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.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
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:
.
(Exact name of registrant as specified in its charter)
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification Number) |
(Address of Principal Executive Offices, including Zip Code)
(
(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 | |
| The |
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.
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).
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.
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
The number of shares of common stock, par value of $0.01 per share, outstanding as of August 5, 2022 was
INDEX to FORM 10-Q
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 | $ | | $ | | ||
Restricted cash | | | ||||
Available-for-sale securities, at fair value | | | ||||
Equity securities | | | ||||
Accounts receivable |
| |
| | ||
Inventory |
| |
| | ||
Contract assets | | | ||||
Prepaid expenses and other current assets |
| |
| | ||
Total current assets |
| |
| | ||
Restricted cash |
| |
| | ||
Property, plant, and equipment, net | |
| | |||
Right of use assets related to finance leases, net | | | ||||
Right of use assets related to operating leases, net | | | ||||
Equipment related to power purchase agreements and fuel delivered to customers, net | |
| | |||
Contract assets | | | ||||
Goodwill | | | ||||
Intangible assets, net |
| |
| | ||
Investments in non-consolidated entities and non-marketable equity securities | | | ||||
Other assets |
| |
| | ||
Total assets | $ | | $ | | ||
Liabilities and Stockholders’ Equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued expenses |
| |
| | ||
Deferred revenue and other contract liabilities |
| |
| | ||
Operating lease liabilities | | | ||||
Finance lease liabilities | | | ||||
Finance obligations | | | ||||
Current portion of long-term debt | | | ||||
Contingent consideration, loss accrual for service contracts, and other current liabilities |
| |
| | ||
Total current liabilities |
| |
| | ||
Deferred revenue and other contract liabilities |
| |
| | ||
Operating lease liabilities | | | ||||
Finance lease liabilities | | | ||||
Finance obligations |
| |
| | ||
Convertible senior notes, net | | | ||||
Long-term debt | | | ||||
Contingent consideration, loss accrual for service contracts, and other liabilities |
| |
| | ||
Total liabilities |
| |
| | ||
Stockholders’ equity: | ||||||
Common stock, $ |
| |
| | ||
Additional paid-in capital |
| |
| | ||
Accumulated other comprehensive loss |
| ( |
| ( | ||
Accumulated deficit |
| ( |
| ( | ||
Less common stock in treasury: | ( | ( | ||||
Total stockholders’ equity |
| |
| | ||
Total liabilities and stockholders’ equity | $ | | $ | | ||
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 | $ | | $ | | $ | | $ | | |||
Services performed on fuel cell systems and related infrastructure | | | | | |||||||
Power purchase agreements |
| |
| |
| |
| | |||
Fuel delivered to customers and related equipment |
| |
| |
| |
| | |||
Other | | | | | |||||||
Net revenue | | | | | |||||||
Cost of revenue: | |||||||||||
Sales of fuel cell systems, related infrastructure and equipment |
| |
| |
| |
| | |||
Services performed on fuel cell systems and related infrastructure |
| |
| |
| |
| | |||
Provision for loss contracts related to service | | | | | |||||||
Power purchase agreements |
| |
| |
| |
| | |||
Fuel delivered to customers and related equipment |
| |
| |
| |
| | |||
Other |
| |
| |
| |
| | |||
Total cost of revenue |
| |
| |
| |
| | |||
Gross loss |
| ( |
| ( |
| ( |
| ( | |||
Operating expenses: | |||||||||||
Research and development | | | | | |||||||
Selling, general and administrative | | | | | |||||||
Change in fair value of contingent consideration | ( | ( | ( | | |||||||
Total operating expenses | | | | | |||||||
Operating loss | ( | ( | ( | ( | |||||||
Interest income |
| |
| |
| |
| | |||
Interest expense | ( | ( | ( | ( | |||||||
Other expense, net |
| ( |
| ( |
| ( |
| ( | |||
Realized loss on investments, net | ( | | ( | | |||||||
Change in fair value of equity securities | ( | | ( | | |||||||
Loss on equity method investments | ( | — | ( | — | |||||||
Loss before income taxes | $ | ( | $ | ( | $ | ( | $ | ( | |||
Income tax expense |
| |
| — |
| |
| — | |||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||
Net loss per share: | |||||||||||
Basic and diluted | ( | ( | ( | ( | |||||||
Weighted average number of common stock outstanding |
| |
| |
| |
| | |||
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 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Other comprehensive loss: | ||||||||||||
Foreign currency translation (loss) gain |
| ( |
| |
| ( |
| ( | ||||
Change in net unrealized loss on available-for-sale securities | ( | ( | ( | ( | ||||||||
Comprehensive loss attributable to the Company | $ | ( | $ | ( | $ | ( | $ | ( | ||||
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 |
| | $ | | $ | | $ | ( |
| | $ | ( | $ | ( | $ | | ||||||
Net loss | — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||||
Other comprehensive loss | — |
| — |
| — |
| ( |
| — |
| — |
| — | ( | ||||||||
Stock-based compensation | |
| |
| |
| — |
| — |
| — |
| — |
| | |||||||
Stock option exercises and issuance of shares of restricted common stock | |
| |
| |
| — |
| — |
| — |
| — |
| | |||||||
Treasury stock acquired from employees upon exercise of stock options and vesting of restricted stock | — | — | — | — | | ( | — | ( | ||||||||||||||
Provision for common stock warrants | — | — | | — | — | — | — |
| | |||||||||||||
March 31, 2022 |
| | $ | | $ | | $ | ( |
| | $ | ( | $ | ( | $ | | ||||||
Net loss | — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||||
Other comprehensive loss | — |
| — |
| — |
| ( |
| — |
| — |
| — | ( | ||||||||
Stock-based compensation | |
| |
| |
| — |
| — |
| — |
| — |
| | |||||||
Stock option exercises and issuance of shares of restricted common stock | |
| |
| |
| — |
| — |
| — |
| — |
| | |||||||
Treasury stock acquired from employees upon exercise of stock options and vesting of restricted stock | — | — | — | — | | ( | — | ( | ||||||||||||||
Provision for common stock warrants | — | — | | — | — | — | — |
| | |||||||||||||
June 30, 2022 | | $ | | $ | | $ | ( |
| | $ | ( | $ | ( | $ | | |||||||
December 31, 2020 |
| | $ | | $ | | $ | |
| | $ | ( | $ | ( | $ | | ||||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Cumulative impact of Accounting Standards Update 2020-06 adoption | — | — | ( | — | — | — | | ( | ||||||||||||||
Other comprehensive gain |
| — |
| — |
| — |
| ( |
| — |
| — |
| — |
| ( | ||||||
Stock-based compensation |
| |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||
Public offerings, common stock, net | | | | — | — | — | — | | ||||||||||||||
Private offerings, common stock, net | | | | — | — | — | — | | ||||||||||||||
Stock option exercises |
| |
| |
| |
| — |
| — |
| — |
| — |
| | ||||||
Exercise of warrants | | | | — | — | — | — | | ||||||||||||||
Provision for common stock warrants | — | — | | — | — | — | — | | ||||||||||||||
Conversion of | | | | — | — | — | — | | ||||||||||||||
Repurchase of | | | | — | — | — | — | | ||||||||||||||
March 31, 2021 |
| | $ | | $ | | $ | |
| | $ | ( | $ | ( | $ | | ||||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||||
Cumulative impact of Accounting Standards Update 2020-06 adoption | — | — | | — | — | — | ( | | ||||||||||||||
Other comprehensive gain |
| — |
| — |
| — |
| ( |
| — |
| — |
| — |
| ( | ||||||
Stock-based compensation |
| — |
| — |
| |
| — |
| — |
| — |
| — |
| | ||||||
Stock option exercises |
| |
| — |
| ( |
| — |
| — |
| — |
| — |
| ( | ||||||
Exercise of warrants | | | ( | — | — | — | — | | ||||||||||||||
Provision for common stock warrants | — | — | | — | — | — | — | | ||||||||||||||
June 30, 2021 |
| | $ | | $ | | $ | |
| | $ | ( | $ | ( | $ | | ||||||
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 | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Depreciation of long-lived assets |
| |
| | ||
Amortization of intangible assets |
| |
| | ||
Stock-based compensation |
| |
| | ||
Amortization of debt issuance costs and discount on convertible senior notes | | | ||||
Provision for common stock warrants | | | ||||
Deferred income tax benefit | ( | — | ||||
(Benefit)/loss on service contracts | ( | | ||||
Fair value adjustment to contingent consideration | ( | ( | ||||
Net realized loss on investments | | ( | ||||
Amortization of premium on available-for-sale securities | | — | ||||
Lease origination costs | ( | ( | ||||
Loss on disposal of assets | | |||||
Change in fair value for equity securities | | ( | ||||
Loss on equity method investments | | — | ||||
Changes in operating assets and liabilities that provide (use) cash: | ||||||
Accounts receivable |
| |
| ( | ||
Inventory |
| ( |
| ( | ||
Contract assets | ( | — | ||||
Prepaid expenses and other assets |
| ( |
| ( | ||
Accounts payable, accrued expenses, and other liabilities |
| |
| | ||
Deferred revenue and other contract liabilities |
| ( |
| | ||
Net cash used in operating activities |
| ( |
| ( | ||
Investing activities | ||||||
Purchases of property, plant and equipment |
| ( |
| ( | ||
Purchases of equipment related to power purchase agreements and equipment related to fuel delivered to customers | ( | ( | ||||
Purchase of available-for-sale securities | ( | ( | ||||
Proceeds from sales of available-for-sale securities | | | ||||
Proceeds from maturities of available-for-sale securities | | — | ||||
Purchase of equity securities | ( | ( | ||||
Net cash paid for acquisitions |
| ( |
| — | ||
Cash paid for non-consolidated entities and non-marketable equity securities | ( | — | ||||
Net cash provided by (used in) investing activities |
| |
| ( | ||
Financing activities | ||||||
Proceeds from exercise of warrants, net of transaction costs |
| — |
| | ||
Payments of contingent consideration | ( | — | ||||
Proceeds from public and private offerings, net of transaction costs |
| — |
| | ||
Payments of tax withholding on behalf of employees for net stock settlement of stock-based compensation | ( | — | ||||
Proceeds from exercise of stock options |
| |
| | ||
Principal payments on long-term debt | ( | ( | ||||
Proceeds from finance obligations | | | ||||
Principal repayments of finance obligations and finance leases | ( | ( | ||||
Net cash (used in) provided by financing activities |
| ( |
| | ||
Effect of exchange rate changes on cash |
| ( |
| ( | ||
(Decrease)/increase in cash and cash equivalents |
| ( |
| | ||
Increase in restricted cash | | | ||||
Cash, cash equivalents, and restricted cash beginning of period |
| |
| | ||
Cash, cash equivalents, and restricted cash end of period | $ | | $ | | ||
Supplemental disclosure of cash flow information | ||||||
Cash paid for interest, net capitalized interest of $ | $ | | $ | | ||
Summary of non-cash activity | ||||||
Recognition of right of use asset - finance leases | $ | | $ | | ||
Recognition of right of use asset - operating leases | | | ||||
Net tangible liabilities assumed in a business combination | ( | — | ||||
Intangible assets acquired in a business combination | | — | ||||
Conversion of convertible senior notes to common stock | — | | ||||
Net transfers between inventory and long-lived assets | | — | ||||
Accrued purchase of fixed assets, cash to be paid in subsequent period | | | ||||
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 | $ | |
Contingent consideration | | |
Total consideration | $ | |
The contingent consideration represents the estimated fair value associated with earn-out payments of up to $
