensation
|
|
|
10,890
|
|
|
8,771
|
|
|
9,209
|
Provision for bad debts and other assets
|
|
|
1,981
|
|
|
1,626
|
|
|
250
|
Amortization of debt issuance costs and discount on convertible senior notes
|
|
|
8,821
|
|
|
6,347
|
|
|
770
|
Provision for common stock warrants
|
|
|
6,513
|
|
|
10,190
|
|
|
36,360
|
Change in fair value of common stock warrant liability
|
|
|
(79)
|
|
|
(4,286)
|
|
|
15,188
|
Loss on disposal of leased assets
|
|
|
212
|
|
|
—
|
|
|
—
|
Income tax benefit
|
|
|
—
|
|
|
(9,217)
|
|
|
—
|
Changes in operating assets and liabilities that provide (use) cash:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
10,646
|
|
|
(14,398)
|
|
|
(9,951)
|
Inventory
|
|
|
(24,481)
|
|
|
19,041
|
|
|
(18,836)
|
Prepaid expenses, and other assets
|
|
|
(8,110)
|
|
|
(4,654)
|
|
|
2,157
|
Accounts payable, accrued expenses, and other liabilities
|
|
|
19,879
|
|
|
(10,266)
|
|
|
11,430
|
Accrual for loss contracts related to service
|
|
|
—
|
|
|
—
|
|
|
(752)
|
Deferred revenue
|
|
|
(5,016)
|
|
|
5,637
|
|
|
11,290
|
Net cash used in operating activities
|
|
|
(51,522)
|
|
|
(57,617)
|
|
|
(60,182)
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(5,683)
|
|
|
(5,142)
|
|
|
(4,090)
|
Purchase of intangible asset
|
|
|
(2,404)
|
|
|
(929)
|
|
|
—
|
Purchases for construction of leased property
|
|
|
(6,532)
|
|
|
(13,501)
|
|
|
(40,273)
|
Proceeds from sale of leased assets
|
|
|
375
|
|
|
—
|
|
|
—
|
Net cash used in investing activities
|
|
|
(14,244)
|
|
|
(19,572)
|
|
|
(44,363)
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of preferred stock and warrants, net of transaction costs
|
|
|
14,089
|
|
|
30,934
|
|
|
17,636
|
Proceeds from public offerings, net of transaction costs
|
|
|
158,428
|
|
|
7,195
|
|
|
22,992
|
Proceeds from exercise of stock options
|
|
|
1,217
|
|
|
138
|
|
|
97
|
Payments for redemption of preferred stock
|
|
|
(4,040)
|
|
|
—
|
|
|
(3,700)
|
Proceeds from issuance of convertible senior notes, net
|
|
|
39,052
|
|
|
95,856
|
|
|
—
|
Purchase of capped call and common stock forward
|
|
|
—
|
|
|
(43,500)
|
|
|
—
|
Proceeds from borrowing of long-term debt, net of transaction costs
|
|
|
119,186
|
|
|
—
|
|
|
20,147
|
Principal payments on long-term debt
|
|
|
(24,827)
|
|
|
(16,190)
|
|
|
(12,292)
|
Proceeds from sale/leaseback transactions accounted for as finance obligations
|
|
|
83,668
|
|
|
76,175
|
|
|
45,368
|
Repayments of finance obligations
|
|
|
(61,713)
|
|
|
(31,264)
|
|
|
(18,632)
|
Net cash provided by financing activities
|
|
|
325,060
|
|
|
119,344
|
|
|
71,616
|
Effect of exchange rate changes on cash
|
|
|
53
|
|
|
(57)
|
|
|
348
|
Increase (decrease) in cash, cash equivalents and restricted cash
|
|
|
259,347
|
|
|
42,098
|
|
|
(32,581)
|
Cash, cash equivalents, and restricted cash beginning of period
|
|
|
110,153
|
|
|
68,055
|
|
|
100,636
|
Cash, cash equivalents, and restricted cash end of period
|
|
$
|
369,500
|
|
$
|
110,153
|
|
$
|
68,055
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
19,180
|
|
$
|
13,057
|
|
$
|
8,791
|
|
|
|
|
|
|
|
|
|
|
Summary of non-cash investing and financing activity
|
|
|
|
|
|
|
|
|
|
Recognition of right of use asset
|
|
$
|
127,370
|
|
$
|
79,057
|
|
$
|
—
|
Net transfers between inventory, leased assets and property, plant and equipment
|
|
|
—
|
|
|
18,175
|
|
|
—
|
Conversion of preferred stock to common stock
|
|
|
28,392
|
|
|
—
|
|
|
8,222
|
See notes to consolidated financial statements.
1. Nature of Operations
Description of Business
As a leading provider of comprehensive hydrogen fuel cell turnkey solutions, Plug Power is seeking to build a green hydrogen economy. The Company is focused on hydrogen and fuel cell systems that are used to power electric motors primarily in the electric mobility and stationary power markets, given the ongoing paradigm shift in the power, energy, and transportation industries to address climate change, energy security, and meet sustainability goals. Plug Power created the first commercially viable market for hydrogen fuel cell, or the HFC technology. As a result, the Company has deployed over 30,000 fuel cell systems, and has become the largest buyer of liquid hydrogen, having built and operated a hydrogen network across North America.
We are focused on proton exchange membrane, or PEM, fuel cell and fuel processing technologies, fuel cell/battery hybrid technologies, and associated hydrogen storage and dispensing infrastructure from which multiple products are available. A fuel cell is an electrochemical device that combines hydrogen and oxygen to produce electricity and heat without combustion. Hydrogen is derived from hydrocarbon fuels such as liquid petroleum gas, or LPG, natural gas, propane, methanol, ethanol, gasoline or biofuels. Plug Power develops complete hydrogen generation, delivery, storage and refueling solutions for customer locations. Currently, the Company obtains the majority of its hydrogen by purchasing it from fuel suppliers for resale to customers.
We provide and continue to develop commercially-viable hydrogen and fuel cell solutions for industrial mobility applications (including electric forklifts and electric industrial vehicles) at multi‑shift high volume manufacturing and high throughput distribution sites where we believe our products and services provide a unique combination of productivity, flexibility and environmental benefits. Additionally, we manufacture and sell fuel cell products to replace batteries and diesel generators in stationary backup power applications. These products have proven valuable with telecommunications, transportation and utility customers as robust, reliable and sustainable power solutions.
Our current products and services include:
GenDrive: GenDrive is our hydrogen fueled PEM fuel cell system providing power to material handling electric vehicles, including class 1, 2, 3 and 6 electric forklifts and ground support equipment;
GenFuel: GenFuel is our hydrogen fueling delivery, generation, storage and dispensing system;
GenCare: GenCare is our ongoing ‘internet of things’-based maintenance and on-site service program for GenDrive fuel cell systems, GenSure fuel cell systems, GenFuel hydrogen storage and dispensing products and ProGen fuel cell engines;
GenSure: GenSure is our stationary fuel cell solution providing scalable, modular PEM fuel cell power to support the backup and grid-support power requirements of the telecommunications, transportation, and utility sectors;
GenKey: GenKey is our vertically integrated “turn-key” solution combining either GenDrive or GenSure fuel cell power with GenFuel fuel and GenCare aftermarket service, offering complete simplicity to customers transitioning to fuel cell power; and
ProGen: ProGen is our fuel cell stack and engine technology currently used globally in mobility and stationary fuel cell systems, and as engines in electric delivery vans.
We provide our products worldwide through our direct product sales force, and by leveraging relationships with original equipment manufacturers, and their dealer networks. We manufacture our commercially-viable products in Latham, NY and Spokane, WA.
We were organized as a corporation in the State of Delaware on June 27, 1997.
Unless the context indicates otherwise, the terms “Company,” “Plug Power,” “we,” “our” or “us” as used herein refers to Plug Power Inc. and its subsidiaries.
Liquidity
Our cash requirements relate primarily to working capital needed to operate and grow our business, including funding operating expenses, growth in inventory to support both shipments of new units and servicing the installed base, growth in equipment leased to customers under long-term arrangements, funding the growth in our GenKey “turn-key” solution, which includes the installation of our customers’ hydrogen infrastructure as well as delivery of the hydrogen fuel, continued development and expansion of our products, payment of lease/financing obligations under sale/leaseback financings, and the repayment or refinancing of our long-term debt. Our ability to achieve profitability and meet future liquidity needs and capital requirements will depend upon numerous factors, including the timing and quantity of product orders and shipments; attaining and expanding positive gross margins across all product lines; the timing and amount of our operating expenses; the timing and costs of working capital needs; the timing and costs of developing marketing and distribution channels; the ability of our customers to obtain financing to support commercial transactions; our ability to obtain financing arrangements to support the sale or leasing of our products and services to customers and to repay or refinance our long-term debt, and the terms of such agreements that may require us to pledge or restrict substantial amounts of our cash to support these financing arrangements; the timing and costs of developing marketing and distribution channels; the timing and costs of product service requirements; the timing and costs of hiring and training product staff; the timing and costs of product development and introductions; the extent of our ongoing and new research and development programs; and changes in our strategy or our planned activities. If we are unable to fund our operations with positive cash flows and cannot obtain external financing, we may not be able to sustain future operations. As a result, we may be required to delay, reduce and/or cease our operations and/or seek bankruptcy protection.
We have experienced and continue to experience negative cash flows from operations and net losses. The Company incurred net losses attributable to common stockholders of $85.5 million, $78.2 million and $130.2 million for the years ended December 31, 2019, 2018, and 2017, respectively, and had an accumulated deficit of $1.3 billion at December 31, 2019.
We have historically funded our operations primarily through public and private offerings of equity and debt, as well as short-term borrowings, long-term debt and project financings. The Company believes that its current working capital and cash anticipated to be generated from future operations, as well as borrowings from lending and project financing sources and proceeds from equity and debt offerings will provide sufficient liquidity to fund operations for at least one year after the date the financial statements are issued. There is no guarantee that future funding will be available if and when required or at terms acceptable to the Company. This projection is based on our current expectations regarding new project financing and product sales and service, cost structure, cash burn rate and other operating assumptions.
During the year ended December 31, 2019, net cash used in operating activities was $51.5 million, consisting primarily of a net loss attributable to the Company of $85.5 million, and net outflows from fluctuations in working capital and other assets and liabilities of $7.1 million, offset by the impact of noncash charges of $41.0 million,. The changes in working capital primarily were related to decreases in accounts receivable and deferred revenue, offset by increases in inventory, prepaid expenses, other current assets, accounts payable, accrued expenses, and other liabilities. Cash outflows related to equipment that we sell are included in net cash used on operating activities. As of December 31, 2019, we had cash and cash equivalents of $139.5 million and net working capital of $162.5 million. By comparison, at December 31, 2018, we had cash and cash equivalents of $38.6 million and net working capital of $9.2 million.
Net cash used in investing activities for the year ended December 31, 2019, totaled $14.2 million and included purchases of property, plant and equipment and intangible assets and outflows associated with materials, labor, and overhead necessary to construct new leased property. Cash outflows related to equipment that we lease directly to customers are included in net cash used in investing activities. Net cash provided by financing activities for the year ended December 31, 2019 totaled $325.1 million and primarily resulted from the net proceeds from the issuance of preferred stock and warrants of $14.1 million, net proceeds from public offerings of our equity of $158.4 million, proceeds from the exercise of stock options of $1.2 million, net proceeds of $39.1 million from the issuance of the $40 million Convertible Senior Note, proceeds from the issuance of long-term debt of $119.2 million and increase in finance obligations of $83.7
million, offset by payments for redemption of preferred stock of $4.0 million and repayments of long-term debt of $24.8 million and finance obligations of $61.7 million.
Public and Private Offerings of Equity and Debt
Common Stock Issuance
On April 3, 2017, the Company entered into an At Market Issuance Sales Agreement, or the Sales Agreement, with FBR Capital Markets & Co. (now B. Riley FBR, Inc.), or FBR, as sales agent, pursuant to which the Company may offer and sell, from time to time through FBR, shares of common stock par value $0.01 per share having an aggregate offering price of up to $75.0 million. During the year ended December 31, 2019, the Company issued 6.3 million shares of common stock through its Sales Agreement resulting in net proceeds of $14.5 million. As of December 2, 2019, the Company had raised a total of $46.8 million during the term of the Sales Agreement. On December 2, 2019, the Sale Agreement expired.
In December 2019, the Company sold 46 million shares of common stock at a public price of $2.75 per share for net proceeds of approximately $120.4 million.
In March 2019, the Company sold 10 million shares of common stock at a purchase price of $2.35 per share for net proceeds of $23.5 million.
Preferred Stock Issuance
In November 2018, the Company completed a private placement of an aggregate of 35,000 shares of the Company’s Series E Redeemable Convertible Preferred Stock, par value $0.01 per share, or the Series E Preferred Stock, for net proceeds of approximately $30.9 million. In the third quarter of 2019, the Company redeemed 4,038 shares of Series E Preferred Stock totaling $4.0 million. In the fourth quarter of 2019, the Company converted 30,962 shares of Series E Preferred Stock into 13.8 million shares of common stock. In January 2020, the Company converted the remainder of the 500 shares of Series E Preferred Stock into 216 thousand shares of common stock. See Note 12, Redeemable Convertible Preferred Stock, for additional information.
Debt
In September 2019, the Company issued a $40.0 million in aggregate principal amount of 7.5% convertible senior note due in 2023, which we refer to herein as the $40 million Convertible Senior Note. The Company’s total obligation, net of interest accretion, due to the holder is $48.0 million. The total net proceeds from this offering, after deducting costs of the issuance were $39.1 million. As of December 31, 2019, the outstanding balance of the note, net of related discount and issuance costs, was $39.6 million. See Note 10, Convertible Senior Notes, for more details.
In March 2018, the Company issued $100.0 million in aggregate principal amount of 5.5% convertible senior notes due in 2023, which we refer to herein as the $100 million Convertible Senior Notes. The total net proceeds from this offering, after deducting costs of the issuance, were approximately $95.9 million. Approximately $43.5 million of the proceeds were used for the cost of the Capped Call and the Common Stock Forward, both of which are hedges related to the $100 million Convertible Senior Notes. As of December 31, 2019, the outstanding balance of the notes, net of related accretion and issuance costs, was $70.6 million. See Note 10, Convertible Senior Notes, for more details.
On April 12, 2017, the Company issued to Tech Opportunities LLC (Tech Opps) warrants to acquire up to 5,250,750 shares of common stock at an exercise price of $2.69 per share. All of these warrants were exercised on October 15, 2019 for net proceeds of $14.1 million. See Note 11, Stockholders’ Equity, for additional information.
Operating or Finance Leases
The Company enters into sale/leaseback agreements with various financial institutions to facilitate the Company’s commercial transactions with key customers. The Company sells certain fuel cell systems and hydrogen infrastructure to the financial institutions and leases the equipment back to support certain customer locations and to fulfill its varied Power Purchase Agreements (PPAs). In connection with certain operating leases, the financial institutions require the Company
to maintain cash balances in restricted accounts securing the Company’s finance obligations. Cash received from customers under the PPAs is used to make payments against the Company’s finance obligations. As the Company performs under these agreements, the required restricted cash balances are released, according to a set schedule. The total remaining lease payments to financial institutions under these agreements at December 31, 2019 was $227.2 million, $234.5 million of which were secured with restricted cash, security deposits and pledged service escrows.
