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.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED June 30, 2022

OR

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

FOR THE TRANSITION PERIOD FROM                    TO                   

Commission File Number: 1-34392

PLUG POWER INC.

(Exact name of registrant as specified in its charter)

Delaware

22-3672377

(State or Other Jurisdiction of

(I.R.S. Employer

Incorporation or Organization)

Identification Number)

968 ALBANY SHAKER ROAD, LATHAM, NEW YORK 12110

(Address of Principal Executive Offices, including Zip Code)

(518) 782-7700

(Registrant’s telephone number, including area code)

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

Title of Each Class

    

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $.01 per share

 

PLUG

The NASDAQ Capital Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

The number of shares of common stock, par value of $0.01 per share, outstanding as of August 5, 2022 was 578,695,912 shares.

INDEX to FORM 10-Q

Page

PART I. FINANCIAL INFORMATION

Item 1 – Interim Condensed Consolidated Financial Statements (Unaudited)

3

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations

4

Condensed Consolidated Statements of Comprehensive Loss

5

Condensed Consolidated Statements of Stockholders’ Equity

6

Condensed Consolidated Statements of Cash Flows

7

Notes to Interim Condensed Consolidated Financial Statements

8

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

35

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

50

Item 4 – Controls and Procedures

50

PART II. OTHER INFORMATION

Item 1 – Legal Proceedings

53

Item 1A – Risk Factors

53

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

53

Item 3 – Defaults Upon Senior Securities

53

Item 4 – Mine Safety Disclosures

53

Item 5 – Other Information

53

Item 6 – Exhibits

54

Signatures

55

2

PART 1.  FINANCIAL INFORMATION

Item 1 — Interim Financial Statements (Unaudited)

Plug Power Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

    

June 30,

    

December 31,

2022

2021

Assets

Current assets:

Cash and cash equivalents

$

2,255,951

$

2,481,269

Restricted cash

146,013

118,633

Available-for-sale securities, at fair value
(amortized cost $736,983 and allowance for credit losses of $0 at June 30, 2022 and amortized cost $1,242,933 and allowance for credit losses of $0 at December 31, 2021)

715,906

1,240,265

Equity securities

134,342

147,995

Accounts receivable

 

61,502

 

92,675

Inventory

 

429,549

 

269,163

Contract assets

38,961

38,637

Prepaid expenses and other current assets

 

111,846

 

59,888

Total current assets

 

3,894,070

 

4,448,525

Restricted cash

 

559,713

 

532,292

Property, plant, and equipment, net

431,492

 

255,623

Right of use assets related to finance leases, net

44,201

32,494

Right of use assets related to operating leases, net

241,421

212,537

Equipment related to power purchase agreements and fuel delivered to customers, net

83,159

 

72,902

Contract assets

182

120

Goodwill

235,026

220,436

Intangible assets, net

 

204,213

 

158,208

Investments in non-consolidated entities and non-marketable equity securities

37,007

12,892

Other assets

 

3,920

 

4,047

Total assets

$

5,734,404

$

5,950,076

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

146,166

$

92,307

Accrued expenses

 

98,341

 

79,237

Deferred revenue and other contract liabilities

 

60,315

 

116,377

Operating lease liabilities

37,214

30,822

Finance lease liabilities

6,324

4,718

Finance obligations

46,784

42,040

Current portion of long-term debt

980

15,252

Contingent consideration, loss accrual for service contracts, and other current liabilities

 

31,645

 

39,800

Total current liabilities

 

427,769

 

420,553

Deferred revenue and other contract liabilities

 

67,390

 

66,713

Operating lease liabilities

193,333

175,635

Finance lease liabilities

32,972

24,611

Finance obligations

 

219,622

 

211,644

Convertible senior notes, net

193,269

192,633

Long-term debt

91,677

112,794

Contingent consideration, loss accrual for service contracts, and other liabilities

 

169,791

 

139,797

Total liabilities

 

1,395,823

 

1,344,380

Stockholders’ equity:

Common stock, $0.01 par value per share; 1,500,000,000 shares authorized; Issued (including shares in treasury): 595,709,539 at June 30, 2022 and 594,729,610 at December 31, 2021

 

5,958

 

5,947

Additional paid-in capital

 

7,163,486

 

7,070,710

Accumulated other comprehensive loss

 

(28,989)

 

(1,532)

Accumulated deficit

 

(2,726,688)

 

(2,396,903)

Less common stock in treasury: 17,210,049 at June 30, 2022 and 17,074,710 at December 31, 2021

(75,186)

(72,526)

Total stockholders’ equity

 

4,338,581

 

4,605,696

Total liabilities and stockholders’ equity

$

5,734,404

$

5,950,076

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

3

Plug Power Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

    