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 | $ | |
Property, plant and equipment | | |
Right of use asset | | |
Identifiable intangible assets | | |
Lease liability | ( | |
Current liabilities | ( | |
Contract liability | ( | |
Total net assets acquired, excluding goodwill | $ | |
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 $
9
The fair value of the developed technology totaling $
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 $
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 | $ | |
Contingent consideration | | |
Less: net assets acquired | ( | |
Total goodwill recognized | $ | |
The acquisition of Joule contributed $
Applied Cryo Technologies Acquisition
On November 22, 2021, the Company acquired
10
The fair value of consideration paid by the Company in connection with the Applied Cryo acquisition was as follows (in thousands):
Cash | $ | |
Plug Power Inc. Common Stock | | |
Contingent consideration | | |
Settlement of preexisting relationship | | |
Total consideration | $ | |
Included in the $
The contingent consideration represents the estimated fair value associated with earn-out payments of up to $
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 | $ | |
Accounts receivable | | |
Inventory |
| |
Prepaid expenses and other assets | | |
Property, plant and equipment | | |
Right of use asset | | |
Identifiable intangible assets | | |
Lease liability | ( | |
Accounts payable, accrued expenses and other liabilities | ( | |
Deferred tax liability | ( | |
Deferred revenue | ( | |
Total net assets acquired, excluding goodwill | $ | |
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 $
Identifiable intangible assets consisted of developed technology, tradename, acquired customer relationships, non-compete agreements and backlog. The fair value of the developed technology totaling $
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 $
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 $
Included in Applied Cryo’s total net assets acquired, excluding goodwill, were net deferred tax liabilities of $
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 | $ | |
Less: net assets acquired | ( | |
Total goodwill recognized | $ | |
The acquisition of Applied Cryo contributed $
Frames Holding B.V. Acquisition
On December 9, 2021, the Company acquired
The fair value of consideration paid by the Company in connection with the Frames acquisition was as follows (in thousands):
Cash | $ | |
Contingent consideration | | |
Settlement of preexisting relationship | | |
Total consideration | $ | |
The contingent consideration represents the estimated fair value associated with earn-out payments of up to €
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 | $ | |
Accounts receivable | | |
Inventory |
| |
Prepaid expenses and other assets | | |
Property, plant and equipment | | |
Right of use asset | | |
Contract asset | | |
Identifiable intangible assets | | |
Lease liability | ( | |
Contract liability | ( | |
Accounts payable, accrued expenses and other liabilities | ( | |
Deferred tax liability | ( | |
Provision for loss contracts | ( | |
Warranty provisions | ( | |
Total net assets acquired, excluding goodwill | $ | |
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 $
The fair value of the developed technology totaling $
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 $
Included in Frames’ total net assets acquired, excluding goodwill, are net deferred tax liabilities of $
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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 | $ | |
Less: net assets acquired | ( | |
Total goodwill recognized | $ | |
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 $
Three Months Ended | Six Months Ended | ||||
June 30, 2021 | June 30, 2021 | ||||
Revenue | $ | | $ | | |
Net income | $ | | $ | | |
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.
Six months ended | Year ended | ||||
June 30, 2022 | December 31, 2021 | ||||
Beginning balance | $ | | $ | ||
Provision for loss accrual | | ||||
Loss accrual from acquisition | — | ||||
Releases to service cost of sales | ( | ( | |||
Foreign currency translation adjustment | ( | — | |||
Ending balance | $ | | $ | ||
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) | |
| | |
Restricted stock outstanding (2) | |
| | |
Common stock warrants (3) | | | ||
Convertible Senior Notes (4) | |
| | |
Number of dilutive potential shares of common stock | |
| | |
| (1) | During the three months ended June 30, 2022 and 2021, the Company granted options for |
| (2) | During the three months ended June 30, 2022 and 2021, the Company granted |
| (3) | In April 2017, the Company issued a warrant to acquire up to |
In July 2017, the Company issued a warrant to acquire up to
| (4) | In March 2018, the Company issued $ |
Million of
15
6. Inventory
| June 30, |
| December 31, |
| |||
2022 | 2021 | ||||||
Raw materials and supplies - production locations | $ | | $ | | |||
Raw materials and supplies - customer locations | | | |||||
Work-in-process |
| |
| | |||
Finished goods |
| |
| | |||
Inventory | $ | | $ | | |||
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 | $ | | $ | | ||
Construction in progress | | | ||||
Leasehold improvements | | | ||||
Software, machinery, and equipment |
| |
| | ||
Property, plant, and equipment |
| |
| | ||
Less: accumulated depreciation |
| ( |
| ( | ||
Property, plant, and equipment, net | $ | | $ | | ||
Construction in progress is primarily comprised of construction of
Depreciation expense related to property, plant and equipment was $
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):
Weighted Average | Gross Carrying | Accumulated | ||||||||||
Amortization Period | Amount | Amortization | Total |
| ||||||||
Acquired technology |
|
| $ | | $ | ( | $ | | ||||
Dry stack electrolyzer technology | | ( | | |||||||||
Customer relationships, Non-compete agreements, Backlog Trademark |
| | ( | | ||||||||
$ | | $ | ( | $ | | |||||||
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The gross carrying amount and accumulated amortization of the Company’s acquired identifiable intangible assets as of December 31, 2021 were as follows (in thousands):
Weighted Average | Gross Carrying | Accumulated | ||||||||||
Amortization Period | Amount | Amortization | Total |
| ||||||||
Acquired technology |
| $ | | $ | ( | $ | | |||||
Customer relationships, Non-compete agreements, Backlog Trademark | | ( | | |||||||||
In process research and development |
| Indefinite |
| | — |
| | |||||
$ | | $ | ( | $ | | |||||||
The change in the gross carrying amount of the acquired technology from December 31, 2021 to June 30, 2022 was primarily due to the acquisition of Joule, the addition of the dry build electrolyzer stack related to the Giner ELX acquisition, and changes in foreign currency translation.
Amortization expense for acquired identifiable intangible assets for the three months ended June 30, 2022 and 2021 was $
The estimated amortization expense for subsequent years is as follows (in thousands):
Remainder of 2022 |
| $ | |
2023 | | ||
2024 | | ||
2025 | | ||
2026 | | ||
2027 and thereafter | | ||
Total | $ | |
The change in the carrying amount of goodwill for the six month period ended June 30, 2022 was as follows (in thousands):
Beginning balance at December 31, 2021 | $ | | |
Acquisitions | | ||
Measurement period adjustments | | ||
Foreign currency translation adjustment |
| ( | |
Ending balance at June 30, 2022 | $ | |
9. Long-Term Debt
In March 2019, the Company 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 $
The Loan Agreement includes covenants, limitations, and events of default customary for similar facilities. Interest and a portion of the principal amount is payable on a quarterly basis. Principal payments are funded in part by releases of restricted cash, as described in Note 19, “Commitments and Contingencies.” Based on the amortization schedule as of June 30, 2022, the aforementioned loan balance under the Term Loan Facility will be fully paid by October 31, 2025. At June 30, 2022, the Company was in compliance with all debt covenants under the Term Loan Facility.
17
10. Convertible Senior Notes
On May 18, 2020, the Company issued $
The
June 30, | ||||
2022 | ||||
Principal amounts: | ||||
Principal | $ | | ||
Unamortized debt issuance costs (1) | ( | |||
Net carrying amount | $ | | ||
| 1) | Included in the unaudited interim condensed consolidated balance sheets within the |
The following table summarizes the total interest expense and effective interest rate related to the
June 30, | June 30, | ||||||
| 2022 |
| 2021 | ||||
Interest expense | $ | | $ | | |||
Amortization of debt issuance costs | | | |||||
Total | | | |||||
Effective interest rate | |||||||
Based on the closing price of the Company’s common stock of $
Capped Call
In conjunction with the pricing of the
The net cost incurred in connection with the
18
Common Stock Forward
In March 2018, the Company issued $
The net cost incurred in connection with the Common Stock Forward of $
There were
11. Stockholders’ Equity
Common Stock and Warrants
In February 2021, the Company completed a sale of its common stock in connection with a strategic partnership with SK Holdings Co., Ltd. (“SK Holdings”) to accelerate the use of hydrogen as an alternative energy source in Asian markets. The Company sold
In January and February 2021, the Company issued and sold in a registered equity offering an aggregate of
In November 2020, the Company issued and sold in a registered equity offering an aggregate of
In August 2020, the Company issued and sold in a registered equity offering an aggregate of
During 2017, warrants to purchase up to
12. 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, a warrant (the “Amazon Warrant”) to acquire up to
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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 was conditioned upon payments made by Amazon or its affiliates (directly or indirectly through third parties) pursuant to the existing commercial agreements.
The warrant had been exercised with respect to
At December 31, 2021, all
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 (the “Walmart Warrant”) to acquire up to
The warrant had been exercised with respect to
At June 30, 2022 and December 31, 2021,
20
13. Revenue
Disaggregation of revenue
The following table provides information about disaggregation of revenue (in thousands):
Major products/services lines | ||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
Sales of fuel cell systems | $ | | $ | | $ | | $ | | ||||
Sales of hydrogen infrastructure | | | | | ||||||||
Sales of electolyzers | | | | | ||||||||
Sales of engineered equipment | | — | | — | ||||||||
Services performed on fuel cell systems and related infrastructure | | | | | ||||||||
Power Purchase Agreements | | | | | ||||||||
Fuel delivered to customers and related equipment | | | | | ||||||||
Sales of cryogenic equipment | | — | | — | ||||||||
Other | | | | | ||||||||
Net revenue | $ | | $ | | $ | | $ | | ||||
Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers (in thousands):
June 30, | December 31, | |||||
2022 | 2021 | |||||
Accounts receivable | $ | | $ | | ||
Contract assets | | | ||||
Contract liabilities | | | ||||
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 contract assets on the accompanying unaudited interim condensed consolidated balance sheets.
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) and advance consideration received from customers prior to delivery of products. These amounts are included within deferred revenue and other contract liabilities on the unaudited interim condensed consolidated balance sheets.