The Company has a master lease agreement with Wells Fargo Equipment Finance, Inc. (Wells Fargo MLA) to finance the Company’s commercial transactions with Wal-Mart Stores, Inc. (Walmart). The Wells Fargo MLA was entered into in 2017 and amended in 2018. Pursuant to the Wells Fargo MLA, the Company sells fuel cell systems and hydrogen infrastructure to Wells Fargo and then leases them back and operates them at Walmart sites under lease agreements with Walmart. The total remaining lease payments to Wells Fargo were $112.8 million at December 31, 2019. Transactions completed under the Wells Fargo MLA in 2019 and 2018 were accounted for as operating leases and therefore the sales of the fuel cell systems and hydrogen infrastructure were recognized as revenue for the year ended December 31, 2019 and 2018. Transactions completed under the Wells Fargo MLA in 2017 were accounted for as finance leases. The difference in lease classification is due to changes in financing terms and their bearing on lease assessment criteria. Also included in the remaining lease payments to Wells Fargo was a sale/leaseback transaction in 2015 that was accounted for as an operating lease. In connection with the Wells Fargo MLA, the Company has a customer guarantee for a majority of the transactions. The aforementioned Wells Fargo MLA transactions required a letter of credit for the unguaranteed portion totaling $30.7 million.
Additionally, during the third quarter of 2019, the Company entered into master lease agreements with both Key Equipment Finance (KeyBank) and SunTrust Equipment Finance & Lease Corp. (SunTrust), to finance commercial transactions with Walmart. The transactions with KeyBank and SunTrust required cash collateral for the unguaranteed portions totaling $15.9 million. Similar to the aforementioned Wells Fargo MLA, the Company has a customer guarantee for the majority of the transactions.
During the year ended December 31, 2019, the Company entered into additional, similar master lease agreements with Wells Fargo, Crestmark Equipment Finance (Crestmark), First American Bancorp, Inc. (First American), 36th Street Capital Partners, LLC (36th Street) and Fifth Third Bank, National Association (Fifth Third) to finance subscription programs with other customers. The total remaining lease payments to these financial institutions were $93.2 million at December 31, 2019. The majority of the lease payments are secured by cash collateral and letters of credit backed by restricted cash.
Long-Term Debt
In March 2019, the Company entered into a loan and security agreement with Generate Lending, LLC (Generate Capital) pursuant to which the Company borrowed $85.0 million. The initial proceeds of the loan were used to pay in full the Company’s long-term debt and accrued interest of $17.6 million under the loan agreement with NY Green Bank, a Division of the New York State Energy Research & Development Authority, and terminate approximately $50.3 million of certain equipment leases with Generate Plug Power SLB II, LLC as well as repurchase the associated leased equipment. In April 2019 and November 2019, the Company borrowed an additional $15.0 million and $20 million, respectively, under the Term Loan Facility with Generate Capital at 12% interest to fund working capital for ongoing deployments and other general corporate purposes. On December 31, 2019 the outstanding balance was $112.7 million. See Note 9, Long-Term Debt for additional information.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Leases
The Company is a lessee in noncancelable (1) operating leases, primarily related to sale/leaseback transactions with financial institutions for deployment of the Company’s products at certain customer sites, and (2) finance leases, also primarily related to sale/leaseback transactions with financial institutions for similar commercial purposes. The Company accounts for leases in accordance with Accounting Standards Codification (ASC) Topic 842, Leases (ASC Topic 842), as amended, which was adopted in 2018 (see Recently Adopted Accounting Standards).
The Company determines if an arrangement is or contains a lease at contract inception. The Company recognizes a right of use (ROU) asset and a lease liability (i.e. finance obligation) at the lease commencement date. For operating leases, the lease liability is initially measured at the present value of the unpaid lease payments at the lease commencement date. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases and is subsequently measured at amortized cost using the effective interest method.
Key estimates and judgments include how the Company determines (1) the discount rate it uses to discount the unpaid lease payments to present value, (2) the lease term and (3) the lease payments.
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·
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ASC Topic 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, the Company generally uses its incremental borrowing rate as the discount rate for the lease. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.
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·
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The lease term for all of the Company’s leases includes the noncancelable period of the lease, plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.
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·
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Lease payments included in the measurement of the lease liability comprise fixed payments, and the exercise price of a Company option to purchase the underlying asset if the Company is reasonably certain to exercise the option.
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The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of the useful life of the underlying asset or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized and presented separately from interest expense on the lease liability. The Company’s leases do not contain variable lease payments.
ROU assets for operating and finance leases are periodically reviewed for impairment losses. The Company uses the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment – Overall, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize. No impairment losses have been recognized to date.
The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset.
Operating and finance lease ROU assets are presented within leased property, net on the consolidated balance sheets. The current portion of operating and finance lease liabilities is included in finance obligations within current liabilities and the long-term portion is presented in finance obligations within noncurrent liabilities on the consolidated balance sheets.
The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less. The Company has elected to apply the short-term lease recognition and measurement exemption for other classes of leased assets. The Company recognizes the lease payments associated with its short-term leases as an expense on a straight-line basis over the lease term.
Revenue Recognition
The Company enters into contracts that may contain one or a combination of fuel cell systems and infrastructure, installation, maintenance, spare parts, fuel delivery and other support services. Contracts containing fuel cell systems and related infrastructure may be sold or provided to customers under a Power Purchase Agreement (PPA), discussed further below.
The Company does not include a right of return on its products other than rights related to standard warranty provisions that permit repair or replacement of defective goods. The Company accrues for anticipated standard warranty costs at the same time that revenue is recognized for the related product, or when circumstances indicate that warranty costs will be incurred, as applicable. Only a limited number of fuel cell units are under standard warranty.
Revenue is measured based on the transaction price specified in a contract with a customer, subject to the allocation of the transaction price to distinct performance obligations as discussed below. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.
The Company accounts for each distinct performance obligation within its arrangements as a distinct unit of accounting if the items under the performance obligation have value to the customer on a standalone basis. The Company considers a performance obligation to be distinct and have a standalone value if the customer can benefit from the good or service either on its own or together with other resources readily available to the customer and the Company’s promise to transfer the goods or service to the customer is separately identifiable from other promises in the contract. The Company allocates revenue to each distinct performance obligation based on relative standalone selling prices.
Payment terms for sales of fuel cells, infrastructure and service to customers are typically 30 to 90 days. Sale/leaseback transactions with financial institutions are invoiced and collected upon transaction closing. Service is prepaid upfront in a majority of the arrangements. The Company does not adjust the transaction price for a significant financing component when the performance obligation is expected to be fulfilled within a year.
The Company presents the provision for common stock warrants within each revenue-related line item on the consolidated statements of operations. This presentation reflects a discount that those common stock warrants represent, and therefore revenue is net of these non-cash charges. The provision of common stock warrants is allocated to the relevant revenue-related line items based upon the expected mix of the revenue for each respective contract.
Nature of goods and services
The following is a description of principal activities from which the Company generates its revenue.
(i)Sales of Fuel Cell Systems and Related Infrastructure
Revenue from sales of fuel cell systems and related infrastructure represents sales of our GenDrive units, GenSure stationary backup power units, as well as hydrogen fueling infrastructure.
The Company considers comparable list prices, as well as historical average pricing approaches to determine standalone selling prices for GenDrive fuel cells. The Company uses observable evidence from similar products in the market to determine standalone selling prices for GenSure stationary backup power units and hydrogen fueling infrastructure. The determination of standalone selling prices of the Company’s performance obligations requires
significant judgment, including continual assessment of pricing approaches and available observable evidence in the market. Once relative standalone selling prices are determined, the Company proportionately allocates the transaction price to each performance obligation within the customer arrangement. The allocated transaction price related to fuel cell systems and spare parts is recognized as revenue at a point in time which usually occurs at shipment (and occasionally upon delivery). Revenue on hydrogen infrastructure installations is generally recognized at the point at which transfer of control passes to the customer, which usually occurs upon customer acceptance of the hydrogen infrastructure. In certain instances, control on hydrogen infrastructure installations transfers to the customer over time, and the related revenue is recognized over time as the performance obligation is satisfied. The Company uses an input method to determine the amount of revenue to recognize during each reporting period based on the Company’s efforts to satisfy the performance obligation.
(ii)Services performed on fuel cell systems and related infrastructure
Revenue from services performed on fuel cell systems and related infrastructure represents revenue earned on our service and maintenance contracts and sales of spare parts. The transaction price allocated to services as discussed above is generally recognized as revenue over time on a straight-line basis over the expected service period.
In substantially all of its commercial transactions, the Company sells extended maintenance contracts that generally provide for a five to ten year service period from the date of product installation. Services include monitoring, technical support, maintenance and services that provide for 97% to 98% uptime of the fleet. These services are accounted for as a separate performance obligation, and accordingly, revenue generated from these transactions, subject to the proportional allocation of transaction price, is deferred and recognized in income over the term of the contract, generally on a straight-line basis. Additionally, the Company may enter into annual service and extended maintenance contracts that are billed monthly. Revenue generated from these transactions is recognized in income on a straight-line basis over the term of the contract. Costs are recognized as incurred over the term of the contract. Sales of spare parts are included within service revenue on the consolidated statements of operations. When costs are projected to exceed revenues over the life of the extended maintenance contract, an accrual for loss contracts is recorded. Costs are estimated based upon historical experience and consider the estimated impact of the Company’s cost reduction initiatives. The actual results may differ from these estimates.
Upon expiration of the extended maintenance contracts, customers either choose to extend the contract or switch to purchasing spare parts and maintaining the fuel cell systems on their own.
(iii)Power Purchase Agreements
Revenue from PPAs primarily represents payments received from customers who make monthly payments to access the Company’s GenKey solution.
When fuel cell systems and related infrastructure are provided to customers through a PPA, revenues associated with these agreements are treated as rental income and recognized on a straight-line basis over the life of the agreements.
In conjunction with entering into a PPA with a customer, the Company may enter into sale/leaseback transactions with third-party financial institutions, whereby the fuel cells, a majority of the related infrastructure and, in some cases, service are sold to the third-party financial institution and leased back to the Company through either an operating or finance lease.
Certain of the Company’s sale/leaseback transactions with third-party financial institutions are required to be accounted for as finance leases. As a result, no upfront revenue was recognized at the closing of these transactions and a finance obligation for each lease was established. The fuel cell systems and related infrastructure that are provided to customers through these PPAs are considered leased property on the consolidated balance sheets. Costs to service the leased property, depreciation of the leased property, and other related costs are considered cost of PPA revenue on the consolidated statements of operations. Interest cost associated with finance leases is presented within interest and other expense, net on the consolidated statements of operations.
The Company also has sale/leaseback transactions with financial institutions, which were required to be accounted for as an operating lease. The Company has rental expense associated with these sale/leaseback agreements with financial institutions. Rental expense is recognized on a straight-line basis over the life of the agreements and is characterized as cost of PPA revenue on the consolidated statements of operations.
The Company adopted ASC Topic 842, effective January 1, 2018. As part of the adoption, the Company elected the practical expedient to not separate lease and non-lease components (i.e., maintenance services) within its rental income related to all PPA-related assets.
To recognize revenue, the Company, as lessee, is required to determine whether each sale/leaseback arrangement meets operating lease criteria. As part of the assessment of these criteria, the Company estimates certain key inputs to the associated calculations such as: 1) discount rate it uses to discount the unpaid lease payments to present value and 2) useful life of the underlying asset(s):
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·
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ASC Topic 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in its leases because it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, the Company generally uses its incremental borrowing rate to estimate the discount rate for each lease.
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·
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In order for a lease to be classified as an operating lease, the lease term cannot exceed 75% (major part) of the estimated useful life of the leased asset. The average estimated useful life of the fuel cells is 10 years, and the average estimated useful life of the hydrogen infrastructure is 20 years. These estimated useful lives are compared to the term of each lease to ensure that 75% of the estimated useful life of the assets is not exceeded which allows the Company to meet the operating lease criteria.
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(iv)Fuel Delivered to Customers
Revenue associated with fuel delivered to customers represents the sale of hydrogen to customers that has been purchased by the Company from a third party or generated on site.
The Company purchases hydrogen fuel from suppliers in certain cases (and produces hydrogen onsite) and sells to its customers upon delivery. Revenue and cost of revenue related to this fuel is recorded as dispensed and is included in the respective “Fuel delivered to customers” lines on the consolidated statements of operations.
Contract costs
The Company expects that incremental commission fees paid to employees as a result of obtaining sales contracts are recoverable and therefore the Company capitalizes them as contract costs.
Capitalized commission fees are amortized on a straight-line basis over the period of time over which the transfer of goods or services to which the assets relate occur, typically ranging from 5 to 10 years. Amortization of the capitalized commission fees is included in selling, general, and administrative expenses.
The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in selling, general, and administrative expenses.
Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers all highly-liquid debt instruments with original maturities of three months or less to be cash equivalents. At December 31, 2019 and 2018, cash equivalents consist of money market accounts. The Company’s cash and cash equivalents are deposited with financial institutions located in the U.S. and may at times exceed insured limits.
Common Stock Warrant Accounting
The Company accounts for common stock warrants as either derivative liabilities or as equity instruments depending on the specific terms of the respective warrant agreements.
Derivative Liabilities
Registered common stock warrants that require the issuance of registered shares upon exercise and do not sufficiently preclude an implied right to cash settlement are accounted for as derivative liabilities. We currently classify these derivative warrant liabilities on the consolidated balance sheet as a long-term liability, which are revalued at each balance sheet date subsequent to the initial issuance, using the Black-Scholes pricing model. This pricing model, which is based, in part, upon unobservable inputs for which there is little or no market data, requires the Company to develop its own assumptions. Changes in the fair value of the warrants are reflected in the consolidated statements of operations as change in fair value of common stock warrant liability.
Accounts Receivable
Accounts receivable are stated at the amount billed or billable to customers and are ordinarily due between 30 and 60 days after the issuance of the invoice. Receivables are reserved or written off based on individual credit evaluation and specific circumstances of the customer. The allowance for doubtful accounts and related receivable are reduced when the amount is deemed uncollectible. As of both December 31, 2019, and 2018, the allowance for doubtful accounts was $249 thousand.
Inventory
Inventories are valued at the lower of cost, determined on a first-in, first-out basis, and net realizable value. All inventory, including spare parts inventory held at service locations, is not relieved until the customer has received the product, at which time the risks and rewards of ownership have transferred.