2021

2022

    

2021

Net revenue:

Sales of fuel cell systems, related infrastructure and equipment

$

116,233

$

99,278

$

225,080

$

146,050

Services performed on fuel cell systems and related infrastructure

8,822

5,675

17,062

11,720

Power purchase agreements

 

11,169

 

8,361

 

21,206

 

16,187

Fuel delivered to customers and related equipment

 

14,472

 

11,121

 

27,900

 

22,248

Other

571

122

822

310

Net revenue

151,267

124,557

292,070

196,515

Cost of revenue:

Sales of fuel cell systems, related infrastructure and equipment

 

94,153

 

79,913

 

182,981

 

108,887

Services performed on fuel cell systems and related infrastructure

 

11,612

 

15,475

 

25,487

 

28,561

Provision for loss contracts related to service

1,068

6,694

3,116

8,179

Power purchase agreements

 

34,892

 

22,234

 

66,645

 

40,577

Fuel delivered to customers and related equipment

 

41,607

 

40,331

 

80,879

 

62,474

Other

 

400

 

208

 

777

 

306

Total cost of revenue

 

183,732

 

164,855

 

359,885

 

248,984

Gross loss

 

(32,465)

 

(40,298)

 

(67,815)

 

(52,469)

Operating expenses:

Research and development

23,557

11,247

44,018

20,989

Selling, general and administrative

95,953

38,652

176,842

64,231

Change in fair value of contingent consideration

(5,066)

(560)

(2,605)

230

Total operating expenses

114,444

49,339

218,255

85,450

Operating loss

(146,909)

(89,637)

(286,070)

(137,919)

Interest income

 

3,838

 

1,446

 

5,892

 

1,513

Interest expense

(11,203)

(11,714)

(19,851)

(24,047)

Other expense, net

 

(2,456)

 

(70)

 

(3,765)

 

(268)

Realized loss on investments, net

(468)

18

(1,315)

18

Change in fair value of equity securities

(13,484)

323

(18,643)

323

Loss on equity method investments

(2,191)

(6,024)

Loss before income taxes

$

(172,873)

$

(99,634)

$

(329,776)

$

(160,380)

Income tax expense

 

423

 

 

9

 

Net loss

$

(173,296)

$

(99,634)

$

(329,785)

$

(160,380)

Net loss per share:

Basic and diluted

$

(0.30)

$

(0.18)

$

(0.57)

$

(0.30)

Weighted average number of common stock outstanding

 

578,043,278

 

567,033,722

 

578,217,636

 

540,394,003

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

4

Plug Power Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

Three months ended

Six months ended

June 30,

June 30,

    

2022

    

2021

 

2022

    

2021

Net loss

$

(173,296)

$

(99,634)

$

(329,785)

$

(160,380)

Other comprehensive loss:

Foreign currency translation (loss) gain

 

(7,198)

 

581

 

(9,048)

 

(542)

Change in net unrealized loss on available-for-sale securities

(3,329)

(1,967)

(18,409)

(1,875)

Comprehensive loss attributable to the Company

$

(183,823)

$

(101,020)

$

(357,242)

$

(162,797)

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

5

Plug Power Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

    

    

    

    

    

    

    

Accumulated

    

    

    

    

    

    

Additional

Other

Total

Common Stock

 Paid-in

Comprehensive

Treasury Stock

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Shares

    

Amount

    

Deficit

    

Equity

December 31, 2021

 

594,729,610

$

5,947

$

7,070,710

$

(1,532)

 

17,074,710

$

(72,526)

$

(2,396,903)

$

4,605,696

Net loss

 

 

 

 

 

 

(156,489)

 

(156,489)

Other comprehensive loss

 

 

 

(16,930)

 

 

 

(16,930)

Stock-based compensation

226,221

 

2

 

43,384

 

 

 

 

 

43,386

Stock option exercises and issuance of shares of restricted common stock

253,525

 

3

 

288

 

 

 

 

 

291

Treasury stock acquired from employees upon exercise of stock options and vesting of restricted stock

71,627

(1,465)

(1,465)

Provision for common stock warrants

1,743

 

1,743

March 31, 2022

 

595,209,356

$

5,952

$

7,116,125

$

(18,462)

 

17,146,337

$

(73,991)

$

(2,553,392)

$

4,476,232

Net loss

 

 

 

 

 

 

(173,296)

 

(173,296)

Other comprehensive loss

 

 

 

(10,527)

 

 

 

(10,527)

Stock-based compensation

108,216

 

2

 

44,857

 

 

 

 

 

44,859

Stock option exercises and issuance of shares of restricted common stock

391,967

 

4

 