21
Significant changes in the contract assets and the contract liabilities balances during the period are as follows (in thousands):
Contract assets | Six months ended | |||||
June 30, 2022 | December 31, 2021 | |||||
Transferred to receivables from contract assets recognized at the beginning of the period | $ | ( | $ | ( | ||
Contract assets assumed as part of acquisition | — | | ||||
Revenue recognized and not billed as of the end of the period | | | ||||
Net change in contract assets | $ | | $ | | ||
Contract liabilities | Six months ended | |||||
June 30, 2022 | December 31, 2021 | |||||
Increases due to cash received, net of amounts recognized as revenue during the period | $ | | $ | | ||
Contract liabilities assumed as part of acquisitions | | | ||||
Revenue recognized that was included in the contract liability balance as of the beginning of the period | ( | ( | ||||
Net change in contract liabilities | $ | ( | $ | | ||
Estimated future revenue
The following table includes estimated revenue included in the backlog expected to be recognized in the future (sales of fuel cell systems and installations are expected to be recognized as revenue within
June 30, | |||
2022 | |||
Sales of fuel cell systems | $ | | |
Sales of hydrogen installations and other infrastructure | | ||
Sales of electrolyzers | | ||
Sales of engineered equipment | | ||
Services performed on fuel cell systems and related infrastructure | | ||
Power Purchase Agreements | | ||
Fuel delivered to customers and related equipment | | ||
Sales of cryogenic equipment | | ||
Total estimated future revenue | $ | | |
Contract costs
Contract costs consist of capitalized commission fees and other expenses related to obtaining or fulfilling a contract. Capitalized contract costs at June 30, 2022 and December 31, 2021 were $
14. Income Taxes
The Company recorded $
22
The domestic net deferred tax asset generated from the Company’s net operating loss has been offset by a full valuation allowance because it is more likely than not that the tax benefits of the net operating loss carry forward will not be realized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.
15. Fair Value Measurements
The Company records the fair value of assets and liabilities in accordance with ASC 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.
In addition to defining fair value, ASC 820 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety.
These levels are:
| ● | Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| ● | Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. |
| ● | Level 3 — unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability at fair value. |
Securities reported at fair value utilizing Level 1 inputs represent assets whose fair value is determined based upon observable unadjusted quoted market prices for identical assets in active markets. Level 2 securities represent assets whose fair value is determined using observable market information such as previous day trade prices, quotes from less active markets or quoted prices of securities with similar characteristics. Available-for-sale securities are characterized as Level 2 assets, as their fair values are determined using observable market inputs. Equity securities are characterized as Level 1 assets, as their fair values are determined using active markets for identical assets. There were
Financial instruments not recorded at fair value on a recurring basis include equity method investments that have not been remeasured or impaired in the current period, such as our investments in HyVia, AccionaPlug S.L., and SK Plug Hyverse Co., Ltd. During the three and six months ended June 30, 2022, the Company contributed approximately $
23
.
Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):
As of June 30, 2022 | ||||||||||
Carrying | Fair | Fair Value Measurements | ||||||||
Amount | Value | Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||||
Cash equivalents | $ | | $ | | $ | | $ | — | $ | — |
Corporate bonds | | | — | | — | |||||
U.S. Treasuries | | | | — | — | |||||
Equity securities | | | | — | — | |||||
Swaps and forward contracts | | | | — | — | |||||
Liabilities | ||||||||||
Contingent consideration | | | — | — | | |||||
Swaps and forward contracts | | | | — | — | |||||
As of December 31, 2021 | ||||||||||
Carrying | Fair | Fair Value Measurements | ||||||||
Amount | Value | Level 1 | Level 2 | Level 3 | ||||||
Assets | ||||||||||
Cash equivalents | $ | | $ | | $ | | $ | — | $ | — |
Corporate bonds | | | — | | — | |||||
U.S. Treasuries | | | | — | — | |||||
Equity securities | | | | — | — | |||||
Swaps and forward contracts | | | | — | — | |||||
Liabilities | ||||||||||
Contingent consideration | | | — | — | | |||||
Swaps and forward contracts | | | — | — | ||||||
The liabilities measured at fair value on a recurring basis that have unobservable inputs and are therefore categorized as level 3 are related to contingent consideration. The fair value as of June 30, 2022 is comprised of $
24
balance sheets, contingent consideration is recorded in the contingent consideration, loss accrual for service contracts, and other liabilities financial statement line item, and is comprised of the following unobservable inputs:
Financial Instrument |
| Fair Value | Valuation Technique | Unobservable Input | Range (weighted average) | |
Contingent Consideration | $ | | Scenario based method | Credit spread | ||
Discount rate | ||||||
| Monte carlo simulation | Credit spread | ||||
Discount rate | ||||||
Revenue volatility | ||||||
| Monte carlo simulation | Credit spread | ||||
Revenue volatility | ||||||
Gross profit volatility | ||||||
| ||||||
The change in the carrying amount of Level 3 liabilities for the three and six month period ended June 30, 2022 was as follows (in thousands):
Six months ended | |||
June 30, 2022 | |||
Beginning balance at December 31, 2021 | $ | | |
Payments | ( | ||
Additions due to acquisitions | | ||
Fair value adjustments | | ||
Foreign currency translation adjustment |
| ( | |
Ending balance at March 31, 2022 | | ||
Fair value adjustments | ( | ||
Foreign currency translation adjustment |
| ( | |
Ending balance at June 30, 2022 | $ | | |
25
16. Investments
The amortized cost, gross unrealized gains and losses, fair value of those investments classified as available-for-sale, and allowance for credit losses at June 30, 2022 are summarized as follows (in thousands):
June 30, 2022 | ||||||||||||||
Amortized | Gross | Gross | Fair | Allowance for | ||||||||||
Cost | Unrealized Gains | Unrealized Losses | Value | Credit Losses | ||||||||||
Corporate bonds | $ | | $ | — | $ | ( | $ | | — | |||||
U.S. Treasuries | | — | ( | | — | |||||||||
Total | $ | | $ | — | $ | ( | $ | | $ | — | ||||
The amortized cost, gross unrealized gains and losses, fair value of those investments classified as available-for-sale, and allowance for credit losses at December 31, 2021 are summarized as follows (in thousands):
December 31, 2021 | ||||||||||||||
Amortized | Gross | Gross | Fair | Allowance for | ||||||||||
Cost | Unrealized Gains | Unrealized Losses | Value | Credit Losses | ||||||||||
Corporate bonds | $ | | $ | — | $ | ( | $ | | — | |||||
U.S. Treasuries | | | ( | | — | |||||||||
Total | $ | | $ | | $ | ( | $ | | $ | — | ||||
The cost, gross unrealized gains and losses, and fair value of those investments classified as equity securities at June 30, 2022 are summarized as follows (in thousands):
June 30, 2022 | |||||||||||
Gross | Gross | Fair | |||||||||
Cost | Unrealized Gains | Unrealized Losses | Value | ||||||||
Fixed income mutual funds | $ | |
| $ | — | $ | ( | $ | | ||
Exchange traded mutual funds | | — | ( | | |||||||
Total | $ | | $ | — | $ | ( | $ | | |||
The cost, gross unrealized gains and losses, and fair value of those investments classified as equity securities at December 31, 2021 are summarized as follows (in thousands):
December 31, 2021 | |||||||||||
Gross | Gross | Fair | |||||||||
Cost | Unrealized Gains | Unrealized Losses | Value | ||||||||
Fixed income mutual funds | $ | |
| $ | — | $ | ( | $ | | ||
Exchange traded mutual funds | | | — | | |||||||
Total | $ | | $ | | $ | ( | $ | | |||
26
A summary of the amortized cost and fair value of investments classified as available-for-sale, by contractual maturity, as of June 30, 2022 and December 31, 2021 was as follows (in thousands):
June 30, 2022 | December 31, 2021 | ||||||||||
Amortized | Fair | Amortized | Fair | ||||||||
Maturity: | Cost | Value | Cost | Value | |||||||
Within one year | $ | |
| $ | | $ | |
| $ | | |
After one through five years |
| |
| |
| |
| | |||
Total | $ | | $ | | $ | | $ | | |||
Accrued interest income was $
17. Operating and Finance Lease Liabilities
As of June 30, 2022, the Company had operating 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 to
Leases contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote. At the end of the lease term, the leased assets may be returned to the lessor by the Company, the Company may negotiate with the lessor to purchase the assets at fair market value, or the Company may negotiate with the lessor to renew the lease at market rental rates. No residual value guarantees are contained in the leases. No financial covenants are contained within the lease; however, the lease contains customary operational covenants such as the requirement that the Company properly maintain the leased assets and carry appropriate insurance. The leases include credit support in the form of either cash, collateral or letters of credit. See Note 19, “Commitments and Contingencies” for a description of cash held as security associated with the leases.
The Company has finance leases associated with its property and equipment in Latham, New York and at fueling customer locations. The fair value of this finance obligation approximated the carrying value as of June 30, 2022.
Future minimum lease payments under operating and finance leases (with initial or remaining lease terms in excess of one year) as of June 30, 2022 were as follows (in thousands):
Finance | Total | ||||||||
Operating Lease | Lease | Lease | |||||||
Liability | Liability | Liabilities | |||||||
Remainder of 2022 | $ | | $ | | $ | | |||
2023 | |
| | | |||||
2024 | |
| | | |||||
2025 | |
| | | |||||
2026 | | | | ||||||
2027 and thereafter | | | | ||||||
Total future minimum payments | |
| | | |||||
Less imputed interest | ( | ( | ( | ||||||
Total | $ | | $ | | $ | | |||
Rental expense for all operating leases was $
27
At June 30, 2022 and December 31, 2021, security deposits associated with sale/leaseback transactions were $
At June 30, 2022 and December 31, 2021, the right of use assets associated with finance leases was $
Other information related to the operating leases are presented in the following table:
Six months ended | Six months ended | ||||
June 30, 2022 | June 30, 2021 | ||||
Cash payments (in thousands) | $ | | $ | | |
Weighted average remaining lease term (years) | |||||
Weighted average discount rate | |||||
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), and were $
Other information related to the finance leases are presented in the following table:
Six months ended | Six months ended | ||||
June 30, 2022 | June 30, 2021 | ||||
Cash payments (in thousands) | $ | | $ | | |
Weighted average remaining lease term (years) | |||||
Weighted average discount rate | |||||
18. Finance Obligation
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 June 30, 2022 was $
In prior periods, the Company entered into sale/leaseback transactions that were accounted for as financing transactions and reported as part of finance obligations. The outstanding balance of finance obligations related to sale/leaseback transactions at June 30, 2022 was $
28
Future minimum payments under finance obligations notes above as of June 30, 2022 were as follows (in thousands):
Total | |||||||||
Sale of Future | Sale/leaseback | Finance | |||||||
revenue - debt | financings | Obligations | |||||||
Remainder of 2022 | $ | | $ | | $ | | |||
2023 | | | | ||||||
2024 | | | | ||||||
2025 | | | | ||||||
2026 | | | | ||||||
2027 and thereafter | | | | ||||||
Total future minimum payments | | | | ||||||
Less imputed interest | ( | ( | ( | ||||||
Total | $ | | $ | | $ | | |||
Other information related to the above finance obligations are presented in the following table:
Six months ended | Six months ended | ||||
June 30, 2022 | June 30, 2021 | ||||
Cash payments (in thousands) | $ | | $ | | |
Weighted average remaining term (years) | |||||
Weighted average discount rate | |||||
19. Commitments and Contingencies
Restricted Cash
In connection with certain of the above noted sale/leaseback agreements, cash of $
As of June 30, 2022 and December 31, 2021, the Company had $
The Company also had $
Litigation
Legal matters are defended and handled in the ordinary course of business. Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company has not recorded any accruals related to any legal matters.