Property, Plant and Equipment
Property, plant and equipment are originally recorded at cost or, if acquired as part of business combination, at fair value. Maintenance and repairs are expensed as costs are incurred. Depreciation on plant and equipment, which includes depreciation on the Company’s primary manufacturing facility, which is accounted for as a financing obligation, is calculated on the straight-line method over the estimated useful lives of the assets. The Company records depreciation and amortization over the following estimated useful lives:
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Leasehold improvements
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5 ‑ 10 years
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Software, machinery and equipment
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1 ‑ 15 years
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Gains and losses resulting from the sale of property and equipment are recorded in current operations.
Leased Property
Leased property primarily consists of the cost of assets deployed related to finance leases. Depreciation expense is recorded on a straight-line basis over the shorter of the lease term or the estimated useful life of the asset, generally six to seven years, and is included in cost of revenue for PPAs in the consolidated statements of operations.
Impairment of Long-Lived Assets
Long-lived assets, such as property, plant, and equipment, leased property and purchased intangibles subject to amortization, are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated undiscounted
future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Assets to be disposed of and considered held for sale would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet.
Goodwill
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is reviewed for impairment at least annually.
The Company has the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount prior to performing the two-step goodwill impairment test. If this is the case, the two-step goodwill impairment test is required. If it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required.
The Company performs an impairment review of goodwill on an annual basis at December 1, and when a triggering event is determined to have occurred between annual impairment tests. For the years ended December 31, 2019, 2018, and 2017, the Company performed a qualitative assessment of goodwill for its single reporting unit based on multiple factors including market capitalization and determined that it is not more likely than not that the fair value of its reporting unit is less than the carrying amount.
Intangible Assets
Intangible assets consist of acquired technology, customer relationships and trademarks, and are amortized using a straight-line method over their useful lives of 5 - 10 years. Additionally, the intangible assets are reviewed for impairment when certain triggering events occur.
Product Warranty Reserve
Aside from when included in the sale of an extended maintenance contract, the Company provides a one to two year standard product warranty to customers from date of installation of GenDrive units, and the GenSure sales generally include a two year standard product warranty. We currently estimate the costs of satisfying warranty claims based on an analysis of past experience and provide for future claims in the period the revenue is recognized. Factors that affect our warranty liability include the number of installed units, estimated material costs, estimated travel, and labor costs. The warranty reserve is included within the other current liabilities on the consolidated balance sheet.
Equity Instruments
Common stock warrants that meet certain applicable requirements of ASC Subtopic 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity, and other related guidance, including the ability of the Company to settle the warrants without the issuance of registered shares or the absence of rights of the grantee to require cash settlement, are accounted for as equity instruments. The Company classifies these equity instruments within additional paid-in capital on the consolidated balance sheets.
Common stock warrants accounted for as equity instruments represent the warrants issued to Amazon and Walmart as discussed in Note 13, Warrant Transaction Agreements. The Company early-adopted FASB Accounting Standards Update 2019-08, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606) (ASU 2019-08), which requires entities to measure and classify share-based payment awards granted to a customer by applying the guidance under Topic 718. The Company adopted ASU 2019-08 as of January 1, 2019. As a result, the amount recorded as a reduction of revenue will be measured based on the grant-date fair value of the warrants. Previously, this amount was measured based on vesting date fair value with estimates of fair value determined at each
financial reporting date for unvested warrant shares considered to be probable of vesting. Except for the third tranche, all existing unvested warrants are using a measurement date January 1, 2019, the adoption date, in accordance with the transition requirements of ASU 2019-08. For the third tranche, the exercise price will be determined once the second tranche vests. The measurement date will be determined at that time.
As a result of the adoption of ASU 2019-08 in the fourth quarter of 2019, applied with an effective date of January 1, 2019, the Company’s unaudited condensed consolidated financial information for the quarterly periods ended March 31, 2019, June 30, 2019, and September 30, 2019, has been revised. Amounts related to prior years were not impacted by the adoption of ASU 2019-08. The following table summarizes the impact of ASU 2019-08 adoption, as a reduction of revenue, by quarter on the consolidated statement of operations (in thousands):
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Three months ended
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December 31,
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September 30,
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June 30,
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March 31,
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2019
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2019
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2019
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2019
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Total
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|
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|
|
|
|
|
|
|
|
|
|
|
|
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Warrant expense, pre adoption
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$
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(2,807)
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|
$
|
(4,583)
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|
$
|
(1,483)
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|
$
|
(4,179)
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|
$
|
(13,052)
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Adjustment
|
|
—
|
|
|
3,087
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|
|
466
|
|
|
2,986
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|
|
6,539
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Warrant expense, post adoption
|
|
(2,807)
|
|
|
(1,496)
|
|
|
(1,017)
|
|
|
(1,193)
|
|
|
(6,513)
|
The Company uses the Black-Scholes pricing model, which is based, in part, upon unobservable inputs for which there is little or no market data, requiring the Company to develop its own assumptions. The Company estimates the fair value of unvested warrant shares, considered to be probable of vesting. Based on this estimated fair value, the Company determines the amount of warrant expense, which is recorded as a reduction of revenue on the consolidated statement of operations. In order to calculate warrant expense, the Company is required to make certain assumptions of key inputs to the Black-Scholes valuation model such as volatility and risk-free interest rate.
Redeemable Preferred Stock
We account for redeemable preferred stock as temporary equity in accordance with applicable accounting guidance in FASB ASC Topic 480, Distinguishing Liabilities from Equity. Dividends on the redeemable preferred stock are accounted for as an increase in the net loss attributable to common stockholders.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized.
The Company accounts for uncertain tax positions in accordance with FASB ASC No. 740-10-25, Income Taxes-Overall-Recognition. The Company recognizes in its consolidated financial statements the impact of a tax position only if that position is more likely than not to be sustained on audit, based on the technical merits of the position.
Foreign Currency Translation
Foreign currency translation adjustments arising from conversion of the Company’s foreign subsidiary’s financial statements to U.S. dollars for reporting purposes are included in accumulated other comprehensive income in stockholders’ equity on the consolidated balance sheets. Transaction gains and losses resulting from the effect of exchange rate changes on transactions denominated in currencies other than the functional currency of the Company’s operations give rise to realized foreign currency transaction gains and losses, and are included in interest and other income and interest and other expense, respectively, in the consolidated statements of operations.
Research and Development
Costs related to research and development activities by the Company are expensed as incurred.
Stock-Based Compensation
The Company maintains employee stock-based compensation plans, which are described more fully in Note 15, Employee Benefit Plans.
Stock-based compensation represents the cost related to stock-based awards granted to employees and directors. The Company measures stock-based compensation cost at grant-date, based on the fair value of the award, and recognizes the cost as expense on a straight-line basis over the option’s requisite service period.
The Company estimates the fair value of stock-based awards using a Black-Scholes valuation model. Stock-based compensation expense is recorded in cost of revenue associated with sales of fuel cell systems and related infrastructure, cost of revenue for services performed on fuel cell systems and related infrastructure, research and development expense and selling, general and administrative expenses in the consolidated statements of operations based on the employees’ respective function.
The Company records deferred tax assets for awards that result in deductions on the Company’s income tax returns, based upon the amount of compensation cost recognized and the Company's statutory tax rate. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the Company's income tax return are recorded in the income statement. No tax benefit or expense for stock-based compensation has been recorded during the years ended December 31, 2019, 2018 and 2017 since the Company remains in a net operating loss (NOL) position.
Convertible Senior Notes
$100 Million Convertible Senior Notes
In March 2018, the Company issued $100.0 million in aggregate principal amount of 5.5% Convertible Senior Notes due on March 15, 2023. The Company accounts for the $100 million Convertible Senior Notes with separate liability and equity components. The carrying amount of the liability component was initially determined by estimating the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the estimated fair value of the liability component from the par value of the $100 million Convertible Senior Notes as a whole as of the date of issuance. This difference represents a debt discount that is amortized to interest expense, with a corresponding increase to the carrying amount of the liability component, over the term of the $100 million Convertible Senior Notes using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. The Company has allocated issuance costs incurred to the liability and equity components. Issuance costs attributable to the liability component are being amortized to expense over the respective term of the $100 million Convertible Senior Notes, and issuance costs attributable to the equity components were netted with the respective equity component in additional paid-in capital.
$40 Million Convertible Senior Note
In September 2019, the Company issued a $40.0 million in aggregate principal amount of 7.5% Convertible Senior Note due on January 5, 2023, in exchange for net proceeds of $39.1 million.
The Company accounts for the issued $40 million Convertible Senior Note as a liability. Upon maturity of the note, the Company is required to repay 120% of $40.0 million, or $48.0 million. As such, the Company recorded a liability for $48.0 million and associated discount for $8.0 million. The $8.0 million discount amortized into interest expense over the term of the $40 million Convertible Senior Note using the effective interest method. Issuance costs are also being amortized to interest expense over the term of the $40 million Convertible Senior Note.
Use of Estimates
The consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications
Reclassifications are made, whenever necessary, to prior period financial statements to conform to the current period presentation.
Subsequent Events
The Company evaluates subsequent events at the date of the balance sheet as well as conditions that arise after the balance sheet date but before the consolidated financial statements are issued. The effects of conditions that existed at the balance sheet date are recognized in the consolidated financial statements. Events and conditions arising after the balance sheet date but before the consolidated financial statements are issued are evaluated to determine if disclosure is required to keep the consolidated financial statements from being misleading. To the extent such events and conditions exist, if any, disclosures are made regarding the nature of events and the estimated financial effects for those events and conditions.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In November 2019, Accounting Standards Update (ASU) 2019-08, Compensation—Stock Compensation (Topic 718) and , was issued to require entities to measure and classify share-based payment awards granted to a customer (warrants) by applying the guidance in Topic 718. The Company early adopted this update during the fourth quarter of 2019 with retrospective adoption as of January 1, 2019. As a result, the amount recorded as a reduction in revenue will be measured based on the grant-date fair value of the warrants, as opposed to the vesting date. Previous guidance required the Company to measure the warrant liability and related expense using guidance under ASC Topic 606.
In June 2018, an accounting update was issued to simplify the accounting for nonemployee share-based payment transactions resulting from expanding the scope of ASC Topic 718, Compensation-Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. An entity applies the requirements of ASC Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that ASC Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that ASC Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC Topic 606, Revenue from Contracts with Customers. The Company adopted this update on January 1, 2019 and it did not have a material effect on the consolidated financial statements.
In September 2018, the Company early adopted Accounting Standards Update 2016-02, Leases (Topic 842), as amended, effective January 1, 2018 and elected the available practical expedients. This adoption had a material impact on the Company’s consolidated statements of operations in that it allowed the Company to recognize gross profit on sale/leaseback transactions. The previous accounting standard only allowed revenue on sale/leaseback transactions to be recognized up to the amount of cost of goods sold and gross profit was deferred. Under ASC Topic 842, revenue can be recognized in full. Another impact from the adoption of ASC Topic 842 was the recognition of right of use assets and
finance obligations for operating leases on the consolidated balance sheet, as well as expanded disclosures. The table below summarizes the impact of this initial adoption to the consolidated balance sheet as of January 1, 2018 (in thousands):
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Recognition of right of use asset
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$
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34,416
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Decrease in accrued expenses
|
|
385
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Recognition of finance obligation
|
|
(34,161)
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Decrease in prepaid expenses and other assets
|
|
(3,229)
|
Decrease in leased property, net of accumulated depreciation
|
|
(563)
|
Increase in accumulated deficit
|
|
3,487
|
In addition, the consolidated statement of operations for the year ended December 31, 2018 was impacted by a decrease of depreciation expenses of $0.3 million.
Recently Issued and Not Yet Adopted Accounting Pronouncements
In May 2019, Accounting Standards Update (ASU) 2019-05, Financial Instruments – Credit Losses, was issued to provide an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. Adoption of this update is optional and within scope of Topic 326, Financial Instruments – Credit Losses, effective for fiscal years beginning after December 15, 2019. The Company has evaluated the adoption method and determined the impact of this standard to be immaterial to the consolidated financial statements.
In April 2019, Accounting Standards Update (ASU) 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, was issued to make improvements to updates 2016-01, Financial Instruments – Overall (Subtopic 825-10), 2016-13, Financial Instruments – Credit Losses (Topic 326) and 2017-12, Derivatives and Hedging (Topic 815). This update is effective for fiscal years beginning after December 15, 2019. The Company has evaluated the adoption method and determined the impact of this standard to be immaterial to the consolidated financial statements.
In August 2018, Accounting Standards Update (ASU) 2018-05, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40), was issued to help entities evaluate the accounting for fees paid by a customer in cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in this update are effective for public companies beginning after December 15, 2019. Early adoption of the amendments in this update are permitted. The Company has evaluated the adoption method and determined the impact of this standard to be immaterial to the consolidated financial statements.
In January 2017, Accounting Standards Update (ASU) 2017-04, Intangibles – Goodwill and Other (Topic 350), was issued to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. This accounting update is effective for fiscal years beginning after December 15, 2019. The Company has evaluated the adoption method and determined the impact of this standard to be immaterial to the consolidated financial statements.
In August 2016, Accounting Standards Update (ASU) 2016-15, Statement of Cash Flows (Topic 230)s: Classification of Certain Cash Receipts and Cash Payments, was issued to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This accounting update is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company has evaluated the adoption method and determined the impact of this standard to be immaterial to the consolidated financial statements.
In June 2016, Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, was issued. ASU 2016-13 significantly changes how entities account for credit losses for financial assets and certain other instruments, including trade receivables and contract assets, that are not measured at fair value through net income. The ASU requires a number of changes to the assessment of credit losses, including the utilization of an expected credit loss model, which requires consideration of a broader range of information to estimate expected credit losses over the entire lifetime of the asset, including losses where probability is
considered remote. Additionally, the standard requires the estimation of lifetime expected losses for trade receivables and contract assets that are classified as current. This update is effective beginning after January 1, 2020. The Company has evaluated the adoption method and determined the impact of this standard to be immaterial to the consolidated financial statements.
3. Earnings Per Share
Basic earnings per common stock are computed by dividing net loss attributable to common stockholders by the weighted average number of common stock outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options, unvested restricted stock, common stock warrants, and preferred stock) were exercised or converted into common stock or resulted in the issuance of common stock (net of any assumed repurchases) that then shared in the earnings of the Company, if any. This is computed by dividing net earnings by the combination of dilutive common stock equivalents, which is comprised of shares issuable under outstanding warrants, the conversion of preferred stock, and the Company’s share-based compensation plans, and the weighted average number of common stock outstanding during the reporting period. Since the Company is in a net loss position, all common stock equivalents would be considered to be anti-dilutive and are, therefore, not included in the determination of diluted earnings per share. Accordingly, basic and diluted loss per share are the same.