525

 

 

 

 

 

529

Treasury stock acquired from employees upon exercise of stock options and vesting of restricted stock

63,712

(1,195)

(1,195)

Provision for common stock warrants

1,979

 

1,979

June 30, 2022

595,709,539

$

5,958

$

7,163,486

$

(28,989)

 

17,210,049

$

(75,186)

$

(2,726,688)

$

4,338,581

December 31, 2020

 

473,977,469

$

4,740

$

3,446,650

$

2,451

 

15,926,068

$

(40,434)

$

(1,946,488)

$

1,466,919

Net loss

 

 

 

 

 

 

 

(60,746)

 

(60,746)

Cumulative impact of Accounting Standards Update 2020-06 adoption

(130,249)

9,550

(120,699)

Other comprehensive gain

 

 

 

 

(1,031)

 

 

 

 

(1,031)

Stock-based compensation

 

15,166

 

 

9,695

 

 

 

 

 

9,695

Public offerings, common stock, net

32,200,000

322

2,022,866

2,023,188

Private offerings, common stock, net

54,966,188

549

1,564,088

1,564,637

Stock option exercises

 

1,758,375

 

18

 

4,691

 

 

 

 

 

4,709

Exercise of warrants

16,308,978

163

15,282

15,445

Provision for common stock warrants

1,601

1,601

Conversion of 7.5% Convertible Senior Note

3,016,036

30

15,155

15,185

Repurchase of 5.5% Convertible Senior Notes, net of income tax benefit

69,808

1

159

160

March 31, 2021

 

582,312,020

$

5,823

$

6,949,938

$

1,420

 

15,926,068

$

(40,434)

$

(1,997,684)

$

4,919,063

Net loss

 

 

 

 

 

 

 

(99,634)

 

(99,634)

Cumulative impact of Accounting Standards Update 2020-06 adoption

64

(1)

63

Other comprehensive gain

 

 

 

 

(1,386)

 

 

 

 

(1,386)

Stock-based compensation

 

 

 

11,120

 

 

 

 

 

11,120

Stock option exercises

 

2,075

 

 

(4)

 

 

 

 

 

(4)

Exercise of warrants

4,534,130

45

(40)

5

Provision for common stock warrants

1,642

1,642

June 30, 2021

 

586,848,225

$

5,868

$

6,962,720

$

34

 

15,926,068

$

(40,434)

$

(2,097,319)

$

4,830,869

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

6

Plug Power Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six months ended June 30,

2022

    

2021

    

Operating activities

Net loss

$

(329,785)

$

(160,380)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation of long-lived assets

 

11,204

 

9,725

Amortization of intangible assets

 

10,374

 

730

Stock-based compensation

 

88,245

 

20,815

Amortization of debt issuance costs and discount on convertible senior notes

1,336

1,726

Provision for common stock warrants

3,942

3,452

Deferred income tax benefit

(916)

(Benefit)/loss on service contracts

(18,131)

4,399

Fair value adjustment to contingent consideration

(2,605)

(230)

Net realized loss on investments

1,315

(18)

Amortization of premium on available-for-sale securities

4,560

Lease origination costs

(3,150)

(4,553)

Loss on disposal of assets

268

Change in fair value for equity securities

18,643

(323)

Loss on equity method investments

6,024

Changes in operating assets and liabilities that provide (use) cash:

Accounts receivable

 

31,990

 

(48,318)

Inventory

 

(159,445)

 

(70,588)

Contract assets

(386)

Prepaid expenses and other assets

 

(51,654)

 

(22,967)

Accounts payable, accrued expenses, and other liabilities

 

38,663

 

4,047

Deferred revenue and other contract liabilities

 

(55,605)

 

15,848

Net cash used in operating activities

 

(405,113)

 

(246,635)

Investing activities

Purchases of property, plant and equipment

 

(157,838)

 

(33,062)

Purchases of equipment related to power purchase agreements and equipment related to fuel delivered to customers

(15,268)

(7,598)

Purchase of available-for-sale securities

(143,230)

(1,504,891)

Proceeds from sales of available-for-sale securities

475,676

260,313

Proceeds from maturities of available-for-sale securities

167,629

Purchase of equity securities

(4,990)

(119,979)

Net cash paid for acquisitions

 

(26,473)

 

Cash paid for non-consolidated entities and non-marketable equity securities

(30,139)

Net cash provided by (used in) investing activities

 

265,367

 

(1,405,217)

Financing activities

Proceeds from exercise of warrants, net of transaction costs

 

 

15,450

Payments of contingent consideration

(2,667)

Proceeds from public and private offerings, net of transaction costs

 

 

3,587,825

Payments of tax withholding on behalf of employees for net stock settlement of stock-based compensation