As previously disclosed, on July 22, 2021, the U.S. District Court for the Southern District of New York consolidated multiple shareholder class actions into In re Plug Power, Inc. Securities Litigation, No. 1:21-cv-2004,
29
pending in the U.S. District Court for the Southern District of New York (the “Class Action”) and appointed a lead plaintiff. For previously reported information about the cases that were consolidated into the Class Action, refer to Part I, Item 3, “Legal Proceedings,” of the Company’s 2021 Form 10-K. On October 6, 2021, lead plaintiff filed a Consolidated Amended Class Action Complaint (the “Class Action Amended Complaint”) which asserts claims individually and on behalf of all persons who purchased or otherwise acquired the Company’s securities between November 9, 2020 and March 9, 2021 (the “Class”). The Class Action Amended Complaint includes two claims, for (1) violation of Section 10(b) of the exchange act and Rule 10b5 promulgated thereunder (against all defendants); and (2) violation of Section 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (against Mr. Marsh and Mr. Middleton). The Class Action Amended Complaint alleges that defendants made “materially false” statements concerning (1) adjusted EBITDA; (2) fuel delivery and research and development expenses; (3) costs related to provision for loss contracts; (4) gross losses; and (5) the effectiveness of internal controls and procedures, and that these alleged misstatements caused Class members losses and damages. The Class Action Amended Complaint seeks compensatory damages “in an amount to be proven at trial, including prejudgment interest thereon”; “reasonable costs and expenses incurred in th[e] action”; and “[s]uch other and further relief as the [c]ourt may deem just and proper.” On December 6, 2021, defendants filed a motion to dismiss the Class Action Amended Complaint. Briefing on the motion to dismiss was completed in March 2022.
On June 13, 2022, alleged Company stockholder Donna Max, derivatively on behalf of nominal defendant Plug, filed a complaint in the United States District Court for the District of Delaware against the derivative defendants named in the Liu Derivative Complaint, captioned Max v. Marsh, et. al., case no. 1:22-cv-00781(D. Del.)(the “Max Derivative Complaint”). The Max Derivative Complaint alleges that, for the years 2018, 2019 and 2020, the defendants did not “assure that a reliable system of financial controls was in place and functioning effectively”; “failed to disclose errors in the Company's accounting primarily relating to (i) the reported book value of right of use assets and related finance obligations, (ii) loss accruals for certain service contracts, (iii) the impairment of certain long-lived assets, and (iv) the classification of certain expenses previously included in research and development costs”; and that certain defendants traded Plug Power stock at “artificially inflated stock prices.” The Max Derivative Complaint asserts claims for (1) breach of fiduciary against all defendants; (2) breach of fiduciary duty for insider trading against certain defendants; and (3) contribution under Sections 10(b) and 21D of the Securities Exchange Act of 1934 against certain defendants. The Max Derivative Complaint seeks an award “for the damages sustained by [the Company]” and related relief. By stipulation approved by the Court, the case has been stayed pending the resolution of the motion to dismiss in the Securities Class action.
On June 29, 2022, alleged Company stockholder Abbas Khambati, derivatively on behalf of nominal defendant Plug, filed a complaint in the Court of Chancery in the State of Delaware against the derivative defendants named in the Liu Derivative Complaint and Gerard A. Conway, Jr. and Keith Schmid, captioned Khambati v. McNamee, et. al., C.A. no. 2022-05691(Del. Ch.)(the “Khambati Derivative Complaint”). The Khambati Derivative Complaint alleges that the defendants “deceive[d] the investing public, including stockholders of Plug Power, regarding the Individual Defendants’ management of Plug Power’s operations and the Company’s compliance with the SEC's accounting rules”; “facilitate[d” certain defendants’ sales of “their personally held shares while in possession of material, nonpublic information”; and “enhance[d] the Individual Defendants’ executive and directorial positions at Plug Power and the profits, power, and prestige that the Individual Defendants enjoyed as a result of holding these positions.” The Khambati Derivative Complaint asserts claims for (1) breach of fiduciary; and (2) disgorgement and unjust enrichment. The Khambati Derivative Complaint seeks an award “for the damages sustained by [the Company] as a result of the breaches” alleged or “disgorgement or restitution”; “disgorgement of insider trading profits” and “all profits, benefits and other compensation obtained by [defendants’] insider trading and further profits flowing therefrom”; an order “[d]irecting the Company to take all necessary actions to reform and improve its corporate governance and internal procedures”; and related relief. By stipulation approved by the Court, the case has been stayed pending the resolution of the motion to dismiss in the Securities Class action.
On July 19, 2022, alleged Company stockholder Anne D. Graziano, as Trustee of the Anne D. Graziano Revocable Living Trust, derivatively on behalf of nominal defendant Plug, filed a complaint in the Court of Chancery in the State of Delaware against the derivative defendants named in the Khambati Derivative Complaint, captioned Graziano v. Marsh, et. al., C.A. no. 2022-0629 (Del. Ch.)(the “Graziano Derivative Complaint”). The Graziano Derivative Complaint alleges that the director defendants (i) “either knowingly or recklessly issued or caused the Company to issue the materially false and misleading statements” concerning “certain critical accounting issues”; (ii) “willfully ignored, or recklessly failed to inform themselves of, the obvious problems with the Company’s internal
30
controls, practices, and procedures, and failed to make a good faith effort to correct the problems or prevent their recurrence”; (iii) the members of the Audit Committee failed “to prevent, correct, or inform the Board of the issuance of material misstatements and omissions regarding critical accounting issues and the adequacy of the Company’s internal controls”; (iv) “received payments, benefits, stock options, and other emoluments by virtue of their membership on the Board and their control of the Company; (v) violated Plug’s Code of Conduct because they knowingly or recklessly engaged in and participated in making and/or causing the Company to make the materially false and misleading statements; and (vi) that certain defendants “sold large amounts of Company stock while it was trading at artificially inflated prices.” The Graziano Derivative Complaint asserts claims for (1) breach of fiduciary; (2) breach of fiduciary duty against certain defendants for insider trading; (3) unjust enrichment; (4) aiding and abetting breach of fiduciary duty; and (5) waste of corporate assets. The Graziano Derivative Complaint seeks an award of “the amount of damages sustained by the Company”; seeks an order “[d]irecting Plug Power to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws and to protect Plug Power and its stockholders from a repeat of the damaging events described herein”; and related relief. The parties to the Graziano Derivative Complaint and Khambati Derivative Complaint have agreed to consolidate their actions and have filed a stipulation with the Court to that effect and for a stay of the Graziano Derivative Complaint pending the resolution of the motion to dismiss in the Securities Class action.
As previously disclosed, on August 28, 2018, a lawsuit was filed on behalf of multiple individuals against the Company and five corporate co-defendants in the 9th Judicial District Court, Rapides Parish, Louisiana. The lawsuit relates to the previously disclosed May 2018 accident involving a forklift powered by the Company’s fuel cell at a Procter Gamble facility in Louisiana. The lawsuit alleges claims against the Company and co-defendants, including Structural Composites Industries, Deep South Equipment Co., Air Products and Chemicals, Inc., and Hyster-Yale Group, Inc. for claims under the Louisiana Product Liability Act (“LPLA”) including defect in construction and/or composition, design defect, inadequate warning, breach of express warranty and negligence for wrongful death and personal injuries, among other damages. Procter Gamble has intervened in that suit to recover worker’s compensation benefits paid to or for the employees/dependents. Procter Gamble has also filed suit for property damage, business interruption, loss of revenue, expenses, and other damages. Procter Gamble alleges theories under the LPLA, breach of warranty and quasi-contractual claims under Louisiana law. Defendants include the Company and several of the same co-defendants from the August 2018 lawsuit, including Structural Composites Industries, Deep South Equipment Co., and Hyster-Yale Group, Inc. In April 2022, Plug reached a settlement with respect to the individual plaintiffs on terms well below the Company’s commercial liability insurance limits and continues to vigorously defend the remaining lawsuit against Proctor Gamble.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist principally of cash, cash equivalents, restricted cash, accounts receivable and marketable securities. Cash and restricted cash are maintained in accounts with financial institutions, which, at times may exceed the Federal depository insurance coverage of $
Concentrations of credit risk with respect to receivables exist due to the limited number of select customers with whom the Company has commercial sales arrangements. To mitigate credit risk, the Company performs appropriate evaluation of a prospective customer’s financial condition.
At June 30, 2022,
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. For the three and six months ended June 30, 2022,
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20. Employee Benefit Plans
2011 and 2021 Stock Option and Incentive Plan
The Company has issued stock-based awards to employees and members of its Board of Directors (the “Board”) consisting of stock options and restricted stock awards. The Company accounts for all stock-based awards to employees and members of the Board as compensation costs in the consolidated financial statements based on their fair values measured as of the date of grant. These costs are recognized over the requisite service period. Stock-based compensation costs recognized, excluding the Company’s matching contributions to the Plug Power Inc. 401(k) Savings Retirement Plan and quarterly Board compensation, were $
The components and classification of stock-based compensation expense were as follows (in thousands):
Three months ended | Six months ended | ||||||||||
June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | ||||||||
Cost of sales | $ | | $ | | $ | | $ | | |||
Research and development | | | | | |||||||
Selling, general and administrative | | | | | |||||||
$ | | $ | | $ | | $ | | ||||
Option Awards
The Company issues options that are time and performance-based awards. All option awards are determined to be classified as equity awards.