The following table provides the components of the calculations of basic and diluted earnings per share (in thousands, except share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2019
|
|
2018
|
|
|
2017
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
$
|
(85,517)
|
|
$
|
(78,167)
|
|
$
|
(130,178)
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common stock outstanding
|
|
|
237,152,780
|
|
|
218,882,337
|
|
|
216,343,985
|
|
The dilutive potential shares common stock are summarized as follows:
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
2019
|
|
2018
|
|
2017
|
Stock options outstanding (1)
|
|
23,013,590
|
|
21,957,150
|
|
19,872,029
|
Restricted stock outstanding (2)
|
|
4,608,560
|
|
2,347,347
|
|
234,744
|
Common stock warrants (3)
|
|
110,573,392
|
|
115,824,142
|
|
115,824,242
|
Preferred stock (4)
|
|
2,998,527
|
|
17,933,591
|
|
2,782,075
|
Convertible Senior Notes (5)
|
|
59,133,896
|
|
43,630,020
|
|
-
|
Number of dilutive potential shares of common stock
|
|
200,327,965
|
|
201,692,250
|
|
138,713,090
|
|
(1)
|
|
During the years ended December 31, 2019, 2018, and 2017, the Company granted 3,221,892, 2,679,667, and 5,485,863 stock options, respectively.
|
|
(2)
|
|
During the years ended December 31, 2019, 2018, and 2017, the Company granted 3,201,892, 2,367,347, and 234,744 shares of restricted stock, respectively.
|
|
(3)
|
|
In April 2017, the Company issued 5,250,750 warrants with an exercise price of $2.69 per warrant, as described in Note 11, Stockholders’ Equity. Of these warrants issued in April 2017, all have been exercised as of December 31, 2019.
|
In April 2017, the Company issued warrants to acquire up to 55,286,696 of the Company’s common stock as part of a transaction agreement with Amazon, subject to certain vesting events, as described in Note 13, Warrant Transaction Agreements. Of these warrants issued, none have been exercised as of December 31, 2019.
In July 2017, the Company issued warrants to acquire up to 55,286,696 of the Company’s common stock as part of a transaction agreement with Walmart, subject to certain vesting events, as described in Note 13, Warrant Transaction Agreements. Of these warrants issued, none have been exercised as of December 31, 2019.
|
(4)
|
|
The preferred stock amount represents the dilutive potential shares of common stock of the Series C, D and E redeemable convertible preferred stock, based on the conversion price of the preferred stock as of December 31, 2019, 2018 and 2017, respectively. Of the 10,431 Series C redeemable preferred stock issued on May 16, 2013, 7,811 had been converted to common stock through December 31, 2017, with the remainder still outstanding. Of the 18,500 Series D redeemable convertible preferred stock issued on December 22, 2016, 3,700 shares have been redeemed and the remaining 14,800 have been converted to common stock during the year ended December 31, 2017. On November 1, 2018, the Company issued 35,000 shares of Series E redeemable convertible preferred stock. As of December 31, 2019, 30,462 of the Series E Preferred Stock had been converted to common stock and 4,038 were redeemed for cash. The remainder of 500 were converted in January 2020.
|
|
(5)
|
|
In March 2018, the Company issued $100.0 million in aggregate principal amount of 5.5% Convertible Senior Notes. In September 2019, the Company issued a $40.0 million in aggregate principal amount of 7.5% Convertible Senior Note. See Note 10, Convertible Senior Notes.
|
4. Inventory
Inventory as of December 31, 2019 and 2018 consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
December 31, 2018
|
Raw materials and supplies - production locations
|
|
$
|
48,011
|
|
$
|
32,941
|
Raw materials and supplies - customer locations
|
|
|
9,241
|
|
|
6,755
|
Work-in-process
|
|
|
12,529
|
|
|
5,589
|
Finished goods
|
|
|
2,610
|
|
|
2,625
|
Inventory
|
|
$
|
72,391
|
|
$
|
47,910
|
5. Property, Plant and Equipment
Property, plant and equipment at December 31, 2019 and 2018 consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2019
|
|
2018
|
|
Leasehold improvements
|
|
$
|
862
|
|
$
|
214
|
|
Software, machinery and equipment
|
|
|
31,514
|
|
|
27,058
|
|
Property, plant, and equipment
|
|
|
32,376
|
|
|
27,272
|
|
Less: accumulated depreciation
|
|
|
(17,417)
|
|
|
(14,403)
|
|
Property, plant, and equipment, net
|
|
$
|
14,959
|
|
$
|
12,869
|
|
Depreciation expense related to property, plant and equipment was $3.6 million, $2.6 million, and $1.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. Upon the adoption of ASC 842, the Company reclassified property and equipment, subject to a finance lease, to right of use assets. See Note 18, Commitments and Contingencies – Finance Leases as Lessee.
6. Leased Property
Leased property at December 31, 2019 and 2018 consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2019
|
|
2018
|
|
Right of use assets - operating
|
|
$
|
198,068
|
|
$
|
76,747
|
|
Right of use assets - finance
|
|
|
41,475
|
|
|
39,905
|
|
Capitalized costs of lessor assets
|
|
|
41,465
|
|
|
41,040
|
|
Less: accumulated depreciation
|
|
|
(36,268)
|
|
|
(10,941)
|
|
Leased property, net
|
|
$
|
244,740
|
|
$
|
146,751
|
|
Capitalized costs of lessor assets associated with finance leases have been reclassified to right of use assets upon the adoption of ASC 842. Depreciation expense related to leased property was $8.4 million, $8.4 million, and $7.3 million the years ended December 31, 2019, 2018 and 2017, respectively.
7. Intangible Assets
The gross carrying amount and accumulated amortization of the Company’s acquired identifiable intangible assets as of December 31, 2019 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
Gross Carrying
|
|
Accumulated
|
|
|
|
|
|
Amortization Period
|
|
Amount
|
|
Amortization
|
|
Total
|
Acquired technology
|
|
10 years
|
|
$
|
8,244
|
|
$
|
(2,815)
|
|
$
|
5,429
|
Customer relationships
|
|
10 years
|
|
|
260
|
|
|
(150)
|
|
|
110
|
Trademark
|
|
5 years
|
|
|
60
|
|
|
(60)
|
|
|
—
|
|
|
|
|
$
|
8,564
|
|
$
|
(3,025)
|
|
$
|
5,539
|
The gross carrying amount and accumulated amortization of the Company’s acquired identifiable intangible assets as of December 31, 2018 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
Gross Carrying
|
|
Accumulated
|
|
|
|
|
|
Amortization Period
|
|
Amount
|
|
Amortization
|
|
Total
|
Acquired technology
|
|
9 years
|
|
$
|
5,926
|
|
$
|
(2,176)
|
|
$
|
3,750
|
Customer relationships
|
|
10 years
|
|
|
260
|
|
|
(123)
|
|
|
137
|
Trademark
|
|
5 years
|
|
|
60
|
|
|
(57)
|
|
|
3
|
|
|
|
|
$
|
6,246
|
|
$
|
(2,356)
|
|
$
|
3,890
|
The change in the gross carrying amount of the acquired technology from December 31, 2018 to December 31, 2019 was due to the acquisition of intellectual property from EnergyOr in May 2019, a milestone payment and accrual to American Fuel Cell LLC (AFC), as well as changes attributed to foreign currency translation. The Company acquired intellectual property from EnergyOr for $1.5 million. In addition, the Company agreed to pay the sellers a royalty based on future sales of relevant applications, not to exceed $3.0 million, by May 22, 2025.
As part of the agreement to acquire the intellectual property from AFC, the Company shall pay AFC milestone payments not to exceed $2.9 million in total, if certain milestones associated with the production of components related to the acquired technology are met before April 2021. As of December 31, the Company paid $0.4 million and accrued $0.5 million in relation to the aforementioned milestones.
Amortization expense for acquired identifiable intangible assets for the years ended December 31, 2019 and 2018 was $0.7 million, $0.7 million, respectively. Estimated amortization expense for subsequent years is as follows (in thousands):
|
|
|
|
2020
|
|
|
801
|
2021
|
|
|
801
|
2022
|
|
|
801
|
2023
|
|
|
801
|
2024 and thereafter
|
|
|
2,335
|
Total
|
|
$
|
5,539
|
8. Accrued Expenses
Accrued expenses at December 31, 2019 and 2018 consist of (in thousands):
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Accrued payroll and compensation related costs
|
|
$
|
2,933
|
|
$
|
2,150
|
|
Accrued accounts payable
|
|
|
7,254
|
|
|
1,790
|
|
Accrued sales and other taxes
|
|
|
905
|
|
|
1,478
|
|
Accrued interest
|
|
|
2,374
|
|
|
1,605
|
|
Accrued other
|
|
|
747
|
|
|
841
|
|
Total
|
|
$
|
14,213
|
|
$
|
7,864
|
|
9. Long-Term Debt
In March 2019, the Company, and its subsidiaries Emerging Power Inc. and Emergent Power Inc., entered into a loan and security agreement, as amended (the Loan Agreement), with Generate Lending, LLC (Generate Capital), providing for a secured Term Loan Facility in the amount of $100.0 million (the Term Loan Facility). The Company borrowed $85.0 million under the Loan Agreement on the date of closing and borrowed an additional $15.0 million in April 2019. A portion of the initial proceeds of the loan was used to pay in full the Company’s long-term debt with NY Green Bank, a Division of the New York State Energy Research & Development Authority, including accrued interest of $17.6 million (the Green Bank Loan), and terminate approximately $50.3 million of certain equipment leases with Generate Plug Power SLB II, LLC and repurchase the associated leased equipment. In connection with this transaction, the Company recognized a loss on extinguishment of debt of approximately $0.5 million. This loss was recorded in interest and other expenses, net in the Company’s consolidated statement of operations. Additionally, $1.7 million was paid to an escrow account related to additional fees due in connection with the Green Bank Loan if the Company does not meet certain New York State employment and fuel cell deployment targets by March 2021. This amount paid to an escrow account was recorded in long-term other assets on the Company’s consolidated balance sheet as of December 31, 2019. Additionally, in November 2019, the Company borrowed an incremental $20.0 million at 12% interest to fund working capital for ongoing deployments and other general corporate purposes. On December 31, 2019 the outstanding balance was $112.7 million.
Advances under the Term Loan Facility bear interest at 12.0% per annum. The Loan Agreement includes covenants, limitations, and events of default customary for similar facilities. The term of the loan is three years, with a maturity date of October 6, 2022. Principal payments will be funded in part by releases of restricted cash, as described in Note 18, Commitments and Contingencies.
Interest and a portion of the principal amount is payable on a quarterly basis and the entire then outstanding principal balance of the Term Loan Facility, together with all accrued and unpaid interest, is due and payable on the maturity date of October 6, 2022. The Company may also be required to pay Generate Capital additional fees of up to $1.5 million if the Company is unable to provide $50.0 million of structured project financing arrangements with Generate Capital prior to December 31, 2021.
All obligations under the Loan Agreement are unconditionally guaranteed by Emerging Power Inc. and Emergent Power Inc. The Term Loan Facility is secured by substantially all of the Company’s and the guarantor subsidiaries’ assets, including, among other assets, all intellectual property, all securities in domestic subsidiaries and 65% of the securities in foreign subsidiaries, subject to certain exceptions and exclusions.
The Loan Agreement contains covenants, including, among others, (i) the provision of annual and quarterly financial statements, management rights and insurance policies and (ii) restrictions on incurring debt, granting liens, making acquisitions, making loans, paying dividends, dissolving, and entering into leases and asset sales and (iii) compliance with a collateral coverage covenant. The Loan Agreement also provides for events of default, including, among others, payment, bankruptcy, covenant, representation and warranty, change of control, judgment and material adverse effect defaults at the discretion of the lender. As of December 31, 2019, the Company is in compliance with all the covenants.
The Loan Agreement provides that if there is an event of default due to the Company’s insolvency or if the Company fails to perform in any material respect the servicing requirements for fuel cell systems under certain customer agreements, which failure would entitle the customer to terminate such customer agreement, replace the Company or withhold the payment of any material amount to the Company under such customer agreement, then Generate Capital has the right to cause Proton Services Inc., a wholly owned subsidiary of the Company, to replace the Company in performing the maintenance services under such customer agreement.
The Term Loan Facility requires the principal balance at the end of each of the following years may not exceed the following (in thousands):
|
|
|
December 31, 2020
|
$
|
86,159
|
December 31, 2021
|
|
59,373
|
10. Convertible Senior Notes
$40 Million Convertible Senior Note
In September 2019, the Company issued a $40.0 million in aggregate principal amount of 7.5% Convertible Senior Note due on January 5, 2023 in exchange for net proceeds of $39.1 million, in a private placement to an accredited investor pursuant to Rule 144A under the Securities Act. There are no required principal payments prior to maturity of the note. Upon maturity of the note, the Company is required to repay 120% of $40.0 million, or $48.0 million. The note bears interest at 7.5% per annum, payable quarterly in arrears on January 5, April 5, July 5 and October 5 of each year beginning on October 5, 2019 and will mature on January 5, 2023 unless earlier converted or repurchased in accordance with its terms. The note is unsecured and does not contain any financial covenants or any restrictions on the payment of dividends, or the issuance or repurchase of common stock by the Company.
The note has an initial conversion rate of 387.5969, which is subject to adjustment in certain events. The initial conversion rate is equivalent to an initial conversion price of approximately $2.58 per share of common stock. The holder of the note may convert at its option at any time until the close of business on the second scheduled trading day immediately prior to the maturity date for shares of the Company’s common stock, subject to certain limitations. In addition, the note will be automatically converted if (1) the daily volume-weighted average price per share of common stock exceeds 175% of the conversion price (as described above) on each of the 20 consecutive VWAP trading days (as defined in the note) beginning after the issue date of the note and (2) certain equity conditions (as defined in the note) are satisfied. Only if both criteria are met is the note automatically converted. Upon either the voluntary or automatic conversion of the note, the Company will deliver shares of common stock based on (1) the then-effective conversion rate and (2) the original principal amount of $40.0 million and not the maturity principal amount of $48.0 million. The note does not allow cash settlement (entirely or partially) upon conversion. As such, the Company uses the if-converted method for calculating any potential dilutive effect of the conversion option on diluted earnings per share.
The Company concluded the conversion features did not require bifurcation. Specifically, while the Company determined that (i) the conversion features were not clearly and closely related to the host contracts, (ii) the note (i.e., hybrid instrument) is not remeasured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (iii) the conversion features, if freestanding, would meet the definition of a derivative, the Company concluded such conversion features meet the equity scope exception, and therefore, the conversion features are not required to be bifurcated from the note.
If the Company undergoes a fundamental change prior to the maturity date, subject to certain limitations, the holder may require the Company to repurchase for cash all or a portion of the note at a cash repurchase price equal to any accrued and unpaid interest on the note (or portion thereof), plus the greater of (1) 115% of the maturity principal amount of $48.0 million (or portion thereof) and (2) 110% of the product of (i) the conversion rate in effect as of the trading day immediately preceding the date of such fundamental change; (ii) the principal amount of the $40.0 million note to be repurchased divided by $1,000; and (iii) the average of the daily volume-weighted average price per share of the Company’s common stock over the five consecutive VWAP trading days immediately before the effective date of such fundamental change.
In addition, with the consent of the holder of the note, subject to certain limitations, the Company may redeem all or any portion of the note, at the Company’s option, at a cash redemption price equal to any accrued and unpaid interest
on the note (or portion thereof), plus the greater of (1) 105% of the maturity principal amount of $48.0 million (or portion thereof); and (2) 115% of the product of (i) the conversion rate in effect as of the trading day immediately preceding the related redemption date; (ii) the principal amount of the $40.0 million note to be redeemed divided by $1,000; and (iii) the arithmetic average of the daily volume-weighted average price per share of common stock over the five consecutive VWAP trading days immediately before the related redemption date.