(2,660)

Proceeds from exercise of stock options

 

820

 

4,705

Principal payments on long-term debt

(36,089)

(15,564)

Proceeds from finance obligations

35,048

32,159

Principal repayments of finance obligations and finance leases

(25,168)

(17,281)

Net cash (used in) provided by financing activities

 

(30,716)

 

3,607,294

Effect of exchange rate changes on cash

 

(55)

 

(163)

(Decrease)/increase in cash and cash equivalents

 

(225,318)

 

1,847,766

Increase in restricted cash

54,801

107,513

Cash, cash equivalents, and restricted cash beginning of period

 

3,132,194

 

1,634,284

Cash, cash equivalents, and restricted cash end of period

$

2,961,677

$

3,589,563

Supplemental disclosure of cash flow information

Cash paid for interest, net capitalized interest of $5.8 million

$

18,737

$

11,261

Summary of non-cash activity

Recognition of right of use asset - finance leases

$

12,644

$

11,286

Recognition of right of use asset - operating leases

40,352

39,271

Net tangible liabilities assumed in a business combination

(5,124)

Intangible assets acquired in a business combination

60,522

Conversion of convertible senior notes to common stock

15,345

Net transfers between inventory and long-lived assets

916

Accrued purchase of fixed assets, cash to be paid in subsequent period

39,681

6,124

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

7

1.  Nature of Operations

Plug Power Inc. (the “Company,” “Plug,” “we” or “our”) is facilitating the paradigm shift to an increasingly electrified world by innovating cutting-edge hydrogen and fuel cell solutions.  While we continue to develop commercially-viable hydrogen and fuel cell product solutions to replace lead-acid and lithium batteries in electric material handling vehicles and industrial trucks for some of the world’s largest retail-distribution and manufacturing businesses, we have expanded our offerings to support a variety of commercial operations that can be powered with green hydrogen. We also provide electrolyzers that allow customers — such as refineries, producers of chemicals, steel and fertilizer and commercial refueling stations — to generate hydrogen on-site. Additionally, we intend for our electrolyzers to be used to generate green hydrogen within Plug’s own plants that will then be sold to customers. We are focusing our efforts on 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 back-up power applications for telecommunications, transportation, and utility customers. Plug supports these markets with an ecosystem of integrated products that make, transport, handle, dispense and use hydrogen.

2.  Summary of Significant Accounting Policies

Principles of Consolidation

The unaudited interim condensed consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. In addition, we include our share of the results of our joint venture with Renault SAS (“Renault”) named HyVia, a French société par actions simplifiée (“HyVia”), AccionaPlug S.L., and SK Plug Hyverse Co., Ltd., using the equity method based on our economic ownership interest and our ability to exercise significant influence over the operating and financial decisions of HyVia, AccionaPlug S.L., and SK Plug Hyverse Co., Ltd.

Interim Financial Statements

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly, in accordance with U.S. generally accepted accounting principles (“GAAP”), the financial position, results of operations and cash flows for all periods presented, have been made. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.

Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Form 10-K”).

The information presented in the accompanying unaudited interim condensed consolidated balance sheets as of December 31, 2021 has been derived from the Company’s December 31, 2021 audited consolidated financial statements.

The unaudited interim condensed consolidated financial statements contained herein should be read in conjunction with our 2021 Form 10-K.

8

Recent Accounting Pronouncements

Recently Adopted Accounting Guidance

Other than the adoption of the accounting guidance mentioned in our 2021 Form 10-K, there have been no other significant changes in our reported financial position or results of operations and cash flows resulting from the adoption of new accounting pronouncements.

Recent Accounting Guidance Not Yet Effective

All issued but not yet effective accounting and reporting standards as of June 30, 2022 are either not applicable to the Company or are not expected to have a material impact on the Company.

3. Acquisitions

Joule Processing LLC

On January 14, 2022, the Company acquired Joule Processing LLC (“Joule”),  an engineered modular equipment, process design and procurement company founded in 2009.

The fair value of consideration paid by the Company in connection with the Joule acquisition was as follows (in thousands):

Cash

$

28,140

Contingent consideration

41,732

Total consideration

$

69,872

The contingent consideration represents the estimated fair value associated with earn-out payments of  up to $130 million that the sellers are eligible to receive in cash or shares of the Company’s common stock (at the Company’s election). Of the total earnout consideration, $90 million is related to the achievement of certain financial performance and $40 million is related to the achievement of certain internal operational milestones.