Service Stock Options Awards
The following table reflects the service stock option activity for the six months ended June 30, 2022:
|
|
| Weighted |
| ||||||
Weighted | Average | |||||||||
Average | Remaining | Aggregate | ||||||||
Exercise | Contractual | Intrinsic | ||||||||
Shares | Price | Terms | Value | |||||||
Options outstanding at December 31, 2021 | | $ | | $ | | |||||
Granted | | | — | — | ||||||
Exercised | ( | | — | — | ||||||
Forfeited | ( | | — | — | ||||||
Options outstanding at June 30, 2022 | | $ | | $ | | |||||
Options exercisable at June 30, 2022 | | | | |||||||
Options unvested at June 30, 2022 | | $ | | $ | | |||||
The weighted average grant-date fair value of the service stock options granted during the three months ended June 30, 2022 and 2021 was $
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June 30, 2022 and 2021 was approximately $
Compensation cost associated with service stock options represented approximately $
Performance Stock Option Awards
Compensation cost associated with performance stock options represented approximately $
Restricted Stock Awards
The Company recorded expense associated with its restricted stock awards of approximately $
A summary of restricted stock activity for the six months ended June 30, 2022 is as follows (in thousands except share amounts):
| Weighted |
| Aggregate |
| |||||
Average Grant Date | Intrinsic | ||||||||
Shares | Fair Value | Value | |||||||
Unvested restricted stock at December 31, 2021 | | $ | | $ | — | ||||
Granted | | | — | ||||||
Vested | ( | | — | ||||||
Forfeited | ( | | — | ||||||
Unvested restricted stock at June 30, 2022 | | $ | | $ | | ||||
The weighted average grant-date fair value of the restricted stock awards granted during the three months ended June 30, 2022 and 2021, was $
401(k) Savings Retirement Plan
The Company issued
33
The Company’s expense for this plan was approximately $
Non-Employee Director Compensation
The Company granted
21. Segment Reporting
Our organization is managed from a sales perspective on the basis of “go-to-market” sales channels, emphasizing shared learning across end user applications and common supplier/vendor relationships. These sales channels are structured to serve a range of customers for our products and services. As a result of this structure, we concluded that we have
Revenues | Long-Lived Assets as of | ||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | June 30, 2022 | December 31, 2021 | ||||||||||||
North America | $ | | $ | | $ | | $ | | $ | | $ | | |||||
Other | | | | | | | |||||||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | |||||
22. Subsequent Events
We have evaluated events as of August 9, 2022 and have not identified any subsequent events.
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Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our accompanying unaudited interim condensed consolidated financial statements and notes thereto included within this report, and our audited and notes thereto included in our 2021 10-K. In addition to historical information, this Quarterly Report on Form 10-Q and the following discussion contain statements that are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. These forward-looking statements contain projections of our future results of operations or of our financial position or state other forward-looking information. In some cases, you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “continue,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” “would,” “plan,” “projected” or the negative of such words or other similar words or phrases. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Investors are cautioned not to unduly rely on forward-looking statements because they involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including, but not limited to:
| ● | the risk that we continue to incur losses and might never achieve or maintain profitability; |
| ● | the risk that we will need to raise additional capital to fund our operations and such capital may not be available to us; |
| ● | the risk that we may not be able to expand our business or manage our future growth effectively; |
| ● | the risk that delays in or not completing our product development goals may adversely affect our revenue and profitability; |
| ● | The risk that we may be unable to successfully pursue, integrate, or execute upon our new business ventures. |
| ● | the risk of dilution to our stockholders and/or stock price should we need to raise additional capital; |
| ● | the risk that our lack of extensive experience in manufacturing and marketing products may impact our ability to manufacture and market products on a profitable and large-scale commercial basis; |
| ● | the risk that unit orders may not ship, be installed and/or converted to revenue, in whole or in part; |
| ● | the risk that a loss of one or more of our major customers, or if one of our major customers delays payment of or is unable to pay its receivables, a material adverse effect could result on our financial condition; |
| ● | the risk that a sale of a significant number of shares of stock could depress the market price of our common stock; |
| ● | the risk that our convertible senior notes, if settled in cash, could have a material effect on our financial results; |
| ● | the risk that our convertible note hedges may affect the value of our convertible senior notes and our common stock; |
| ● | the risk that negative publicity related to our business or stock could result in a negative impact on our stock value and profitability; |
| ● | the risk of potential losses related to any product liability claims or contract disputes; |
| ● | the risk of loss related to an inability to remediate the material weaknesses identified in internal control over financial reporting as disclosed in this Quarterly Report on Form 10-Q, or inability to otherwise maintain an effective system of internal control; |
| ● | the risk that the restatement of our financial statements as of and for the years ended December 31, 2019 and 2018 and for each of the quarterly periods ended March 31, 2020 and 2019, June 30, 2020 and 2019, September 30, 2020 and 2019 could negatively affect investor confidence and raise reputational issues; |
| ● | the risk of loss related to an inability to maintain an effective system of internal controls; |
| ● | our ability to attract and maintain key personnel; |
| ● | the risks related to the use of flammable fuels in our products; |
| ● | the risk that pending orders may not convert to purchase orders, in whole or in part; |
| ● | the cost and timing of developing, marketing and selling our products; |
| ● | the risks of delays in or not completing our product development goals; |
| ● | the risks involved with participating in joint ventures, including our ability or inability to execute our strategic growth plan through joint ventures; |
| ● | our ability to obtain financing arrangements to support the sale or leasing of our products and services to customers; |
35
| ● | our ability to successfully pursue new business ventures; |
| ● | our ability to achieve the forecasted gross margin on the sale of our products; |
| ● | the cost and availability of fuel and fueling infrastructures for our products; |
| ● | the risks, liabilities, and costs related to environmental, health and safety matters; |
| ● | the risk of elimination of government subsidies and economic incentives for alternative energy products; |
| ● | market acceptance of our products and services, including GenDrive, GenSure and GenKey systems; |
| ● | our ability to establish and maintain relationships with third parties with respect to product development, manufacturing, distribution and servicing, and the supply of key product components; |
| ● | the cost and availability of components and parts for our products; |
| ● | the risk that possible new tariffs or sanctions could have a material adverse effect on our business; |
| ● | our ability to develop commercially viable products; |
| ● | our ability to reduce product and manufacturing costs; |
| ● | our ability to successfully market, distribute and service our products and services internationally; |
| ● | our ability to improve system reliability for our products; |
| ● | competitive factors, such as price competition and competition from other traditional and alternative energy companies; |
| ● | our ability to protect our intellectual property; |
| ● | the risk of dependency on information technology on our operations and the failure of such technology; |
| ● | the cost of complying with current and future federal, state and international governmental regulations; |
| ● | our subjectivity to legal proceedings and legal compliance; |
| ● | the risks associated with past and potential future acquisitions; |
| ● | the risks associated with geopolitical and global economic uncertainty, including the conflict between Russia and Ukraine, inflationary pressures, rising interest rates, and supply chain disruptions; and |
| ● | the volatility of our stock price. |
The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks discussed in the section titled “Risk Factors” included under Part I, Item 1A, in our 2021 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from these contained in any forward-looking statements. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. These forward-looking statements speak only as of the date on which the statements were made. Except as may be required by applicable law, we do not undertake or intend to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q.
References in this Quarterly Report on Form 10-Q to “Plug,” the “Company,” “we,” “our” or “us” refer to Plug Power Inc., including as the context requires, its subsidiaries.
Overview
Plug 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
36
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.
Our current products and services include:
GenDrive: GenDrive is our hydrogen fueled Proton Exchange Membrane (“PEM”) fuel cell system, providing power to material handling electric vehicles, including Class 1, 2, 3 and 6 electric forklifts, Automated Guided Vehicles (AGVs), and ground support equipment.
GenFuel: GenFuel is our liquid 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; GenSure High Power Fuel Cell Platform will support large scale stationary power and data center markets.
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.
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. This includes the Plug membrane electrode assembly, a critical component of the fuel cell stack used in zero-emission fuel cell electric vehicle engines.
GenFuel electrolyzers: GenFuel electrolyzers are modular, scalable hydrogen generators optimized for clean hydrogen production. Electrolyzers generate hydrogen from water using electricity and a special membrane and “green” hydrogen is generated by using renewable energy inputs, such as solar or wind power.
We provide our products and solutions worldwide through our direct sales force, and by leveraging relationships with original equipment manufacturers (“OEMs”) and their dealer networks. Plug is currently targeting Asia, Australia, Europe, Middle East and North America for expansion in adoption. Europe has rolled out ambitious targets for the hydrogen economy and Plug is seeking to execute on its strategy to become one of the European leaders. This includes a targeted account strategy for material handling, securing strategic partnerships with European OEMs, energy companies, utility leaders and accelerating our electrolyzer business. Our global strategy includes leveraging a network of integrators or contract manufacturers. We manufacture our commercially viable products in Latham, New York, Rochester, New York, Houston, Texas and Spokane, Washington and support liquid hydrogen generation and logistics in Charleston, Tennessee.
Part of our long-term plan includes Plug penetrating the on-road vehicle market and large-scale stationary market. Plug’s formation of joint ventures with HyVia and Acciona Plug S.L. in Europe and SK Plug Hyverse Co., Ltd., in Asia not only support this goal but are expected to provide us with a more global footprint. Plug has been successful with acquisitions, strategic partnerships and joint ventures, and we plan to continue this mix.
Recent Developments
COVID-19 Update
Starting on January 3, 2022, all U.S. based employees, including temporary employees were required to either be vaccinated against COVID-19, or be subject to weekly COVID-19 testing in an effort to stop the spread of COVID-19 and continue to protect our workforce. As of February 28, 2022, we discontinued the weekly testing for unvaccinated employees and removed the mask requirement for fully vaccinated employees. Our positive cases declined significantly;
37
and that, combined with guidance from state and federal agencies resulted in the change in practice. We continue to monitor the situation, and remain prepared to adjust accordingly. On March 25, 2022, we transitioned our face-covering requirement to voluntary for all employees and visitors. Additionally, we removed our daily COVID-19 questionnaire and discontinued temperature monitoring as a daily requirement at our facilities. Employees are still expected to remain home if they are not feeling well and should contact our COVID team for future guidance. Furthermore, we have resumed all commercial air travel and all other non-critical travel, while also allowing employees to resume their personal travel. We have enabled third-party access to our facilities, and are continuing our normal janitorial and sanitary procedures. We no longer are requiring staggered shifts in our manufacturing facilities and are offering hybrid work schedules to those whose job function enabled them to do so.
We cannot predict at this time the full extent to which COVID-19 and its related variants will continue to impact our business, results, and financial condition, which will depend on many factors. We are staying in close communication with our manufacturing facilities, employees, customers, suppliers, and partners, and acting to mitigate the impact of this dynamic and evolving situation, but there is no guarantee that we will be able to do so. Many of the parts for our products are sourced from suppliers in China and the manufacturing situation in China remains variable. Supply chain disruptions could reduce the availability of key components, increase prices or both, as the COVID-19 pandemic has caused significant challenges for global supply chains resulting primarily in transportation delays. These transportation delays have caused incremental freight charges, which have negatively impacted our results of operations. We expect that these challenges will continue to have an impact on our businesses for the foreseeable future.
We continue to take proactive steps to limit the impact of these challenges and are working closely with our suppliers and transportation vendors to ensure availability of products and implement other cost savings initiatives. In addition, we continue to invest in our supply chain to improve its resilience with a focus on automation, dual sourcing of critical components and localized manufacturing when feasible. To date, there has been limited disruption to the availability of our products, though it is possible that more significant disruptions could occur if these supply chain challenges continue.
Inflation, Material Availability and Labor Shortages
In the first half of 2022, we continued to experience higher than expected commodity costs and supply chain costs, including logistics, procurement, and manufacturing costs, largely due to inflationary pressures. We expect this cost inflation to remain elevated through at least the remainder of 2022.