While the Company concluded the fundamental change redemption option represents an embedded derivative, the Company concluded the value of the embedded derivative to be immaterial given the likelihood of the occurrence of a fundamental change was deemed to be remote. As related to the call option, the Company concluded the call option was clearly and closely related to the host contract, and therefore, did not meet the definition of an embedded derivative.
The Company concluded the total debt discount at issuance of the note equaled approximately $8.0 million. This debt discount was comprised of (1) the discount of $8.0 million attributed to the fact that upon maturity, the Company is required to repay 120% of $40.0 million, or $48.0 million and (2) debt issuance costs of $1.0 million. The debt discount was recorded as debt issuance cost (presented as contra debt in the consolidated balance sheet) and is being amortized to interest expense over the term of the note using the effective interest rate method.
The note consisted of the following at December 31, 2019 (in thousands):
|
|
|
Principal amounts:
|
|
|
Principal at maturity
|
$
|
48,000
|
Unamortized debt discount
|
|
(7,400)
|
Unamortized debt issuance costs
|
|
(969)
|
Net carrying amount
|
$
|
39,631
|
As of December 31, 2019, the remaining life of the note was approximately 37 months.
Based on the closing price of the Company’s common stock of $3.16 on December 31, 2019, the if-converted value of the notes was greater than the principal amount. At December 31, 2019, the estimated fair value of the note was approximately $53.5 million. The Company utilized a Monte Carlo simulation model to estimate the fair value of the convertible debt as of December 31, 2019. The simulation model is designed to capture the potential settlement features of the convertible debt, in conjunction with simulated changes in the Company's stock price over the term of the note, incorporating a volatility assumption of 70%. This is considered a Level 3 fair value measurement.
$100 Million Convertible Senior Notes
In March 2018, the Company issued $100.0 million in aggregate principal amount of 5.5% Convertible Senior Notes due on March 15, 2023 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. There are no required principal payments prior to maturity of the notes.
The total net proceeds from the notes were as follows:
|
|
|
|
Amount
|
|
(in thousands)
|
Principal amount
|
$
|
100,000
|
Less initial purchasers' discount
|
|
(3,250)
|
Less cost of related capped call and common stock forward
|
|
(43,500)
|
Less other issuance costs
|
|
(894)
|
Net proceeds
|
$
|
52,356
|
The notes bear interest at 5.5%, payable semi-annually in cash on March 15 and September 15 of each year. The notes will mature on March 15, 2023, unless earlier converted or repurchased in accordance with their terms. The notes are unsecured and do not contain any financial covenants or any restrictions on the payment of dividends, or the issuance or repurchase of common stock by the Company.
Each $1,000 principal amount of the notes will initially be convertible into 436.3002 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $2.29 per share, subject to adjustment upon the occurrence of specified events. Holders of these notes may convert their notes at their option at any time prior to the close of the last business day immediately preceding September 15, 2022, only under the following circumstances:
|
1)
|
|
during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
|
|
2)
|
|
during the five business day period after any five consecutive trading day period (the measurement period) in which the trading price (as defined in the indenture governing the notes) per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate for the notes on each such trading day;
|
|
3)
|
|
if the Company calls any or all of the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or
|
|
4)
|
|
upon the occurrence of certain specified corporate events, such as a beneficial owner acquiring more than 50% of the total voting power of the Company’s common stock, recapitalization of the Company, dissolution or liquidation of the Company, or the Company’s common stock ceases to be listed on an active market exchange.
|
On or after September 15, 2022, holders may convert all or any portion of their notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions.
Upon conversion of the notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. While the Company plans to settle the principal amount of the notes in cash subject to available funding at time of settlement, we currently use the if-converted method for calculating any potential dilutive effect of the conversion option on diluted net income per share, subject to meeting the criteria for using the treasury stock method in future periods.
The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued or unpaid interest. Holders who convert their notes in connection with certain corporate events that constitute a “make-whole fundamental change” per the indenture governing the notes or in connection with a redemption will be, under certain circumstances, entitled to an increase in the conversion rate. In addition, if the Company undergoes a fundamental change prior to the maturity date, holders may require the Company to repurchase for cash all or a portion of its notes at a repurchase price equal to 100% of the principal amount of the repurchased notes, plus accrued and unpaid interest.
The Company may not redeem the notes prior to March 20, 2021. The Company may redeem for cash all or any portion of the notes, at the Company’s option, on or after March 20, 2021 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the three trading days immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
In accounting for the issuance of the notes, the Company separated the notes into liability and equity components. The initial carrying amount of the liability component of approximately $58.2 million, net of costs incurred, was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component of approximately $37.7 million, net of costs incurred, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the notes. The difference between the principal amount of the notes and the liability component (the debt discount) is amortized to interest expense using the effective interest method over the term of the notes. The effective interest rate is approximately 16.0%. The equity
component of the notes is included in additional paid-in capital in the consolidated balance sheet and is not remeasured as long as it continues to meet the conditions for equity classification.
We incurred transaction costs related to the issuance of the notes of approximately $4.1 million, consisting of initial purchasers' discount of approximately $3.3 million and other issuance costs of $0.9 million. In accounting for the transaction costs, we allocated the total amount incurred to the liability and equity components using the same proportions as the proceeds from the notes. Transaction costs attributable to the liability component were approximately $2.4 million, were recorded as debt issuance cost (presented as contra debt in the consolidated balance sheet) and are being amortized to interest expense over the term of the notes. The transaction costs attributable to the equity component were approximately $1.7 million and were netted with the equity component in stockholders’ equity.
The notes consisted of the following at December 31, 2019 (in thousands):
|
|
|
Principal amounts:
|
|
|
Principal
|
$
|
100,000
|
Unamortized debt discount (1)
|
|
(27,818)
|
Unamortized debt issuance costs (1)
|
|
(1,567)
|
Net carrying amount
|
$
|
70,615
|
Carrying amount of the equity component (2)
|
$
|
37,702
|
|
1)
|
|
Included in the consolidated balance sheet within the $100.0 million Convertible Senior Notes, net and amortized over the remaining life of the notes using the effective interest rate method.
|
|
2)
|
|
Included in the consolidated balance sheet within additional paid-in capital, net of $1.7 million in equity issuance costs and associated income tax benefit of $9.2 million.
|
As of December 31, 2019, the remaining life of the notes was approximately 39 months.
Based on the closing price of the Company’s common stock of $3.16 on December 31, 2019, the if-converted value of the notes was greater than the principal amount. At December 31, 2019, the estimated fair value of the notes was approximately $135.3 million. The Company utilized data from market activity for this instrument near December 31, 2019 to determine the fair value of this instrument. This is considered a Level 2 fair value measurement.
Capped Call
In conjunction with the issuance of the $100 million Convertible Senior Notes, the Company entered into capped call options, or Capped Call, on the Company’s common stock with certain counterparties at a price of $16.0 million. The net cost incurred in connection with the Capped Call has been recorded as a reduction to additional paid-in capital in the consolidated balance sheet.
The Capped Call is generally expected to reduce or offset the potential dilution to the Company’s common stock upon any conversion of the $100 million Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the Capped Call transactions will initially be $3.82 per share, which represents a premium of 100% over the last reported sale price of the Company’s common stock of $1.91 per share on the date of the transaction and is subject to certain adjustments under the terms of the Capped Call. The Capped Call becomes exercisable if the conversion option is exercised.
By entering into the Capped Call, the Company expects to reduce the potential dilution to its common stock (or, in the event the conversion is settled in cash, to provide a source of cash to settle a portion of its cash payment obligation) in the event that at the time of conversion its stock price exceeds the conversion price under the $100 million Convertible Senior Notes.
Common Stock Forward
In connection with the sale of the $100 million Convertible Senior Notes, the Company also entered into a forward stock purchase transaction (Common Stock Forward), pursuant to which the Company agreed to purchase 14,397,906 shares of its common stock for settlement on or about March 15, 2023. The number of shares of common stock that the Company will ultimately repurchase under the Common Stock Forward is subject to customary anti-dilution adjustments. The Common Stock Forward is subject to early settlement or settlement with alternative consideration in the event of certain corporate transactions.
The net cost incurred in connection with the Common Stock Forward of $27.5 million has been recorded as an increase in treasury stock in the consolidated balance sheet. The related shares were accounted for as a repurchase of common stock.
The fair values of the Capped Call and Common Stock Forward are not remeasured each reporting period.
9.
11. Stockholders’ Equity
Preferred Stock
The Company has authorized 5.0 million shares of preferred stock, par value $0.01 per share. The Company’s certificate of incorporation provides that shares of preferred stock may be issued from time to time in one or more series. The Company’s Board of Directors is authorized to fix the voting rights, if any, designations, powers, preferences, qualifications, limitations and restrictions thereof, applicable to the shares of each series.
The Company has authorized Series A Junior Participating Cumulative Preferred Stock, par value $.01 per share. As of December 31, 2019 and 2018, there were no shares of Series A Junior Participating Cumulative Preferred Stock issued and outstanding. See Note 12, Redeemable Convertible Preferred Stock, for a description of the Company’s issued and outstanding Series C and E redeemable preferred stock.
Common Stock and Warrants
The Company has one class of common stock, par value $.01 per share. Each share of the Company’s common stock is entitled to one vote on all matters submitted to stockholders.
In December 2019, the Company sold 46 million shares of common stock at a public price of $2.75 per share for net proceeds of approximately $120.4 million.
In September 2019, the Company issued a $40.0 million in aggregate principal amount of 7.5% convertible senior note due in 2023 ($40 million Convertible Senior Note). The Company’s total obligation, net of interest accretion, due to the holder is $48.0 million. The total net proceeds from this offering, after deducting costs of the issuance were $39.1 million. As of December 31, 2019, the outstanding balance of the note, net of related discount and issuance costs was $39.6 million. See Note 10, Convertible Senior Notes, for more details.
In March 2019, the Company issued and sold in a registered direct offering an aggregate of 10 million shares of the Company’s common stock at a purchase price of $2.35 per share. The net proceeds to the Company were approximately $23.5 million. There were 303,378,515 and 219,157,998 shares of common stock outstanding as of December 31, 2019 and 2018, respectively.
On December 22, 2016, the Company issued warrants to purchase 10,501,500 shares of common stock in connection with offerings of common stock and Series D Redeemable Preferred Stock at an exercise price of $1.50 per share. On April 12, 2017, the Company and Tech Opportunities LLC (Tech Opps) entered into an agreement, pursuant to which Tech Opps exercised in full its warrants to purchase an aggregate of 10,501,500 shares of common stock. The net proceeds received by the Company pursuant to the exercise of the existing warrants was $15.1 million and the Company issued to Tech Opps warrants to acquire up to 5,250,750 shares of common stock at an exercise price of $2.69 per share. All of these warrants were exercised on October 15, 2019.
During 2017, additional warrants to purchase up to 110,573,392 shares of common stock were issued in connection with transaction agreements with Amazon and Walmart, as discussed in Note 13, Warrant Transaction Agreements. At both December 31, 2019 and 2018, in connection with these agreements, warrants to acquire 26,188,434 shares of common stock, have vested and are therefore exercisable. These warrants are measured at fair value and are classified as equity instruments on the consolidated balance sheet.
At Market Issuance Sales Agreement
On April 3, 2017, the Company entered into an At Market Issuance Sales Agreement (the Sales Agreement) with FBR Capital Markets & Co. (now B. Riley FBR, Inc.), as sales agent (FBR), pursuant to which the Company may offer and sell, from time to time through FBR, shares of common stock par value $0.01 per share having an aggregate offering price of up to $75.0 million. Under the Sales Agreement, in no event shall the Company issue or sell through FBR such a number of shares that exceeds the number of shares or dollar amount of common stock registered. During the year ended December 31, 2019, the Company raised gross proceeds of $15.3 million. As of October 29, 2019, the Company had raised a total of $46.8 million during the term of the Sales Agreement. During the fourth quarter of 2019, the Sale Agreement expired.
12. Redeemable Convertible Preferred Stock
Series E Preferred Stock
In November 2018, the Company issued an aggregate of 35,000 shares of the Company’s Series E Preferred Stock in a private placement to certain accredited investors in reliance on Section 4(a)(2) of the Securities Act. The Company received net proceeds of approximately $30.9 million, after deducting placement agent fees and expenses payable by the Company. The Company is required to redeem the Series E Preferred Stock in thirteen monthly installments in the amount of $2.7 million each from May 2019 through May 2020. The Company had 500 and 35,000 shares of Series E Preferred Stock outstanding at December 31, 2019 and 2018, respectively. These shares were fully redeemed in January 2020. During 2019, 4,038 shares were redeemed for cash of $4.0 million, and 30,462 shares were converted to 13.8 million shares of common stock.
Each share of Series E Preferred Stock was issued with an initial stated value of $1,000 per share. The Company is required to elect, on a monthly basis, whether it will redeem or convert the installment. Should the Company elect to redeem, the shares are valued at the stated value. Should the Company elect to convert, the holder of the shares will receive common stock, with a conversion price discounted by 15% from the then current market value. The holders of the shares may elect to convert all or any whole amount of shares, at any time at a conversion price of $2.31 per share. Conversion prices are discounted upon a change in control, certain triggering events, or failure to make a redemption payment.
Except for our Series C Preferred Stock, which shall rank senior to the Series E Preferred Stock as to dividends, distributions and payments upon liquidation, dissolution and winding up, all shares of the Company’s capital stock, including common stock, rank junior in rank to the Series E Preferred Stock with respect to dividends, distributions and payments upon liquidation, dissolution and winding up.
Holders of the Series E Preferred Stock are not entitled to receive dividends except in connection with certain purchase rights and other corporate events, as described in the certificate of designation, or in connection with certain distributions of assets, as described in the certificate of designation, or as, when and if declared by the Company’s Board of Directors acting in its sole and absolute discretion. Holders of the Series E Preferred Stock have no voting rights, except on matters required by law or under the certificate of designation to be submitted to a class vote of the Series E Preferred Stock.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or other deemed liquidation event, the holders of the Series E Preferred Stock are entitled to receive, after any amount that is required to be paid to the Series C Preferred Stock and before any amount is paid to the holders of any of capital stock ranking junior to the Series E Preferred Stock, an amount per share equal to the greater of (i) 125% of the sum of the stated value plus any declared and unpaid dividends and late charges as provided in the certificate of designation, on the date of
such payment and (ii) the amount per share such holder would receive if such holder converted such Series E Preferred Stock into common stock immediately prior to the date of such payment.