The following table summarizes the preliminary allocation of the purchase price to the estimated fair value of the net assets acquired, excluding goodwill (in thousands):

Current assets

$

2,672

Property, plant and equipment

493

Right of use asset

182

Identifiable intangible assets

60,522

Lease liability

(374)

Current liabilities

(2,612)

Contract liability

(3,818)

Total net assets acquired, excluding goodwill

$

57,065

The preliminary allocation of the purchase price is still considered provisional due to the finalization of the valuation for the assets acquired and liabilities assumed in relation to the Joule acquisition. Therefore, the fair values of the assets acquired and liabilities assumed are subject to change as we obtain additional information for valuation assumptions such as market demand for Joule product lines to support forecasted revenue growth and the likelihood of achieving earnout milestones during the measurement period, which will not exceed 12 months from the date of acquisition. During the three months ended June 30, 2022, the Company recorded an adjustment to goodwill of $136 thousand due to the payment of a hold back liability related to the Joule acquisition and was recorded in accrued expenses in the unaudited interim condensed consolidated balance sheet.

9

The fair value of the developed technology totaling $59.2 million included in the identifiable intangible assets was calculated using the multi-period excess earnings method (“MPEEM”) approach which is a variant of the income approach. The basic principle of the MPEEM approach is that a single asset, in isolation, is not capable of generating cash flow for an enterprise. Several assets are brought together and exploited to generate cash flow. Therefore, to determine cash flow from the developed technology over its useful life of 15 years, one must deduct the related expenses incurred for the exploitation of other assets used for the generation of overall cash flow. The fair value of the tradename totaling $0.8 million was calculated using the relief from royalty approach which is a variant of the income approach, and was assigned a useful life of four years. The fair value of the non-compete agreements was $0.5 million with a useful life of six years.

In addition to identifiable intangible assets, the fair value of acquired work in process and finished goods inventory, included in inventory, was estimated based on the estimated selling price less costs to be incurred and a market participant profit rate.

In connection with the acquisition, the Company recorded on its consolidated balance sheet a liability of $41.7 million representing the fair value of contingent consideration payable, and is recorded in the unaudited interim condensed consolidated balance sheet in the loss accrual for service contracts and other liabilities. The fair value of this contingent consideration was remeasured to $36.9 million as of June 30, 2022, and as a result a $4.8 million reduction was recorded in the unaudited interim condensed consolidated statement of operations for the three and six months ended June 30, 2022.

Included in the purchase price consideration are contingent earn-out payments as described above. Due to the nature of the earn-outs, a scenario based analysis using the probability of achieving the milestone expectations was used to determine the fair value of the contingent consideration. These fair value measurements were based on unobservable inputs and are considered to be level 3 financial instruments.

The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings and the value of the assembled workforce. Goodwill and intangible assets are not deductible for income tax purposes. Goodwill associated with the Joule acquisition was calculated as follows (in thousands):

Consideration paid

$

28,140

Contingent consideration

41,732

Less: net assets acquired

(57,065)

Total goodwill recognized

$

12,807

The acquisition of Joule contributed $2.0 million and $3.3 million to total consolidated revenue for the three and six months ended June 30, 2022, respectively. The Company determined it impractical to report net loss for the Joule acquisition for the three and six months ended June 30, 2022.

Applied Cryo Technologies Acquisition

On November 22, 2021, the Company acquired 100% of the outstanding shares of Applied Cryo Technologies, Inc. (“Applied Cryo”). Applied Cryo is a manufacturer of engineered equipment servicing multiple applications, including cryogenic trailers and mobile storage equipment for the oil and gas markets and equipment for the distribution of liquified hydrogen, oxygen, argon, nitrogen, and other cryogenic gases.

10

The fair value of consideration paid by the Company in connection with the Applied Cryo acquisition was as follows (in thousands):

Cash

$

98,559

Plug Power Inc. Common Stock

46,697

Contingent consideration

14,000

Settlement of preexisting relationship

2,837

Total consideration

$

162,093

Included in the $98.6 million of cash consideration above, $5.0 million is consideration held by our paying agent in connection with the acquisition and is reported as restricted cash, with a corresponding accrued liability as of June 30, 2022 on the Company’s unaudited interim condensed consolidated balance sheet. We expect that this will be settled in the second half of 2022.

The contingent consideration represents the estimated fair value associated with earn-out payments of  up to $30.0 million that the sellers are eligible to receive in cash or shares of the Company’s common stock (at the Company’s election). Of the total earnout consideration, $15.0 million is related to financial performance, and $15.0 million is related to internal operational milestones.