Our operations require significant amounts of necessary parts and raw materials. From time to time, the Company may encounter difficulties in obtaining certain raw materials or components necessary for production due to supply chain constraints and logistical challenges, which may also negatively impact the pricing of materials and components sourced or used by the Company. Additionally, conflicts abroad, such as the Russia-Ukraine conflict, may potentially contribute to issues related to supply chain disruptions and inflation impacts. While the Company does not currently anticipate any significant, broad-based difficulties in obtaining raw materials or components necessary for production, there have been supply chain and logistical challenges that have resulted in supply constraints and commodity price increases on certain raw materials and components used by the Company in production, as well as increased prices for freight and logistics, including air, sea and ground freight. Consequently, the Company may experience supply shortages for raw materials or components in the future, which could be further exacerbated by increased commodity prices as a result of additional inflationary pressures. Although we have offset a portion of these increased costs through price increases and operational efficiencies to date, there can be no assurance that we will be able to continue to do so. If we are unable to manage fluctuations through pricing actions, cost savings projects, and sourcing decisions as well as through productivity improvements, it may adversely impact our gross margins in future periods.
Additionally, we have observed an increasingly competitive labor market. Tight labor markets have resulted in labor inflation and longer times to fill open positions. Increased employee turnover, changes in the availability of our workers, including as a result of COVID-19-related absences, and labor shortages in our supply chain have resulted in, and could continue to result in, increased costs which could negatively affect our financial condition, results of operations, or cash flows.
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Results of Operations
Our primary sources of revenue are from sales of fuel cell systems, related infrastructure and equipment, services performed on fuel cell systems and related infrastructure, Power Purchase Agreements (PPAs), and fuel delivered to customers. A certain portion of our sales result from acquisitions in legacy markets, which we are working to transition to renewable solutions. Revenue from sales of fuel cell systems, related infrastructure and equipment represents sales of our GenDrive units, GenSure stationary backup power units, cryogenic stationary and onroad storage, electrolyzers and hydrogen fueling 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. Revenue from PPAs primarily represents payments received from customers who make monthly payments to access the Company’s GenKey solution. 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.
Based on historical experience, the Company experiences seasonality with respect to its revenue, with more revenue typically recognized in the second half of the fiscal year as compared to the first half.
Net revenue, cost of revenue, gross profit (loss) and gross margin (loss) percentage for the three and six months ended June 30, 2022 and 2021, were as follows (in thousands):
|
| ||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||
Cost of |
| Gross |
| Gross | Cost of |
| Gross |
| Gross | ||||||||||||||
Net Revenue | Revenue | Profit/(Loss) | Margin |
| Net Revenue | Revenue | Profit/(Loss) | Margin |
| ||||||||||||||
For the period ended June 30, 2022: | |||||||||||||||||||||||
Sales of fuel cell systems, related infrastructure and equipment | $ | 116,233 | $ | 94,153 | $ | 22,080 |
| 19.0 | % | $ | 225,080 | $ | 182,981 | $ | 42,099 |
| 18.7 | % | |||||
Services performed on fuel cell systems and related infrastructure |
| 8,822 |
| 11,612 |
| (2,790) |
| (31.6) | % |
| 17,062 |
| 25,487 |
| (8,425) |
| (49.4) | % | |||||
Provision for loss contracts related to service | — | 1,068 | (1,068) | N/A | — | 3,116 | (3,116) | N/A | |||||||||||||||
Power purchase agreements |
| 11,169 |
| 34,892 |
| (23,723) |
| (212.4) | % |
| 21,206 |
| 66,645 |
| (45,439) |
| (214.3) | % | |||||
Fuel delivered to customers and related equipment |
| 14,472 |
| 41,607 |
| (27,135) |
| (187.5) | % |
| 27,900 |
| 80,879 |
| (52,979) |
| (189.9) | % | |||||
Other |
| 571 |
| 400 |
| 171 |
| 29.9 | % |
| 822 |
| 777 |
| 45 |
| 5.5 | % | |||||
Total | $ | 151,267 | $ | 183,732 | $ | (32,465) |
| (21.5) | % | $ | 292,070 | $ | 359,885 | $ | (67,815) |
| (23.2) | % | |||||
For the period ended June 30, 2021: | |||||||||||||||||||||||
Sales of fuel cell systems, related infrastructure and equipment | $ | 99,278 | $ | 79,913 | $ | 19,365 |
| 19.5 | % | $ | 146,050 | $ | 108,887 | $ | 37,163 |
| 25.4 | % | |||||
Services performed on fuel cell systems and related infrastructure |
| 5,675 |
| 15,475 |
| (9,800) |
| (172.7) | % |
| 11,720 |
| 28,561 |
| (16,841) |
| (143.7) | % | |||||
Provision for loss contracts related to service | — | 6,694 | (6,694) | N/A | — | 8,179 | (8,179) | N/A | |||||||||||||||
Power purchase agreements |
| 8,361 |
| 22,234 |
| (13,873) |
| (165.9) | % |
| 16,187 |
| 40,577 |
| (24,390) |
| (150.7) | % | |||||
Fuel delivered to customers and related equipment |
| 11,121 |
| 40,331 |
| (29,210) |
| (262.7) | % |
| 22,248 |
| 62,474 |
| (40,226) |
| (180.8) | % | |||||
Other |
| 122 |
| 208 |
| (86) |
| (70.5) | % |
| 310 |
| 306 |
| 4 |
| 1.3 | % | |||||
Total | $ | 124,557 | $ | 164,855 | $ | (40,298) |
| (32.4) | % | $ | 196,515 | $ | 248,984 | $ | (52,469) |
| (26.7) | % | |||||
The amount of provision for common stock warrants recorded as a reduction of revenue during the three and six months ended June 30, 2022 and 2021, respectively, is shown in the table below (in thousands):
Three months ended June 30, | Six months ended June 30, | ||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||
Sales of fuel cell systems, related infrastructure and equipment | $ | (102) | $ | — | $ | (119) | $ | (27) | |||||
Services performed on fuel cell systems and related infrastructure |
| (181) |
| (131) |
| (331) |
| (271) | |||||
Power purchase agreements |
| (1,035) |
| (902) |
| (2,009) |
| (1,802) | |||||
Fuel delivered to customers |
| (772) |
| (714) |
| (1,483) |
| (1,352) | |||||
Total | $ | (2,090) | $ | (1,747) | $ | (3,942) | $ | (3,452) | |||||
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Net Revenue
Revenue – sales of fuel cell systems, related infrastructure and equipment. Revenue from sales of fuel cell systems, related infrastructure and equipment represents revenue from the sale of our fuel cells, such as GenDrive units and GenSure stationary backup power units, as well as hydrogen fueling infrastructure referred to at the site level as hydrogen installations, electrolyzers and other equipment such as cryogenic storage equipment. Revenue from sales of fuel cell systems, related infrastructure and equipment for the three months ended June 30, 2022 increased $17.0 million, or 17.1%, to $116.2 million from $99.3 million for the three months ended June 30, 2021 due to the inclusion of revenue of acquired businesses. The total revenue generated by Applied Cryo, Frames and Joule was approximately $46.8 million for the three months ended June 30, 2022. There was no revenue recognized in the second quarter of 2021 related to these acquisitions. Offsetting the increase in revenue from acquisitions was a decrease in revenue related to the number of GenDrives units and hydrogen installations recognized as revenue in the three months ended June 30, 2022 compared to the three months ended June 30, 2021 due to a variation of timing in deployments. There were 1,258 GenDrive units recognized as revenue during the three months ended June 30, 2022, compared to 3,666 for the three months ended June 30, 2021. There was hydrogen infrastructure revenue associated with 10 hydrogen sites during the three months ended June 30, 2022, compared to 16 during the three months ended June 30, 2021.
Revenue from sales of fuel cell systems, related infrastructure and equipment for the six months ended June 30, 2022 increased $79.0 million, or 54.1%, to $225.1 million from $146.1 million for the six months ended June 30, 2021 due to the inclusion of revenue of acquired businesses. The total revenue generated by Applied Cryo, Frames and Joule was approximately $86.9 million for the six months ended June 30, 2022. There was no revenue recognized in the second quarter of 2021 related to these acquisitions. Offsetting the increase in revenue from acquisitions was a decrease in revenue related to the number of GenDrives units and hydrogen installations recognized as revenue in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 due to a variation of timing in deployments. There were 2,487 GenDrive units recognized as revenue during the six months ended June 30, 2022, compared to 4,974 for the six months ended June 30, 2021. There was hydrogen infrastructure revenue associated with 17 hydrogen sites during the three months ended June 30, 2022, compared to 22 during the six months ended June 30, 2021.
Revenue – 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. At June 30, 2022, there were 19,038 fuel cell units and 84 hydrogen installations under extended maintenance contracts, an increase from 15,723 fuel cell units and 71 hydrogen installations at June 30, 2021. Revenue from services performed on fuel cell systems and related infrastructure for the three months ended June 30, 2022 increased $3.1 million, or 55.5%, to $8.8 million as compared to $5.7 million for the three months ended June 30, 2021. The increase in revenue from services performed on fuel cell systems and related infrastructure for the three months ended June 30, 2022 compared to 2021 was primarily related to our expanding customer base and growth within in our current customer base.
Revenue from services performed on fuel cell systems and related infrastructure for the six months ended June 30, 2022 increased $5.3 million, or 45.6%, to $17.1 million as compared to $11.7 million for the six months ended June 30, 2021. The increase in revenue from services performed on fuel cell systems and related infrastructure for the six months ended June 30, 2022 compared to 2021 was primarily related to our expanding customer base and growth within in our current customer base.
Revenue – Power Purchase Agreements. Revenue from PPAs represents payments received from customers for power generated through the provision of equipment and service. At June 30, 2022, there were 82 GenKey sites associated with PPAs, as compared to 52 at June 30, 2021. Revenue from PPAs for the three months ended June 30, 2022 increased $2.8 million, or 33.6%, to $11.2 million from $8.4 million for the three months ended June 30, 2021. The increase in revenue from PPAs for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 was primarily attributable to the new sites for existing customers and new customers accessing the PPA solution. All of the new PPA sites in the second quarter of 2022 were not deployed until late in the quarter; therefore, the full impact on revenue has yet to be realized.
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Revenue from PPAs for the six months ended June 30, 2022 increased $5.0 million, or 31.0%, to $21.2 million from $16.2 million for the six months ended June 30, 2021. The increase in revenue from PPAs for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 was primarily attributable to the new sites for existing customers and new customers accessing the PPA solution. All of the new PPA sites in the second quarter of 2022 were not deployed until late in the quarter; therefore, the full impact on revenue has yet to be realized.
Revenue – fuel delivered to customers and related equipment. Revenue associated with fuel delivered to customers and related equipment represents the sale of hydrogen to customers that has been purchased by the Company from a third party or generated on site. Revenue associated with fuel delivered to customers for the three months ended June 30, 2022 increased $3.4 million, or 30.1%, to $14.5 million from $11.1 million for the three months ended June 30, 2021. The increase in revenue was due to an increase in the number of sites with fuel contracts from 125 as of June 30, 2021 to 169 as of June 30, 2022. All of the new fuel sites in the second quarter of 2022 were not deployed until late in the quarter; therefore, the full impact on revenue has yet to be realized.