Series C Preferred Stock
The Company had 2,620 shares of Series C Preferred Stock outstanding at December 31, 2019 and 2018. The holder of the Series C Preferred Stock is entitled to receive dividends at a rate of 8.0% per annum, based on the original issue price per share of $248.794, payable in equal quarterly installments in cash or in shares of common stock, at the Company’s option. As of December 31, 2019 and December 31, 2018, respectively, all dividends have been paid in shares of common stock. Each share of Series C Preferred Stock is convertible into shares of common stock with the number of shares of common stock issuable upon conversion determined by dividing the original issue price per share of $248.794 by the conversion price in effect at the time the shares are converted, provided that such conversion price shall not be less than $0.1554 per share. The conversion price of the Series C Preferred Stock as of December 31, 2019 and December 31, 2018 was $0.2343. The shares of Series C Preferred Stock vote together with the common stock on an as-converted basis on all matters.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, or other deemed liquidation event, the holder of the Series C Preferred Stock will be entitled to be paid an amount per share equal to the greater of (i) the original issue price, plus any accrued but unpaid dividends or (ii) the amount per share that would have been payable had all shares of the Series C Preferred Stock been converted to shares of common stock immediately prior to such liquidation event. The Series C Preferred Stock is redeemable at the election of the holder of the Series C Stock or the Company. If the redemption is at the election of the holders of the Series C Preferred Stock, the redemption price will be the original issue price plus any accrued and unpaid dividends. If the redemption is at the election of the Company, the redemption price will be a per share price equal to the greater of (i) the original issue price per share plus any accrued and unpaid dividends and (ii) the fair market value of a single share of Series C Preferred Stock.
13. Warrant Transaction Agreements
Amazon Transaction Agreement
On April 4, 2017, the Company and Amazon entered into a Transaction Agreement (the Amazon Transaction Agreement), pursuant to which the Company agreed to issue to Amazon.com NV Investment Holdings LLC, a wholly owned subsidiary of Amazon, warrants to acquire up to 55,286,696 shares of the Company’s common stock (the Amazon Warrant Shares), subject to certain vesting events described below. The Company and Amazon entered into the Amazon Transaction Agreement in connection with existing commercial agreements between the Company and Amazon with respect to the deployment of the Company’s GenKey fuel cell technology at Amazon distribution centers. The existing commercial agreements contemplate, but do not guarantee, future purchase orders for the Company’s fuel cell technology. The vesting of the Amazon Warrant Shares is linked to payments made by Amazon or its affiliates (directly or indirectly through third parties) pursuant to the existing commercial agreements.
The majority of the Amazon Warrant Shares will vest based on Amazon’s payment of up to $600.0 million to the Company in connection with Amazon’s purchase of goods and services from the Company. The first tranche of 5,819,652 Amazon Warrant Shares vested upon the execution of the Amazon Transaction Agreement. Accordingly, $6.7 million, the fair value of the first tranche of Amazon Warrant Shares, was recognized as selling, general and administrative expense on the consolidated statements of operations during 2017. All future provision for common stock warrants will be recorded in revenue. The second tranche of 29,098,260 Amazon Warrant Shares will vest in four installments of 7,274,565 Amazon Warrant Shares each time Amazon or its affiliates, directly or indirectly through third parties, make an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $200.0 million in the aggregate. The exercise price for the first and second tranches of Amazon Warrant Shares will be $1.1893 per share. After Amazon has made payments to the Company totaling $200.0 million, the third tranche of 20,368,784 Amazon Warrant Shares will vest in eight installments of 2,546,098 Amazon Warrant Shares each time Amazon or its affiliates, directly or indirectly through third parties, make an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $400.0 million in the aggregate. The exercise price of the third tranche of Amazon Warrant Shares will be an amount per share equal to ninety percent (90%) of the 30-day volume weighted average share price of the common stock
as of the final vesting date of the second tranche of Amazon Warrant Shares. The Amazon Warrant Shares are exercisable through April 4, 2027.
The Amazon Warrant Shares provide for net share settlement that, if elected by the holders, will reduce the number of shares issued upon exercise to reflect net settlement of the exercise price. The Amazon Warrant Shares provide for certain adjustments that may be made to the exercise price and the number of shares of common stock issuable upon exercise due to customary anti-dilution provisions based on future events. These warrants are classified as equity instruments.
As of January 1, 2019, the Company’s adoption of ASU 2019-08 requires these share-based payment awards granted to a customer to be measured and classified by applying the guidance of ASC Topic 718.
As a result, the amount recorded as a reduction in revenue is measured based on the grant-date fair value of the Amazon Warrant Shares, as opposed to the vesting date. The transition guidance of ASU 2019-08 specifies that equity instruments that are unvested and subject to its guidance as of the adoption date are to be measured at the adoption date fair value. See Equity Instruments in Note 2, Summary of Significant Accounting Policies for further information regarding the impact of adoption of ASU 2019-08.
At both December 31, 2019 and 2018, 20,368,782 of the Amazon Warrant Shares had vested. The amount of provision for common stock warrants recorded as a reduction of revenue for the Amazon Warrant during the years ended December 31, 2019 and 2018 was $4.1 million and $9.8 million, respectively.
Walmart Transaction Agreement
On July 20, 2017, the Company and Walmart entered into a Transaction Agreement (the Walmart Transaction Agreement), pursuant to which the Company agreed to issue to Walmart a warrant to acquire up to 55,286,696 shares of the Company’s common stock, subject to certain vesting events (the Walmart Warrant Shares). The Company and Walmart entered into the Walmart Transaction Agreement in connection with existing commercial agreements between the Company and Walmart with respect to the deployment of the Company’s GenKey fuel cell technology across various Walmart distribution centers. The existing commercial agreements contemplate, but do not guarantee, future purchase orders for the Company’s fuel cell technology. The vesting of the warrant shares is linked to payments made by Walmart or its affiliates (directly or indirectly through third parties) pursuant to transactions entered into after January 1, 2017 under existing commercial agreements.
The majority of the Walmart Warrant Shares will vest based on Walmart’s payment of up to $600.0 million to the Company in connection with Walmart’s purchase of goods and services from the Company. The first tranche of 5,819,652 Walmart Warrant Shares vested upon the execution of the Walmart Transaction Agreement. Accordingly, $10.9 million, the fair value of the first tranche of Walmart Warrant Shares, was recorded as a provision for common stock warrants and presented as a reduction to revenue on the consolidated statements of operations during 2017. All future provision for common stock warrants will be recorded in revenue. The second tranche of 29,098,260 Walmart Warrant Shares will vest in four installments of 7,274,565 Walmart Warrant Shares each time Walmart or its affiliates, directly or indirectly through third parties, make an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $200.0 million in the aggregate. The exercise price for the first and second tranches of Walmart Warrant Shares will be $2.1231 per share. After Walmart has made payments to the Company totaling $200.0 million, the third tranche of 20,368,784 Walmart Warrant Shares will vest in eight installments of 2,546,098 Walmart Warrant Shares each time Walmart or its affiliates, directly or indirectly through third parties, make an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $400.0 million in the aggregate. The exercise price of the third tranche of Walmart Warrant Shares will be an amount per share equal to ninety percent (90%) of the 30-day volume weighted average share price of the common stock as of the final vesting date of the second tranche of Walmart Warrant Shares, provided that, with limited exceptions, the exercise price for the third tranche will be no lower than $1.1893. The Walmart Warrant Shares are exercisable through July 20, 2027.
The Walmart Warrant Shares provide for net share settlement that, if elected by the holders, will reduce the number of shares issued upon exercise to reflect net settlement of the exercise price. The Walmart Warrant Shares provide for certain adjustments that may be made to the exercise price and the number of shares of common stock issuable upon
exercise due to customary anti-dilution provisions based on future events. These warrants are classified as equity instruments.
As of January 1, 2019, the Company’s adoption of ASU 2019-08 requires these share-based payment awards granted to a customer to be measured and classified by applying the guidance of ASC Topic 718.
As a result, the amount recorded as a reduction in revenue is measured based on the grant-date fair value of the Walmart Warrant Shares, as opposed to the vesting date. The transition guidance of ASU 2019-08 specifies that equity instruments that are unvested and subject to its guidance as of the adoption date are to be measured at the adoption date fair value. See Equity Instruments in Note 2, Summary of Significant Accounting Policies for further information regarding the impact of adoption of ASU 2019-08.
At both December 31, 2019 and 2018, 5,819,652 of the Walmart Warrant Shares had vested. The amount of provision for common stock warrants recorded as a reduction of revenue for the Walmart Warrant during the years ended December 31, 2019 and 2018 was $2.4 million and $0.4 million, respectively.
14. Revenue
Disaggregation of revenue
The following table provides information about disaggregation of revenue (in thousands):
|
|
|
|
|
|
|
|
|
|
Major products/services lines
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2019
|
|
2018
|
|
2017
|
Sales of fuel cell systems
|
|
$
|
130,721
|
|
$
|
75,146
|
|
$
|
49,206
|
Sale of hydrogen installations and other infrastructure
|
|
|
19,163
|
|
|
32,146
|
|
|
13,425
|
Services performed on fuel cell systems and related infrastructure
|
|
|
25,217
|
|
|
22,002
|
|
|
16,202
|
Power Purchase Agreements
|
|
|
25,853
|
|
|
22,869
|
|
|
12,869
|
Fuel delivered to customers
|
|
|
29,099
|
|
|
22,469
|
|
|
8,167
|
Other
|
|
|
186
|
|
|
—
|
|
|
284
|
Net revenue
|
|
$
|
230,239
|
|
$
|
174,632
|
|
$
|
100,153
|
Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers (in thousands):
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Accounts receivable
|
|
$
|
25,448
|
|
$
|
37,347
|
Contract assets
|
|
|
13,251
|
|
|
3,328
|
Contract liabilities
|
|
|
43,480
|
|
|
40,476
|
Contract assets relate to contracts for which revenue is recognized on a straight-line basis, however billings escalate over the life of a contract. Contract assets also include amounts recognized as revenue in advance of billings to customers, which are dependent upon the satisfaction of another performance obligation. These amounts are included in prepaid expenses and other assets on the consolidated balance sheet.
The contract liabilities relate to the advance consideration received from customers for services that will be recognized over time (primarily fuel cell and related infrastructure services). These amounts are included within deferred
revenue on the consolidated balance sheet. Contract liabilities also include advance consideration received from customers prior to delivery of products. These amounts are included in other current liabilities on the consolidated balance sheet.
Significant changes in the contract assets and the contract liabilities balances during the period are as follows (in thousands):
|
|
|
|
|
|
|
|
Contract assets
|
|
Year ended
|
|
|
December 31, 2019
|
Transferred to receivables from contract assets recognized at the beginning of the period
|
|
$
|
(1,252)
|
Revenue recognized and not billed as of the end of the period
|
|
|
11,175
|
Net change in contract assets
|
|
$
|
9,923
|
|
|
|
|
Contract liabilities
|
|
Year ended
|
|
|
December 31, 2019
|
Revenue recognized that was included in the contract liability balance as of the beginning of the period
|
|
$
|
(10,172)
|
Increases due to cash received, net of amounts recognized as revenue during the period
|
|
|
13,175
|
Net change in contract liabilities
|
|
$
|
3,003
|
Estimated future revenue
The following table includes estimated revenue expected to be recognized in the future (sales of fuel cell systems and hydrogen installations are expected to be recognized as revenue within one year; sales of services and PPAs are expected to be recognized as revenue over five to seven years) related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period, excluding provision for common stock warrants as it is not readily estimable as it depends on the valuation of the common stock warrants when revenue is recognized (in thousands):
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
2019
|
|
2018
|
Sales of fuel cell systems
|
|
$
|
73,491
|
|
$
|
17,318
|
Sale of hydrogen installations and other infrastructure
|
|
|
72,862
|
|
|
9,141
|
Services performed on fuel cell systems and related infrastructure
|
|
|
87,020
|
|
|
73,381
|
Power Purchase Agreements
|
|
|
133,475
|
|
|
111,533
|
Other rental income
|
|
|
4,993
|
|
|
6,633
|
Total estimated future revenue
|
|
$
|
371,841
|
|
$
|
218,006
|
Contract costs
Contract costs consists of capitalized commission fees and other expenses related to obtaining or fulfilling a contract.
Capitalized contract costs at December 31, 2019 and 2018 were $0.5 million and $0.2, respectively. Expense related to the amortization of capitalized contract costs was not significant for the year ended December 31, 2019.
15. Employee Benefit Plans
2011 Stock Option and Incentive Plan
On May 12, 2011, the Company’s stockholders approved the 2011 Stock Option and Incentive Plan (the 2011 Plan). The 2011 Plan provided for the issuance of up to a maximum number of shares of common stock equal to the sum of (i) 1,000,000, plus (ii) the number of shares of common stock underlying any grants pursuant to the 2011 Plan or the Plug Power Inc. 1999 Stock Option and Incentive Plan that are forfeited, canceled, repurchased or are terminated (other
than by exercise). The shares may be issued pursuant to stock options, stock appreciation rights, restricted stock awards and certain other equity-based awards granted to employees, directors and consultants of the Company. No grants may be made under the 2011 Plan after May 12, 2021. Through various amendments to the 2011 Plan approved by the Company’s stockholders, the number of shares of the Company’s common stock authorized for issuance under the 2011 Plan has been increased to 42.4 million. For the years ended December 31, 2019, 2018, and 2017, the Company recorded expense of approximately $8.8 million, $7.4 million, and $9.0 million, respectively, in connection with the Third Amended and Restated 2011 Stock Option and Incentive Plan.
At December 31, 2019, there were outstanding options to purchase approximately 23.0 million shares of Common Stock and 8.4 million shares available for future awards under the 2011 Plan, including adjustments for other types of share-based awards. Options for employees issued under this plan generally vest in equal annual installments over three years and expire ten years after issuance. Options granted to members of the Board generally vest one year after issuance. To date, options granted under the 2011 Plan have vesting provisions ranging from one to three years in duration and expire ten years after issuance.
Compensation cost associated with employee stock options represented approximately $6.0 million, $6.4 million, and $8.6 million of the total share-based payment expense recorded for the years ended December 31, 2019, 2018, and 2017, respectively. The Company estimates the fair value of stock options using a Black-Scholes valuation model, and the resulting fair value is recorded as compensation cost on a straight-line basis over the option vesting period. Key inputs and assumptions used to estimate the fair value of stock options include the grant price of the award, the expected option term, volatility of the Company’s stock, an appropriate risk-free rate, and the Company’s dividend yield. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the Company. The assumptions made for purposes of estimating fair value under the Black-Scholes model for the 3,221,892, 2,679,667and 5,485,863 options granted during the years ended December 31, 2019, 2018 and 2017, respectively, were as follows:
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Expected term of options (years)
|
|
6
|
|
6
|
|
6
|
Risk free interest rate
|
|
1.52% - 2.53%
|
|
2.81% - 2.88%
|
|
1.89% - 2.16%
|
Volatility
|
|
69.32% - 87.94%
|
|
98.31% - 98.89%
|
|
99.24% - 102.16%
|
There was no expected dividend yield for the employee stock options granted.
The Company’s estimate of an expected option term was calculated in accordance with the simplified method for calculating the expected term assumption. The estimated stock price volatility was derived from the Company’s actual historic stock prices over the past six years, which represents the Company’s best estimate of expected volatility.