The following table summarizes the preliminary allocation of the purchase price to the estimated fair value of the net assets acquired, excluding goodwill (in thousands):

Cash

$

1,180

Accounts receivable

4,123

Inventory

 

24,655

Prepaid expenses and other assets

1,506

Property, plant and equipment

4,515

Right of use asset

2,788

Identifiable intangible assets

70,484

Lease liability

(2,672)

Accounts payable, accrued expenses and other liabilities

(7,683)

Deferred tax liability

(16,541)

Deferred revenue

(12,990)

Total net assets acquired, excluding goodwill

$

69,365

The preliminary allocation of the purchase price is still considered provisional due to the tradename, technology, and customer relationship valuations. The Company continues to evaluate valuation assumptions such as the market demand for the Applied Cryo existing product lines to support forecasted revenue growth. Additionally, the Company continues to research the technology and buying power of Applied Cryo and evaluate the likelihood of achieving the additional production capacity needed in a timely manner to meet earnout milestones. During the three months ended June 30, 2022, the Company recorded a measurement period adjustment to goodwill of $0.5 million due to a release of escrow, which was recorded to accrued expenses in the unaudited interim condensed consolidated balance sheet. Any necessary adjustments will be finalized within one year from the date of acquisition.

Identifiable intangible assets consisted of developed technology, tradename, acquired customer relationships, non-compete agreements and backlog. The fair value of the developed technology totaling $26.3 million was calculated using the relief from royalty approach which is a variant of the income approach. The application of the relief from royalty approach involves estimating the value of an intangible asset by quantifying the present value of the stream of market derived royalty payments that the owner of the intangible asset is exempted or ‘relieved’ from paying. The developed technology has a useful life of 15 years. The fair value of the tradename totaling $13.7 million was calculated using the relief from royalty approach with a useful life of 15 years. The fair value of the acquired customer relationships totaling $26.6 million was calculated using the MPEEM approach and has a 15 year useful life. The fair value of the acquired

11

customer relationships was estimated by discounting the net cash flow derived from the expected revenues attributable to the acquired customer relationships. The fair value of the non-compete agreements was $1.0 million with a useful life of three years. The fair value of the customer backlog was $2.9 million with a useful life of one year.

In addition to identifiable intangible assets, the fair value of acquired work in process and finished goods inventory, included in inventory, was estimated based on the estimated selling price less costs to be incurred and a market participant profit rate.

Included in the purchase price consideration are contingent earn-out payments described above. Due to the nature of the earn-outs, a scenario based analysis using the probability of achieving the milestone expectations was used to value these contingent payments. These fair value measurements were based on unobservable inputs and are considered to be level 3 financial instruments.

In connection with the acquisition, the Company recorded on its consolidated balance sheet a liability of $14.0 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was remeasured as of June 30, 2022 and was $13.7 million as of June 30, 2022, and reductions of $0.4 million and $0.3 million was recorded in the unaudited interim condensed consolidated statement of operations for the three and six months ended June 30, 2022, respectively.

Included in Applied Cryo’s total net assets acquired, excluding goodwill, were net deferred tax liabilities of $16.5 million. In connection with the acquisition of these net deferred tax liabilities, the Company reduced its valuation allowance by $16.5 million and recognized a tax benefit $16.5 million during the year ended December 31, 2021.

The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings and the value of the assembled workforce. Goodwill and intangible assets are not deductible for income tax purposes. Goodwill associated with the Applied Cryo acquisition was calculated as follows (in thousands):

Consideration paid

$

162,093

Less: net assets acquired

(69,365)

Total goodwill recognized

$

92,728

The acquisition of Applied Cryo contributed $16.2 million and $33.1 million to total consolidated revenue for the three and six months ended June 30, 2022, respectively. The Company determined it impractical to report net loss for the Applied Cryo acquisition for the three and six months ended June 30, 2022.

Frames Holding B.V. Acquisition

On December 9, 2021, the Company acquired 100% of the outstanding shares of Frames Holding B.V. (“Frames”). Frames, a leading provider of  turnkey hydrogen solutions.

The fair value of consideration paid by the Company in connection with the Frames acquisition was as follows (in thousands):

Cash

$

94,541

Contingent consideration

29,057

Settlement of preexisting relationship

4,263

Total consideration

$

127,861

The contingent consideration represents the estimated fair value associated with earn-out payments of up to €30.0 million that the sellers are eligible to receive in the form of cash.  The contingent consideration is related to the achievement of certain internal operational targets during the four years following the closing date and is payable in two equal installments.