Revenue associated with fuel delivered to customers for the six months ended June 30, 2022 increased $5.7 million, or 25.4%, to $27.9 million from $22.3 million for the six months ended June 30, 2021. The increase in revenue was due to an increase in the number of sites with fuel contracts from 125 as of June 30, 2021 to 169 as of June 30, 2022. All of the new fuel sites in the second quarter of 2022 were not deployed until late in the quarter; therefore, the full impact on revenue has yet to be realized.
Cost of Revenue
Cost of revenue – sales of fuel cell systems, related infrastructure and equipment. Cost of revenue from sales of fuel cell systems, related infrastructure and equipment includes direct materials, labor costs, and allocated overhead costs related to the manufacture of our fuel cells such as GenDrive units and GenSure stationary backup power units, as well as hydrogen fueling infrastructure referred to at the site level as hydrogen installations, electrolyzers and other equipment such as cryogenic storage equipment. Cost of revenue from sales of fuel cell systems, related infrastructure and equipment for the three months ended June 30, 2022 increased 17.8%, or $14.2 million, to $94.2 million, compared to $79.9 million for the three months ended June 30, 2021. This increase was driven by the acquisitions of Applied Cryo, Joule and Frames. There were 1,258 GenDrive units recognized as revenue during the three months ended June 30, 2022, compared to 3,666 for the three months ended June 30, 2021. Gross profit generated from sales of fuel cell systems and related infrastructure decreased to 19.0% for the three months ended June 30, 2022, compared to 19.5% for the three months ended June 30, 2021 primarily due to increased freight and higher labor costs given an increasingly competitive labor market and COVID-19 related staffing and coverage issues. Additionally, the margin on the equipment revenue from recently acquired businesses was lower than our legacy equipment margins given the focus on integrating and scaling these new businesses. A certain portion of our sales for the sales of engineered equipment are from an acquisition; the sales of engineered equipment from an acquisition are not expected to continue beyond current commitments.
Cost of revenue from sales of fuel cell systems, related infrastructure and equipment for the six months ended June 30, 2022 increased 68.0%, or $74.1 million, to $183.0 million, compared to $108.9 million for the six months ended June 30, 2021. This increase was driven by the acquisitions of Applied Cryo, Joule and Frames. There were 2,487 GenDrive units recognized as revenue during the six months ended June 30, 2022, compared to 4,974 for the six months ended June 30, 2021. Gross profit generated from sales of fuel cell systems and related infrastructure decreased to 18.7% for the six months ended June 30, 2022, compared to 25.4% for the six months ended June 30, 2021 primarily due to increased freight and material cost largely due to inflationary pressures, and higher labor costs given an increasingly competitive labor market and COVID-19 related staffing and coverage issues. Additionally, the margin on the equipment revenue from recently acquired businesses was lower than our legacy equipment margins given the focus on integrating and scaling these new businesses. The sales of engineered equipment from an acquisition are not expected to continue beyond current commitments.
Cost of revenue – services performed on fuel cell systems and related infrastructure. Cost of revenue from services performed on fuel cell systems and related infrastructure includes the labor, material costs and allocated overhead costs incurred for our product service and hydrogen site maintenance contracts and spare parts. At June 30, 2022, there were 19,038 fuel cell units and 84 hydrogen installations under extended maintenance contracts, an increase from 15,723
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fuel cell units and 71 hydrogen installations at June 30, 2021, respectively. Cost of revenue from services performed on fuel cell systems and related infrastructure for the three months ended June 30, 2022 decreased 25.0%, or $3.9 million, to $11.6 million, compared to $15.5 million for the three months ended June 30, 2021. The increase in cost of revenue was due primarily to the increase in install base. Gross loss decreased to (31.6%) for the three months ended June 30, 2022, compared to (172.7%) for the three months ended June 30, 2021, primarily due to the release of loss accrual recorded in prior periods.
Cost of revenue from services performed on fuel cell systems and related infrastructure for the six months ended June 30, 2022 decreased 10.8%, or $3.1 million, to $25.5 million, compared to $28.6 million for the six months ended June 30, 2021. The increase in cost of revenue was due primarily to the increase in install base. Gross loss decreased to (49.4%) for the six months ended June 30, 2022, compared to (143.7%) for the six months ended June 30, 2021, primarily due to the release of loss accrual recorded in prior periods.
Cost of revenue – provision for loss contracts related to service. The Company also recorded a provision for loss contracts related to service of $1.1 million for the three months ended June 30, 2022, compared to $6.7 million for the three months ended June 30, 2021, related primarily to new service contracts entered into during the second quarter of 2022.
The Company also recorded a provision for loss contracts related to service of $3.1 million for the six months ended June 30, 2022, compared to $8.2 million for the six months ended June 30, 2021, related primarily to new service contracts entered into during the second quarter of 2022.
Cost of revenue – Power Purchase Agreements. Cost of revenue from PPAs includes depreciation of assets utilized and service costs to fulfill PPA obligations and interest costs associated with certain financial institutions for leased equipment. At June 30, 2022, there were 82 GenKey sites associated with PPAs, as compared to 52 at June 30, 2021. Cost of revenue from PPAs for the three months ended June 30, 2022 increased 56.9%, or $12.7 million, to $34.9 million from $22.2 million for the three months ended June 30, 2021 due to the increase in units and sites under PPA contract as well as certain inflation and COVID-19 related issues such as increased freight costs and scrap charges associated with certain parts. Gross loss increased to (212.4%) for the three months ended June 30, 2022, as compared to (165.9%) for the three months ended June 30, 2021 primarily due to certain inflation and COVID-19 related issues, such as increased freight charges, and scrap charges associated with certain parts.
Cost of revenue from PPAs for the six months ended June 30, 2022 increased 64.2%, or $26.1 million, to $66.7 million from $40.6 million for the six months ended June 30, 2021 due to the increase in units and sites under PPA contract as well as certain inflation and COVID-19 related issues such as increased freight costs and scrap charges associated with certain parts. Gross loss increased to (214.3%) for the six months ended June 30, 2022, as compared to (150.7%) for the six months ended June 30, 2021 primarily due to certain inflation and COVID-19 related issues, such as increased freight charges, and scrap charges associated with certain parts.
Cost of revenue – fuel delivered to customers and related equipment. Cost of revenue from fuel delivered to customers and related equipment represents the purchase of hydrogen from suppliers that ultimately is sold to customers and costs for onsite generation. Cost of revenue from fuel delivered to customers for the three months ended June 30, 2022 increased 3.2%, or $1.3 million, to $41.6 million from $40.3 million for the three months ended June 30, 2021. The increase was primarily due to higher volume of hydrogen delivered to customer sites as a result of an increase in the number of hydrogen installations completed under GenKey agreements, inefficiencies in fueling systems and higher fuel costs. The gross loss decreased to (187.5%) during the three months ended June 30, 2022, compared to (262.7%) during the three months ended June 30, 2021, primarily due to one-time vendor transition costs that occurred in the second quarter of 2021.
Cost of revenue from fuel delivered to customers for the six months ended June 30, 2022 increased 29.5%, or $18.4 million, to $80.9 million from $62.5 million for the six months ended June 30, 2021. The increase was primarily due to higher volume of hydrogen delivered to customer sites as a result of an increase in the number of hydrogen installations completed under GenKey agreements, inefficiencies in fueling systems and higher fuel costs. As a result of these inefficiencies and higher costs, gross loss increased to (189.9%) during the six months ended June 30, 2022, compared to
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(180.8%) during the six months ended June 30, 2021. We expect higher hydrogen molecule costs to continue at least through 2022.
Expenses
Research and development expense. Research and development (“RD”) expense includes: materials to build development and prototype units, cash and non-cash stock-based compensation and benefits for the engineering and related staff, expenses for contract engineers, fees paid to consultants for services provided, materials and supplies consumed, facility related costs such as computer and network services, and other general overhead costs associated with our research and development activities.
Research and development expense for the three months ended June 30, 2022 increased $12.3 million, or 109.5%, to $23.6 million, from $11.2 million for the three months ended June 30, 2021. The overall growth in RD investment is commensurate with the Company’s future expansion into new markets, new product lines, acquisitions and varied vertical integrations.
Research and development expense for the six months ended June 30, 2022 increased $23.0 million, or 109.7%, to $44.0 million, from $21.0 million for the six months ended June 30, 2021. The overall growth in RD investment is commensurate with the Company’s future expansion into new markets, new product lines, acquisitions and varied vertical integrations.
Selling, general and administrative expenses. Selling, general and administrative expenses includes cash and non-cash stock-based compensation, benefits, amortization of intangible assets and related costs in support of our general corporate functions, including general management, finance and accounting, human resources, selling and marketing, information technology and legal services.
Selling, general and administrative expenses for the three months ended June 30, 2022, increased $57.3 million, or 148.2%, to $96.0 million from $38.7 million for the three months ended June 30, 2021. This increase was primarily related to increased headcount, which resulted in increased salaries and stock-based compensation, as well as branding expenses.
Selling, general and administrative expenses for the six months ended June 30, 2022, increased $112.6 million, or 175.3%, to $176.8 million from $64.2 million for the six months ended June 30, 2021. This increase was primarily related to increased headcount, which resulted in increased salaries and stock-based compensation, as well as branding expenses.
Contingent consideration. The fair value of the contingent consideration related to the Giner ELX, Inc., United Hydrogen Group Inc, Frames, Applied Cryo and Joule acquisitions was remeasured as of June 30, 2022, which resulted in a $5.1 million benefit for the three months ended June 30, 2022 and a $2.6 million benefit for the six months ended June 30, 2022, both of which are reflected in the unaudited interim condensed consolidated statement of operations for the three and six months ended June 30, 2022, respectively.
Interest income. Interest income primarily consists of income generated by our investment holdings, restricted cash escrow accounts, and money market accounts. Interest income for the three and six months ended June 30, 2022 increased $2.4 million and $4.4 million, respectively, as compared to the three and six months ended June 30, 2021. The increase is primarily related to the increase in the investment portfolio during 2022.
Interest expense. Interest expense consists of interest expense related to our long-term debt, convertible senior notes, obligations under finance leases and our finance obligations. Interest expense for the three months ended June 30, 2022 decreased $0.5 million compared to the three months ended June 30, 2021, primarily related to a decrease in long-term debt and an increase in capitalized interest, offset by an increase in finance obligations. Interest expense for the six months ended June 30, 2022 decreased $4.2 million compared to the six months ended June 30, 2021, primarily related to a decrease in long-term debt and an increase in capitalized interest, offset by an increase in finance obligations.
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Realized loss on investments, net. Realized loss on investments, net consists of the sales related to available-for-sale debt securities. For the three and six months ended June 30, 2022, the Company had a loss of $0.5 million and $1.3 million, respectively, of net realized loss on investments. For the three and six months ended June 30, 2021, the Company had a gain of $18 thousand, of net realized loss (gain) on investments.