A summary of stock option activity for the year December 31, 2019 is as follows (in thousands except share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
Shares
|
|
Price
|
|
Terms
|
|
Value
|
Options outstanding at December 31, 2018
|
|
21,957,150
|
|
$
|
2.51
|
|
7.1
|
|
$
|
1,432
|
Granted
|
|
3,221,892
|
|
|
2.40
|
|
—
|
|
|
—
|
Exercised
|
|
(1,151,307)
|
|
|
1.56
|
|
—
|
|
|
—
|
Forfeited
|
|
(934,195)
|
|
|
3.50
|
|
—
|
|
|
—
|
Expired
|
|
(79,950)
|
|
|
9.43
|
|
—
|
|
|
—
|
Options outstanding at December 31, 2019
|
|
23,013,590
|
|
$
|
2.48
|
|
6.6
|
|
$
|
22,277
|
Options exercisable at December 31, 2019
|
|
16,608,362
|
|
|
2.57
|
|
5.8
|
|
|
16,285
|
Options unvested at December 31, 2019
|
|
6,405,228
|
|
$
|
2.22
|
|
8.9
|
|
$
|
5,992
|
The weighted average grant-date fair value of options granted during the years ended December 31, 2019, 2018 and 2017 was $1.67, $1.55, and $1.67, respectively. As of December 31, 2019, there was approximately $8.1 million of
unrecognized compensation cost related to stock option awards to be recognized over the next three years with all of this expected to vest. The total fair value of stock options that vested during the years ended December 31, 2019 and 2018 was approximately $6.1 million and $7.1 million, respectively.
Restricted stock awards generally vest in equal installments over a period of one to three years. Restricted stock awards are valued based on the closing price of the Company’s common stock on the date of grant, and compensation cost is recorded on a straight-line basis over the share vesting period. The Company recorded expense associated with its restricted stock awards of approximately $2.8 million, $966 thousand, and $335 thousand, for the years ended December 31, 2019, 2018 and 2017, respectively. Additionally, for the years ended December 31, 2019, 2018 and 2017, there was $8.4 million, $3.9 million, and $208 thousand, respectively, of unrecognized compensation cost related to restricted stock awards to be recognized over the next three years.
A summary of restricted stock activity for the year ended December 31, 2019 is as follows (in thousands except share amounts):
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
Value
|
|
Unvested restricted stock at December 31, 2018
|
|
2,347,347
|
|
$
|
—
|
|
Granted
|
|
3,201,892
|
|
|
—
|
|
Vested
|
|
(920,679)
|
|
|
—
|
|
Forfeited
|
|
(20,000)
|
|
|
|
|
Unvested restricted stock at December 31, 2019
|
|
4,608,560
|
|
$
|
14,563
|
|
401(k) Savings & Retirement Plan
The Company offers a 401(k) Savings & Retirement Plan to eligible employees meeting certain age and service requirements. This plan permits participants to contribute 100% of their salary, up to the maximum allowable by the Internal Revenue Service regulations. Participants are immediately vested in their voluntary contributions plus actual earnings or less actual losses thereon. Participants are vested in the Company’s matching contribution based on years of service completed. Participants are fully vested upon completion of three years of service. During 2018, the Company began funding its matching contribution in a combination of cash and common stock. Accordingly, the Company has issued 841,539 shares and 633,827 shares of common stock to the Plug Power Inc. 401(k) Savings & Retirement Plan during 2019 and 2018, respectively.
The Company’s expense for this plan was approximately $1.9 million, $1.8 million, and $1.6 million for years ended December 31, 2019, 2018 and 2017, respectively.
Non-Employee Director Compensation
Each non-employee director is paid an annual retainer for their services, in the form of either cash or stock compensation. The Company granted 114,285, 107,389, and 148,077 shares of stock to non-employee directors as compensation for the years ended December 31, 2019, 2018, and 2017, respectively. All common stock issued is fully vested at the time of issuance and is valued at fair value on the date of issuance. The Company’s share-based compensation expense for this plan was approximately $243 thousand, $261 thousand, and $276 thousand for the years ended December 31, 2019, 2018, and 2017 respectively.
16. Fair Value Measurements
As of December 31, 2019, the Company had no financial instruments measured at fair value on a recurring basis. The following table summarizes the financial instruments measured at fair value on a recurring basis in the consolidated balance sheets (in thousands) at December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices
|
|
Significant
|
|
Significant
|
|
|
|
|
|
|
in Active
|
|
Other
|
|
Other
|
|
|
|
|
|
|
Markets for
|
|
Observable
|
|
Unobservable
|
|
|
|
|
|
|
Identical Items
|
|
Inputs
|
|
Inputs
|
|
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Common stock warrant liability
|
|
$
|
105
|
|
$
|
—
|
|
$
|
—
|
|
$
|
105
|
|
Derivative Liabilities
The Company’s common stock warrant liability represents the only asset or liability classified financial instrument measured at fair value on a recurring basis in the consolidated balance sheets. The fair value measurement is determined by using Level 3 inputs due to the lack of active and observable markets that can be used to price identical assets. Level 3 inputs are unobservable inputs and should be used to determine fair value only when observable inputs are not available. Unobservable inputs should be developed based on the best information available in the circumstances, which might include internally generated data and assumptions being used to price the asset or liability.
Fair value of the common stock warrant liability is based on the Black-Scholes pricing model, which is based, in part, upon unobservable inputs for which there is little or no market data, requiring the Company to develop its own assumptions.
The Company used the following assumptions for its liability-classified common stock warrants for the year ended December 31, 2018:
|
|
|
|
Risk-free interest rate
|
|
|
1.64% - 2.66%
|
Volatility
|
|
|
18.40% - 81.69%
|
Expected average term
|
|
|
0.01 - 1.53
|
There was no expected dividend yield for the warrants granted.
If factors change and different assumptions are used, the warrant liability and the change in estimated fair value could be materially different. Generally, as the market price of our common stock increases, the fair value of the warrants increases, and conversely, as the market price of our common stock decreases, the fair value of the warrants decrease. Also, a significant increase in the volatility of the market price of the Company’s common stock, in isolation, would result in significantly higher fair value measurements; and a significant decrease in volatility would result in significantly lower fair value measurements.
The following table shows the activity in the common stock warrant liability (in thousands):
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Beginning of period
|
$
|
105
|
|
$
|
4,391
|
|
Change in fair value of common stock warrants
|
|
(79)
|
|
|
(4,286)
|
|
Issuance of common stock warrants
|
|
—
|
|
|
—
|
|
Exercise of common stock warrants
|
|
(26)
|
|
|
—
|
|
End of period
|
$
|
—
|
|
$
|
105
|
|
Equity Instruments
The fair value measurement of the Company’s equity-classified common stock warrants further described in Note 13, Warrant Transaction Agreements, is determined by using Level 3 inputs due to the lack of active and observable markets that can be used to price identical instruments.
The Company adopted ASU 2019-08, with retrospective adoption as of January 1, 2019. As a result, the fair value is measured based on the grant-date of warrants. Prior to that, the fair value of the warrants was measured as of the vesting date using the Monte Carlo pricing model, which is based, in part, upon unobservable inputs for which there is little or no market data, requiring the Company to develop its own assumptions.
The Company used the following assumptions for its equity-classified common stock warrants for the years ended December 31, 2019 and 2018:
|
|
|
|
|
|
|
Year ended
|
|
|
January 1, 2019
|
|
December 31, 2018
|
Risk-free interest rate
|
|
2.60%-2.63%
|
|
2.60% - 3.02%
|
Volatility
|
|
0.95
|
|
75.00% - 85.00%
|
Expected average term
|
|
8.26-8.55
|
|
8.26 - 9.30
|
The Monte Carlo pricing models used in the determination of the fair value of the equity-classified warrants also incorporate assumptions involving future revenues associated with Amazon and Walmart, and related timing.
The following table represents the fair value per warrant on the execution date of the transaction agreements and as of December 31, 2019 and 2018:
|
|
|
|
|
|
|
|
Amazon Warrant Shares
|
|
|
Walmart Warrant Shares
|
Issuance date - first tranche
|
$
|
1.15
|
|
$
|
1.88
|
As of vesting date - second tranche, first installment
|
|
2.16
|
|
|
—
|
As of vesting date - second tranche, second installment
|
|
1.54
|
|
|
—
|
As of December 2019 - second tranche
|
|
1.05
|
|
|
1.00
|
As of December 2018 - second tranche
|
|
0.98
|
|
|
0.92
|
17. Income Taxes
The components of loss before income taxes and the income tax benefit for the years ended December 31, 2019, 2018 and 2017, by jurisdiction, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
Loss before income taxes
|
|
$
|
(83,910)
|
|
$
|
(1,555)
|
|
$
|
(85,465)
|
|
$
|
(85,925)
|
|
$
|
(1,407)
|
|
$
|
(87,332)
|
|
$
|
(125,871)
|
|
$
|
(1,209)
|
|
$
|
(127,080)
|
|
Income tax benefit
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,217
|
|
|
—
|
|
|
9,217
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net loss attributable to the Company
|
|
$
|
(83,910)
|
|
$
|
(1,555)
|
|
$
|
(85,465)
|
|
$
|
(76,708)
|
|
$
|
(1,407)
|
|
$
|
(78,115)
|
|
$
|
(125,871)
|
|
$
|
(1,209)
|
|
$
|
(127,080)
|
|
The significant components of deferred income tax expense (benefit) for the years ended December 31, 2019, 2018 and 2017, by jurisdiction, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
Deferred tax (benefit) expense
|
|
$
|
(8,910)
|
|
$
|
(426)
|
|
$
|
(9,336)
|
|
$
|
(10,182)
|
|
$
|
933
|
|
$
|
(9,249)
|
|
$
|
7,675
|
|
$
|
(531)
|
|
$
|
7,144
|
|
Net operating loss carryforward generated
|
|
|
(7,254)
|
|
|
(270)
|
|
|
(7,524)
|
|
|
(10,038)
|
|
|
(665)
|
|
|
(10,703)
|
|
|
(19,117)
|
|
|
(17)
|
|
|
(19,134)
|
|
Rate change impact on net operating loss carryforwards
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,609
|
|
|
—
|
|
|
23,609
|
|
Valuation allowance increase (decrease)
|
|
|
16,164
|
|
|
696
|
|
|
16,860
|
|
|
11,003
|
|
|
(268)
|
|
|
10,735
|
|
|
(12,167)
|
|
|
548
|
|
|
(11,619)
|
|
Provision for income taxes
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(9,217)
|
|
$
|
—
|
|
$
|
(9,217)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
The Company’s effective income tax rate differed from the federal statutory rate as follows:
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
U.S. Federal statutory tax rate
|
|
(21.0)
|
%
|
(21.0)
|
%
|
(35.0)
|
%
|
Deferred state taxes
|
|
1.2
|
%
|
(1.9)
|
%
|
(1.4)
|
%
|
Common stock warrant liability
|
|
—
|
%
|
(1.0)
|
%
|
4.2
|
%
|
Provision to return and deferred tax asset adjustments
|
|
—
|
%
|
—
|
%
|
5.9
|
%
|
Change in U.S. Federal statutory tax rate
|
|
—
|
%
|
—
|
%
|
33.5
|
%
|
Other, net
|
|
(0.5)
|
%
|
0.4
|
%
|
2.0
|
%
|
Change in valuation allowance
|
|
20.3
|
%
|
12.9
|
%
|
(9.2)
|
%
|
|
|
0.0
|
%
|
(10.6)
|
%
|
0.0
|
%
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of certain assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2019 and 2018 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Intangible assets
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,197
|
|
$
|
1,146
|
|
$
|
1,197
|
|
$
|
1,146
|
Deferred revenue
|
|
|
7,898
|
|
|
9,304
|
|
|
129
|
|
|
—
|
|
|
8,027
|
|
|
9,304
|
Interest expense
|
|
|
11,299
|
|
|
5,239
|
|
|
—
|
|
|
—
|
|
|
11,299
|
|
|
5,239
|
Other reserves and accruals
|
|
|
699
|
|
|
592
|
|
|
—
|
|
|
—
|
|
|
699
|
|
|
592
|
Tax credit carryforwards
|
|
|
2,590
|
|
|
1,865
|
|
|
1,253
|
|
|
1,200
|
|
|
3,843
|
|
|
3,065
|
Amortization of stock-based compensation
|
|
|
9,081
|
|
|
8,442
|
|
|
—
|
|
|
—
|
|
|
9,081
|
|
|
8,442
|
Non-compensatory warrants
|
|
|
4,322
|
|
|
3,597
|
|
|
—
|
|
|
—
|
|
|
4,322
|
|
|
3,597
|
Capitalized research & development expenditures
|
|
|
22,601
|
|
|
19,116
|
|
|
4,483
|
|
|
4,294
|
|
|
27,084
|
|
|
23,410
|
Right of use liability (operating leases)
|
|
|
39,237
|
|
|
16,715
|
|
|
—
|
|
|
—
|
|
|
39,237
|
|
|
16,715
|
Net operating loss carryforwards
|
|
|
54,947
|
|
|
49,058
|
|
|
9,576
|
|
|
9,306
|
|
|
64,523
|
|
|
58,364
|
Total deferred tax asset
|
|
|
152,674
|
|
|
113,928
|
|
|
16,638
|
|
|
15,946
|
|
|
169,312
|
|
|
129,874
|
Valuation allowance
|
|
|
(100,731)
|
|
|
(84,567)
|
|
|
(16,622)
|
|
|
(15,926)
|
|
|
(117,353)
|
|
|
(100,493)
|
Net deferred tax assets
|
|
$
|
51,943
|
|
$
|
29,361
|
|
$
|
16
|
|
$
|
20
|
|
$
|
51,959
|
|
$
|
29,381
|
Intangible assets
|
|
|
(15)
|
|
|
(37)
|
|
|
—
|
|
|
—
|
|
|
(15)
|
|
|
(37)
|
Convertible debt
|
|
|
(7,718)
|
|
|
(9,217)
|
|
|
—
|
|
|
—
|
|
|
(7,718)
|
|
|
(9,217)
|
Right of use asset (operating leases)
|
|
|
(40,298)
|
|
|
(18,066)
|
|
|
—
|
|
|
—
|
|
|
(40,298)
|
|
|
(18,066)
|
Other reserves and accruals
|
|
|
—
|
|
|
—
|
|
|
(16)
|
|
|
(20)
|
|
|
(16)
|
|
|
(20)
|
Property, plant and equipment and right of use assets
|
|
|
(3,912)
|
|
|
(2,041)
|
|
|
—
|
|
|
—
|
|
|
(3,912)
|
|
|
(2,041)
|
Deferred tax liability
|
|
$
|
(51,943)
|
|
$
|
(29,361)
|
|
$
|
(16)
|
|
$
|
(20)
|
|
$
|
(51,959)
|
|
$
|
(29,381)
|
Net
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
The Company has recorded a valuation allowance, as a result of uncertainties related to the realization of its net deferred tax asset, at December 31, 2019 and 2018 of approximately $117.4 million and $100.5 million, respectively. A reconciliation of the current year change in valuation allowance is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
Foreign
|
|
Total
|
|
Increase in valuation allowance for current year increase in net operating losses
|
|
$
|
7,254
|
|
$
|
368
|
|
$
|
7,622
|
|
Increase (decrease) in valuation allowance for current year net increase (decrease) in deferred tax assets other than net operating losses
|
|
|
11,845
|
|
|
(59)
|
|
|
11,786
|
|
Decrease in valuation allowance as a result of foreign currency fluctuation
|
|
|
(2,935)
|
|
|
—
|
|
|
(2,935)
|
|
Increase in valuation allowance due to change in tax rates
|
|
|
—
|
|
|
387
|
|
|
387
|
|
Net increase in valuation allowance
|
|
$
|
16,164
|
|
$
|
696
|
|
$
|
16,860
|
|
The deferred tax assets have been offset by a full valuation allowance because it is more likely than not that the tax benefits of the net operating loss carryforwards and other deferred tax assets may not be realized due to cumulative losses.