12

The following table summarizes the preliminary allocation of the purchase price to the estimated fair value of the total net assets acquired, excluding goodwill (in thousands):

Cash

$

45,394

Accounts receivable

17,910

Inventory

 

34

Prepaid expenses and other assets

3,652

Property, plant and equipment

709

Right of use asset

1,937

Contract asset

9,960

Identifiable intangible assets

50,478

Lease liability

(1,937)

Contract liability

(22,737)

Accounts payable, accrued expenses and other liabilities

(18,465)

Deferred tax liability

(11,259)

Provision for loss contracts

(2,636)

Warranty provisions

(7,566)

Total net assets acquired, excluding goodwill

$

65,474

The preliminary allocation of the purchase price is still considered provisional due to outstanding customer valuation analysis. Identifiable intangible assets consisted of developed technology, tradename, acquired customer relationships, non-compete agreements and backlog. Any necessary adjustments will be finalized within one year from the date of acquisition. During the three months ended June 30, 2022, the Company recorded a measurement period adjustment to goodwill of $7.2 million due to the recording of the deferred tax treatment surrounding the tangible and intangible assets acquired, which was recorded to contingent consideration, loss accrual for service contracts, and other liabilities in the unaudited interim condensed consolidated balance sheet.

The fair value of the developed technology totaling $5.3 million was calculated using the relief from royalty approach which is a variant of the income approach, and it has a useful life of eight years. The fair value of the tradename totaling $11.6 million was calculated using the relief from royalty approach, and it has a useful life of eight years. The fair value of the acquired customer relationships totaling $27.2 million was calculated using the MPEEM approach which is a variant of the income approach, and it has a useful life of 17 years. The fair value of the customer relationships was estimated by discounting the net cash flow derived from the expected revenues attributable to the acquired customer relationships. The fair value of the non-compete agreements totaling $4.9 million was calculated using the with and without income approach, and it has a useful life of approximately four years. The fair value of the backlog was $1.4 million, and it has a useful life of one year.

Included in the purchase price consideration are contingent earn-out payments described above. Due to the nature of the earn-outs, a scenario based analysis using the probability of achieving the milestone expectations was used to determine the fair value of the contingent consideration. These fair value measurements were based on unobservable inputs and are considered to be level 3 financial instruments.

In connection with the acquisition, the Company recorded on its consolidated balance sheet a liability of $29.1 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was remeasured as of June 30, 2022 and was $28.0 million as of June 30, 2022. The change in fair value decline was partially due to a change in the foreign currency translation, partially offset by an increase in the liability. The Company recorded an adjustment of $1.4 million and $1.1 million for the three and six months ended June 30, 2022 in the unaudited interim condensed consolidated statement of operations.

Included in Frames’ total net assets acquired, excluding goodwill, are net deferred tax liabilities of $4.1 million.

13

The goodwill was primarily attributed to the value of synergies created with the Company’s current and future offerings and the value of the assembled workforce. Goodwill and intangible assets are not deductible for income tax purposes. Goodwill associated with the Frames acquisition was calculated as follows (in thousands):

Consideration paid

$

127,861

Less: net assets acquired

(65,474)

Total goodwill recognized

$

62,387

The above estimates are preliminary in nature and subject to adjustments. Any necessary adjustments will be finalized within one year from the date of acquisition. Substantially all the receivables acquired are expected to be collectable. Purchased goodwill is not expected to be deductible for tax purposes.

The acquisition of Frames contributed $28.6 million and $50.5 million to total consolidated revenue for the three and six months ended June 30, 2022, respectively. The following table reflects the unaudited pro forma results of operations for the six months ended June 30, 2021 assuming that the Frames acquisition had occurred on January 1, 2021 (in thousands):

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2021

Revenue

$

14,397

$

31,804

Net income

$

879

$

1,034

The unaudited pro forma net income for the three and six months ended June 30, 2021 have been adjusted to reflect increased amortization of intangibles as if the acquisition had occurred on January 1, 2021. The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the actual results that would have been achieved had the Frames acquisition occurred as of January 1, 2021 or indicative of the results that may be achieved in future periods.  

None of the Joule and Applied Cryo Technologies acquisition was material to our consolidated results of operations or financial position and, therefore, pro forma financial information is not presented.

4. Extended Maintenance Contracts

On a quarterly basis, we evaluate any potential losses related to our extended maintenance contracts for fuel cell systems and related infrastructure that have been sold. The following table shows the rollforward of balance in the accrual for loss contracts, including changes due to the provision for loss accrual, loss accrual from acquisition, releases to service cost of sales, and releases due to the provision for warrants (in thousands):

Six months ended

Year ended

June 30, 2022

December 31, 2021

Beginning balance

$

89,773

$

24,013

Provision for loss accrual

3,116

71,988

Loss accrual from acquisition

2,636

Releases to service cost of sales

(21,247)

(8,864)

Foreign currency translation adjustment

(103)

Ending balance

$

71,539

$

89,773

5. 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. In periods when we have net income, the shares of our common stock subject to the convertible notes outstanding during the period will be included in our diluted earnings per share under the if-converted method. Since the Company is in a net loss position, all common stock