Under Internal Revenue Code (IRC) Section 382, the use of loss carryforwards may be limited if a change in ownership of a company occurs. If it is determined that due to transactions involving the Company’s shares owned by its 5 percent or greater stockholders a change of ownership has occurred under the provisions of IRC Section 382, the Company's federal and state net operating loss carryforwards could be subject to significant IRC Section 382 limitations.
Based on studies of the changes in ownership of the Company, it has been determined that an IRC Section 382 ownership change occurred in 2013 that limited the amount of pre-change net operating losses that can be used in future years to $13.5 million. These net operating loss carryforwards will expire, if unused, at various dates from 2020 through 2033. Net operating losses of $223.1 million incurred after the most recent ownership change are not subject to IRC Section 382 and are available for use in future years. Accordingly, the Company's deferred tax assets include $236.6 million of U.S. net operating loss carryforwards. The net operating loss carryforwards available at December 31, 2019, include $27.7 million of net operating loss that was generated in 2019 and $42.2 million of net operating loss that was generated in 2018 that do not expire. The remainder, if unused, will expire at various dates from 2032 through 2037.
Approximately $2.6 million of research credit carryforwards generated after the most recent IRC Section 382 ownership change are included in the Company's deferred tax assets. Due to limitations under IRC Section 382, research credit carryforwards existing prior to the most recent IRC Section 382 ownership change will not be used and are not reflected in the Company's gross deferred tax asset at December 31, 2019. The remaining credit carryforwards will expire during the periods 2033 through 2039.
At December 31, 2019, the Company has unused Canadian net operating loss carryforwards of approximately $14.0 million. The net operating loss carryforwards if unused will expire at various dates from 2026 through 2034. At December 31, 2019, the Company has Scientific Research and Experimental Development (SR&ED) expenditures of $17.2 million available to offset future taxable income. These (SR&ED) expenditures have no expiry date. At December 31, 2019, the Company has Canadian ITC credit carryforwards of $1.3 million available to offset future income tax. These credit carryforwards if unused will expire at various dates from 2022 through 2028.
At December 31, 2019, the Company has unused French net operating loss carryforwards of approximately $17.9 million. The net operating loss may carryforward indefinitely or until the Company changes its activity.
As of December 31, 2019, the Company has no un-repatriated foreign earnings or unrecognized tax benefits.
The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. Open tax years in the US range from 2016 and forward. Open tax years in the foreign jurisdictions range from 2009 to 2018. However, upon examination in subsequent years, if net operating losses carryforwards and tax credit carryforwards are utilized, the US and foreign jurisdictions can reduce net operating loss carryforwards and tax credit carryforwards utilized in the year being examined if they do not agree with the carryforward amount. As of December 31, 2019, the Company was not under audit in the U.S. or non-U.S. taxing jurisdictions.
The Tax Cuts and Jobs Act, or the Act, was enacted on December 22, 2017. The Act makes broad and complex changes to the U.S. tax code including a reduction of the U.S. federal corporate tax rate from 35 percent to 21 percent effective for the 2018 tax year. Accordingly, federal deferred tax assets were adjusted in 2017 by $42.5 million to reflect the reduction in tax rates. Also, in 2017 the valuation allowance was reduced by $42.5 million resulting in no change to the net deferred tax asset. The deferred tax asset adjustments reduced the tax benefit of the current year losses by 33.5% as shown in the effective tax rate schedule. The valuation allowance rate impact includes an offsetting 33.5% for the tax rate reduction resulting in no change to the provision for income taxes.
18. Commitments and Contingencies
Lessor Obligations
As of December 31, 2019, the Company had noncancelable operating leases (as lessor), primarily associated with assets deployed at customer sites. These leases expire over the next one to seven years. Leases contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote.
Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2019 were as follows (in thousands):
|
|
|
|
2020
|
|
$
|
31,279
|
2021
|
|
|
30,316
|
2022
|
|
|
22,432
|
2023
|
|
|
18,346
|
2024 and thereafter
|
|
|
36,095
|
Total future minimum lease payments
|
|
$
|
138,468
|
Lessee Obligations
As of December 31, 2019, the Company had operating and finance leases, as lessee, primarily associated with sale/leaseback transactions that are partially secured by restricted cash, security deposits and pledged escrows (see also Note 1, Nature of Operations) as summarized below. These leases expire over the next one to nine years. Minimum rent payments under operating and finance leases are recognized on a straight‑line basis over the term of the lease. Leases contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote.
In prior periods, the Company entered into sale/leaseback transactions that were accounted for as finance leases and reported as part of finance obligations. The outstanding balance of finance obligations related to sale/leaseback transactions at December 31, 2019 and December 31, 2018 was $31.7 million and $81.9 million, respectively. The fair value of the finance obligation approximated the carrying value as of both December 31, 2019 and December 31, 2018.
The Company has sold future services to be performed associated with certain sale/leaseback transactions and recorded the balance as a finance obligation. The outstanding balance of this obligation at December 31, 2019 was $109.4 million, $15.5 million and $93.9 million of which was classified as short-term and long-term, respectively, on the accompanying consolidated balance sheet. The outstanding balance of this obligation at December 31, 2018 was $37.0 million, $5.7 million and $31.3 million of which was classified as short-term and long-term, respectively. The amount is amortized using the effective interest method. The fair value of this finance obligation approximated the carrying value as of December 31, 2019.
The Company has a finance lease associated with its property and equipment in Latham, New York. Liabilities relating to this lease of $2.2 million has been recorded as a finance obligation in the accompanying consolidated balance sheet as of December 31, 2019. The fair value of this finance obligation approximated the carrying value as of December 31, 2019.
Future minimum lease payments under operating and finance leases (with initial or remaining lease terms in excess of one year) as of December 31, 2019 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Total
|
|
|
Operating
|
|
Finance
|
|
Leased
|
|
Finance
|
|
|
Leases
|
|
Leases
|
|
Property
|
|
Obligations
|
2020
|
|
$
|
44,849
|
|
$
|
10,128
|
|
$
|
414
|
|
$
|
55,391
|
2021
|
|
|
44,919
|
|
|
9,276
|
|
|
407
|
|
|
54,602
|
2022
|
|
|
40,329
|
|
|
4,975
|
|
|
390
|
|
|
45,694
|
2023
|
|
|
35,738
|
|
|
3,150
|
|
|
366
|
|
|
39,254
|
2024 and thereafter
|
|
|
70,718
|
|
|
16,154
|
|
|
1,547
|
|
|
88,419
|
Total future minimum lease payments
|
|
|
236,553
|
|
|
43,683
|
|
|
3,124
|
|
|
283,360
|
Less imputed lease interest
|
|
|
(65,226)
|
|
|
(11,934)
|
|
|
(887)
|
|
|
(78,047)
|
Sale of future services
|
|
|
—
|
|
|
109,422
|
|
|
—
|
|
|
109,422
|
Total lease liabilities
|
|
$
|
171,327
|
|
$
|
141,171
|
|
$
|
2,237
|
|
$
|
314,735
|
Rental expense for all operating leases was $30.6 million and $15.8 million for the years ended December 31, 2019 and 2018, respectively.
The gross profit on sale/leaseback transactions for all operating leases was $26.2 million and $16.4 million for the years ended December 31, 2019 and 2018, respectively. Right of use assets obtained in exchange for new operating lease liabilities was $121.4 million and $46.3 million for the years ended December 31, 2019 and 2018, respectively.
At December 31, 2019 and 2018, security deposits associated with sale/leaseback transactions were $6.0 million and $6.8 million, respectively, and were included in other assets in the consolidated balance sheet.
Other information related to the operating leases are presented in the following table:
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
Cash payments (in thousands)
|
$
|
29,317
|
|
$
|
14,926
|
Weighted average remaining lease term (years)
|
|
5.61
|
|
|
4.36
|
Weighted average discount rate
|
|
12.1%
|
|
|
12.1%
|
Finance lease costs include amortization of the right of use assets (i.e. depreciation expense) and interest on lease liabilities (i.e. interest and other expense, net in the consolidated statement of operations). Finance lease costs were as follows (in thousands):
|
|
|
|
|
|
|
Year ended
|
|
Year ended
|
|
December 31, 2019
|
|
December 31, 2018
|
Amortization of right of use asset
|
$
|
3,178
|
|
$
|
7,549
|
Interest on finance obligations
|
|
4,863
|
|
|
6,908
|
Total finance lease cost
|
$
|
8,041
|
|
$
|
14,457
|
Right of use assets obtained in exchange for new finance lease liabilities were $5.9 million and $2.2 million for the years ended December 31, 2019 and 2018, respectively.
Other information related to the finance leases are presented in the following table:
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
Cash payments (in thousands)
|
$
|
61,237
|
|
$
|
33,715
|
Weighted average remaining lease term (years)
|
|
2.99
|
|
|
3.17
|
Weighted average discount rate
|
|
11.1%
|
|
|
11.8%
|
Restricted Cash
In connection with certain of the above noted sale/leaseback agreements, cash of $125.1 million was required to be restricted as security as of December 31, 2019, which restricted cash will be released over the lease term. As of December 31, 2019, the Company also had certain letters of credit backed by security deposits totaling $103.4 million that are security for the above noted sale/leaseback agreements.
The Company also had letters of credit in the aggregate amount of $0.5 million at December 31, 2019 associated with a finance obligation from the sale/leaseback of its building. We consider cash collateralizing this letter of credit as restricted cash.
Litigation
Legal matters are defended and handled in the ordinary course of business. The Company has established accruals for matters for which management considers a loss to be probable and reasonably estimable. It is the opinion of management that facts known at the present time do not indicate that such litigation, after taking into account insurance coverage and the aforementioned accruals, will have a material adverse impact on our results of operations, financial position, or cash flows.
Concentrations of credit risk
Concentrations of credit risk with respect to receivables exist due to the limited number of select customers with whom the Company has initial commercial sales arrangements. To mitigate credit risk, the Company performs appropriate evaluation of a prospective customer’s financial condition.
At December 31, 2019, two customers comprised approximately 63.4% of the total accounts receivable balance. At December 31, 2018, two customers comprised approximately 52.3% of the total accounts receivable balance.
For the year ended December 31, 2019, 49.6% of total consolidated revenues were associated primarily with two customers. For the year ended December 31, 2018 66.7% of total consolidated revenues were associated primarily with two customers. For purposes of assigning a customer to a sale/leaseback transaction completed with a financial institution, the Company considers the end user of the assets to be the ultimate customer.
19. Unaudited Quarterly Financial Data (in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters ended
|
|
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
Net revenue (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of fuel cell systems and related infrastructure
|
|
$
|
2,544
|
|
$
|
38,696
|
|
$
|
38,877
|
|
$
|
69,767
|
|
Services performed on fuel cell systems and related infrastructure
|
|
|
6,343
|
|
|
5,341
|
|
|
6,205
|
|
|
7,328
|
|
Power Purchase Agreements
|
|
|
6,110
|
|
|
6,409
|
|
|
6,595
|
|
|
6,739
|
|
Fuel delivered to customers
|
|
|
6,582
|
|
|
7,089
|
|
|
7,649
|
|
|
7,779
|
|
Other
|
|
|
-
|
|
|
-
|
|
|
135
|
|
|
51
|
|
Net revenue
|
|
|
21,579
|
|
|
57,535
|
|
|
59,461
|
|
|
91,664
|
|
Gross (loss) profit
|
|
|
(3,784)
|
|
|
10,619
|
|
|
8,349
|
|
|
12,782
|
|
Operating expenses
|
|
|
16,697
|
|
|
22,560
|
|
|
18,428
|
|
|
20,323
|
|
Operating loss
|
|
|
(20,481)
|
|
|
(11,941)
|
|
|
(10,079)
|
|
|
(7,541)
|
|
Net loss attributable to common stockholders
|
|
|
(31,004)
|
|
|
(18,070)
|
|
|
(18,155)
|
|
|
(18,288)
|
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
$
|
(0.14)
|
|
$
|
(0.07)
|
|
$
|
(0.08)
|
|
$
|
(0.07)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters ended
|
|
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
Net revenue (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of fuel cell systems and related infrastructure
|
|
$
|
10,613
|
|
$
|
18,820
|
|
$
|
36,668
|
|
$
|
41,191
|
|
Services performed on fuel cell systems and related infrastructure
|
|
|
5,483
|
|
|
5,691
|
|
|
5,156
|
|
|
5,672
|
|
Power Purchase Agreements
|
|
|
5,372
|
|
|
5,438
|
|
|
5,555
|
|
|
6,504
|
|
Fuel delivered to customers
|
|
|
4,950
|
|
|
5,280
|
|
|
5,786
|
|
|
6,453
|
|
Net revenue
|
|
|
26,418
|
|
|
35,229
|
|
|
53,165
|
|
|
59,820
|
|
Gross loss
|
|
|
(3,984)
|
|
|
(2,310)
|
|
|
4,409
|
|
|
4,507
|
|
Operating expenses
|
|
|
16,957
|
|
|
20,668
|
|
|
17,054
|
|
|
17,426
|
|
Operating loss
|
|
|
(20,941)
|
|
|
(22,978)
|
|
|
(12,645)
|
|
|
(12,919)
|
|
Net loss attributable to common stockholders
|
|
|
(19,848)
|
|
|
(25,881)
|
|
|
(15,578)
|
|
|
(16,860)
|
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
$
|
(0.09)
|
|
$
|
(0.12)
|
|
$
|
(0.07)
|
|
$
|
(0.08)
|
|
|
(1)
|
|
The Company early-adopted Accounting Standards Update 2019-08, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606) (ASU 2019-08), as of January 1, 2019 resulting in changes to previously reported 2019 interim financial information. See Note 2, Summary of Significant Accounting Policies, for details. Amounts related to 2018 were not impacted by the adoption of ASU 2019-08.
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
PLUG POWER INC.
|
|
|
|
|
|
|
|
By:
|
/s/ ANDREW MARSH
|
|
|
Andrew Marsh
|
|
|
President, Chief Executive Officer and Director
|
Date: March 9, 2020
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