14

equivalents would be considered 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 potentially dilutive securities are summarized as follows:

At June 30,

    

2022

    

2021

Stock options outstanding (1)

24,184,619

 

9,165,066

Restricted stock outstanding (2)

5,616,280

 

6,511,808

Common stock warrants (3)

80,017,181

83,518,821

Convertible Senior Notes (4)

39,170,766

 

39,170,766

Number of dilutive potential shares of common stock

148,988,846

 

138,366,461

(1) During the three months ended June 30, 2022 and 2021, the Company granted options for 308,351 and 117,500 shares of common stock, respectively. During the six months ended June 30, 2022 and 2021, the Company granted options for 759,851 and 698,500 shares of common stock, respectively.

(2) During the three months ended June 30, 2022 and 2021, the Company granted 323,991 and 98,000 restricted shares of common stock, respectively. During the six months ended June 30, 2022 and 2021, the Company granted 1,126,491 and 653,000 restricted shares of common stock, respectively.

(3) In April 2017, the Company issued a warrant to acquire up to 55,286,696 shares of the Company’s common stock as part of a transaction agreement with Amazon, subject to certain vesting events, as described in Note 12, “Warrant Transaction Agreements.”  The warrant had been exercised with respect to 17,461,994 and 13,960,354 shares of the Company’s common stock as of June 30, 2022 and 2021, respectively.  

In July 2017, the Company issued a warrant to acquire up to 55,286,696 shares of the Company’s common stock as part of a transaction agreement with Walmart, subject to certain vesting events, as described in Note 12, “Warrant Transaction Agreements.” The warrant had been exercised with respect to 13,094,217 shares of the Company’s common stock as of June 30, 2022 and 2021.

(4) In March 2018, the Company issued $100.0 million in aggregate principal amount of the 5.5% Convertible Senior Notes due 2023 (the “5.5% Convertible Senior Notes”).  In May 2020, the Company repurchased $66.3 million of the 5.5% Convertible Senior Notes and in the fourth quarter of 2020, $33.5 million of the 5.5% Convertible Senior Notes were converted into approximately 14.6 million shares of common stock. The remaining $0.2 million aggregate principal amount of the 5.5% Convertible Senior Notes were converted into 69,808 shares of common stock in January 2021. In September 2019, the Company issued $40.0 million in aggregate principal amount of the 7.5% Convertible Senior Note due 2023 (the “7.5% Convertible Senior Note”), which was fully converted into 16.0 million shares of common stock on July 1, 2020. In May 2020, the Company issued $212.5 million in aggregate principal amount of the 3.75% Convertible Senior Notes.  There were no conversions for the three and six months ended June 30, 2022. There were no conversations for the three months ended June 30, 2021. For the six months ended June 30, 2021, $15.2 million of the 3.75% Convertible Senior Notes were converted, resulting in the issuance of 3,016,036 shares of common stock.

Million of

15

6. Inventory

Inventory as of June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

    

June 30,

    

December 31,

 

2022

2021

Raw materials and supplies - production locations

$

321,261

$

187,449

Raw materials and supplies - customer locations

13,629

16,294

Work-in-process

 

86,235

 

58,341

Finished goods

 

8,424

 

7,079

Inventory

$

429,549

$

269,163

7. Property, Plant and Equipment

Property, plant and equipment at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

June 30, 2022

December 31, 2021

Land

$

1,165

$

1,165

Construction in progress

332,982

169,415

Leasehold improvements

2,895

2,099

Software, machinery, and equipment

 

131,699

 

112,068

Property, plant, and equipment

 

468,741

 

284,747

Less: accumulated depreciation

 

(37,249)

 

(29,124)

Property, plant, and equipment, net

$

431,492

$

255,623

Construction in progress is primarily comprised of construction of five hydrogen production plants and the Gigafactory in Rochester, NY.  Completed assets are transferred to their respective asset classes, and depreciation begins when an asset is ready for its intended use. Interest on outstanding debt is capitalized during periods of capital asset construction and amortized over the useful lives of the related assets. During the three and six months ended June 30, 2022,  the Company capitalized $1.5 million and $5.8 million of interest, respectively.

Depreciation expense related to property, plant and equipment was $5.5 million and $1.6 million for the three months ended June 30, 2022 and 2021, respectively. Depreciation expense related to property, plant and equipment was $8.1 million and $3.3 million for the six months ended June 30, 2022 and 2021, respectively.

8. Intangible Assets and Goodwill

The gross carrying amount and accumulated amortization of the Company’s acquired identifiable intangible assets as of June 30, 2022 were as follows (in thousands):