Change in fair value of equity securities. Change in fair value of equity securities consists of the changes in fair value for equity securities. This increased $13.8 million and $19.0 million for the three and six months ended June 30, 2022 in comparison to the three and six months ended June 30, 2021.
Loss on equity method investments. Loss on equity method investments consists of our interest in HyVia, which is our 50/50 joint venture with Renault, AccionaPlug S.L., which is our 50/50 joint venture with Acciona, and SK Plug Hyverse Co., Ltd., which is our 49/51 joint venture with SK ES. For the three and six months ended June 30, 2022, the Company recorded a loss of $2.2 million and $6.0 million on equity method investments. These losses are driven from the start-up activities for commercial and production operations. The Company did not have any equity method investments for the three or six months ended June 30, 2021.
Income Taxes
The Company recorded $0.4 million and $0 of income tax expense for the three months ended June 30, 2022 and 2021, respectively. The Company recorded $9 thousand and $0 of income tax expense for the six months ended June 30, 2022 and 2021, respectively. The Company has not changed its overall conclusion with respect to the need for a valuation allowance against its domestic net deferred tax assets, which remain fully reserved.
The domestic net deferred tax asset generated from the Company’s net operating loss has been offset by a full valuation allowance because it is more likely than not that the tax benefits of the net operating loss carry forward will not be realized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.
Liquidity and Capital Resources
Liquidity
As of June 30, 2022 and December 31, 2021, the Company had $2.3 billion and $2.5 billion, respectively of cash and cash equivalents and $705.7 million and $650.9 million of restricted cash, respectively. In January and February 2021, the Company issued and sold in a registered equity offering an aggregate of 32.2 million shares of its common stock at a purchase price of $65.00 per share for net proceeds of approximately $2.0 billion. In February 2021, the Company sold 54,996,188 shares of its common stock to a subsidiary of SK Holdings at a purchase price of $29.2893 per share, or an aggregate purchase price of approximately $1.6 billion.
The Company has continued to experience negative cash flows from operations and net losses. The Company incurred net losses of $329.8 million and $160.4 million for the six months ended June 30, 2022 and 2021, respectively, and had an accumulated deficit of $2.7 billion at June 30, 2022.
The net cash used in operating activities for the six months ended June 30, 2022 and 2021 was $405.1 million and $246.6 million, respectively. The Company’s working capital was $3.5 billion at June 30, 2022, which included unrestricted cash and cash equivalents of $2.3 billion. The Company plans to invest a portion of its available cash to expand its current production and manufacturing capacity, construction of hydrogen plants and to fund strategic acquisitions and partnerships and capital projects. Future use of the Company’s funds is discretionary and the Company believes that its working capital and cash position will be sufficient to fund its operations for at least one year after the date the financial statements are issued.
The net cash provided by (used in) investing activities for the six months ended June 30, 2022 and 2021 was $265.4 million and ($1.4) billion, respectively. This included purchases of property, plant and equipment and outflows
44
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.
The net cash (used in) provided by financing activities for the six months ended June 30, 2022 and 2021 was ($30.7) million and $3.6 billion, respectively. The change was primarily driven by proceeds from public and private offerings, net of transaction costs that occurred in 2021.
The Company’s significant obligations consisted of the following as of June 30, 2022:
| (i) | Operating and finance leases totaling $230.5 million and $39.3 million, respectively, of which $37.2 million and $6.3 million, respectively, are due within the next 12 months. These leases are primarily related to sale/leaseback agreements entered into with various financial institutions to facilitate the Company’s commercial transactions with key customers. |
| (ii) | Finance obligations totaling $266.4 million, of which approximately $46.8 million is due within the next 12 months. Finance obligations consist primarily of debt associated with the sale of future revenues and failed sale/leaseback transactions. |
| (iii) | Long-term debt, primarily related to the Company’s Loan Agreement with Generate Capital totaling $92.6 million, of which $1.0 million is classified as short term on our consolidated balance sheets. |
| (iv) | Convertible senior notes totaling $193.3 million at June 30, 2022. |
Public and Private Offerings of Equity and Debt
Common Stock Issuances
In February 2021, the Company sold 54,966,188 shares of its common stock to a subsidiary of SK Holdings at a purchase price of $29.2893 per share, or an aggregate purchase price of approximately $1.6 billion.
In January and February 2021, the Company issued and sold in a registered equity offering an aggregate of 32.2 million shares of its common stock at a purchase price of $65.00 per share for net proceeds of approximately $2.0 billion.
In November 2020, the Company issued and sold in a registered direct offering an aggregate of 43,700,000 shares of its common stock at a purchase price of $22.25 per share for net proceeds of approximately $927.3 million.
In August 2020, the Company issued and sold in a registered direct offering an aggregate of 35,276,250 shares of its common stock at a purchase price of $10.25 per share for net proceeds of approximately $344.4 million.
Convertible Senior Notes
In May 2020, the Company issued $212.5 million in aggregate principal amount of 3.75% Convertible Senior Notes. The total net proceeds from this offering, after deducting costs of the issuance, were $205.1 million. The Company used $90.2 million of the net proceeds from the offering of the 3.75% Convertible Senior Notes to repurchase $66.3 million of the $100 million in aggregate principal amount of the 5.5% Convertible Senior Notes. In addition, the Company used approximately $16.3 million of the net proceeds from the offering of the 3.75% Convertible Senior Notes to enter into privately negotiated capped called transactions. In the fourth quarter of 2020, $33.5 million of the remaining 5.5% Convertible Senior Notes were converted into 14.6 million shares of common stock, resulting in a gain of approximately $4.5 million which was recorded on the consolidated statement of operations on the gain (loss) on extinguishment of debt line. As of December 31, 2020, approximately $0.2 million aggregate principal amount of the 5.5% Convertible Senior Notes remained outstanding, all of which were converted to common stock in January 2021.
In September 2019, the Company issued $40.0 million in aggregate principal amount of 7.5% Convertible Senior Note. The Company’s total obligation, net of interest accretion, due to the holder was $48.0 million. The total net proceeds
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from this offering, after deducting costs of the issuance, were $39.1 million. On July 1, 2020, the note automatically converted fully into 16.0 million shares of common stock.
Secured Debt
In March 2019, the Company 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 million (the “Term Loan Facility”). On June 30, 2022, the outstanding balance under the Term Loan Facility was $83.3 million. The carrying value of the Term Loan Facility approximates fair value.
The Loan Agreement includes covenants, limitations, and events of default customary for similar facilities. Interest and a portion of the principal amount is payable on a quarterly basis. Principal payments are funded in part by releases of restricted cash, as described in Note 19, “Commitments and Contingencies.” Based on the amortization schedule as of June 30, 2022, the aforementioned loan balance under the Term Loan Facility will be fully paid by October 31, 2025. At June 30, 2022, the Company was in compliance with all debt covenants under the Term Loan Facility.
3.75% Convertible Senior Notes
On May 18, 2020, the Company issued $200.0 million in aggregate principal amount of 3.75% Convertible Senior Notes due June 1, 2025, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). On May 29, 2020, the Company issued an additional $12.5 million in aggregate principal amount of 3.75% Convertible Senior Notes. During the three and six months ended June 30, 2022, there were no conversions of the 3.75% Convertible Senior Notes.
The 3.75% Convertible Senior Notes consisted of the following (in thousands):
June 30, | ||||
2022 | ||||
Principal amounts: | ||||
Principal | $ | 197,278 | ||
Unamortized debt issuance costs (1) | (4,009) | |||
Net carrying amount | $ | 193,269 | ||
| 1) | Included in the unaudited interim condensed consolidated balance sheets within the 3.75% Convertible Senior Notes, net and amortized over the remaining life of the notes using the effective interest rate method. |
The following table summarizes the total interest expense, the amortization of debt issuance costs and the effective interest rate related to the 3.75% Convertible Senior Notes (in thousands, except for effective interest rate):
June 30, | June 30, | ||||||
| 2022 |
| 2021 | ||||
Interest expense | $ | 1,849 | $ | 1,850 | |||
Amortization of debt issuance costs | 320 | 306 | |||||
Total | 2,169 | 2,156 | |||||
Effective interest rate | 4.5% | 4.5% | |||||
Based on the closing price of the Company’s common stock of $16.57 on June 30, 2022, the if-converted value of the notes was greater than the principal amount. The estimated fair value of the note at June 30, 2022 was approximately $700 million. The fair value estimation was primarily based on an active stock exchange trade on June 14, 2022 of the 3.75% Convertible Senior Notes. See Note 15, “Fair Value Measurements,” for a description of the fair value hierarchy.
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Capped Call
In conjunction with the pricing of the 3.75% Convertible Senior Notes, the Company entered into privately negotiated capped call transactions (the “3.75% Notes Capped Call”) with certain counterparties at a price of $16.2 million. The 3.75% Notes Capped Call covers, subject to anti-dilution adjustments, the aggregate number of shares of the Company’s common stock that underlie the initial 3.75% Convertible Senior Notes and is generally expected to reduce potential dilution to the Company’s common stock upon any conversion of the 3.75% 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 3.75% Notes Capped Call is initially $6.7560 per share, which represents a premium of approximately 60% over the last then-reported sale price of the Company’s common stock of $4.11 per share on the date of the transaction and is subject to certain adjustments under the terms of the 3.75% Notes Capped Call. The 3.75% Notes Capped Call becomes exercisable if the conversion option is exercised.
The net cost incurred in connection with the 3.75% Notes Capped Call were recorded as a reduction to additional paid-in capital in the unaudited interim condensed consolidated balance sheets.
The book value of the 3.75% Notes Capped Call is not remeasured.
Common Stock Forward
In March 2018, the Company issued $100.0 million in aggregate principal amount of the 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, which have been fully converted into shares of common stock. In connection with the issuance of the 5.5% Convertible Senior Notes, the Company entered into a forward stock purchase transaction (the “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. On May 18, 2020, the Company amended and extended the maturity of the Common Stock Forward to June 1, 2025. 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 was recorded as an increase in treasury stock in the unaudited interim condensed consolidated balance sheets. The related shares were accounted for as a repurchase of common stock. The book value of the Common Stock Forward is not remeasured.
There were no shares of common stock settled in connection with the Common Stock Forward during the three and six months ended June 30, 2022. During the three and six months ended June 30, 2021, the Common Stock Forward was partially settled and 2.2 million shares and 8.1 million shares were received by the Company, respectively.
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, a warrant (the “Amazon Warrant”) 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 was conditioned upon payments made by Amazon or its affiliates (directly or indirectly through third parties) pursuant to the existing commercial agreements.
The warrant had been exercised with respect to 17,461,994 shares of the Company’s common stock as of June 30, 2022 and December 31, 2021.
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At December 31, 2021, all 55,286,696 of the Amazon Warrant Shares had vested. For service contracts entered into prior to December 31, 2020, the warrant charge associated with that revenue was capitalized and is subsequently amortized over the life of the service contract. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Amazon Warrant during the three months ended June 30, 2022 and 2021 was $0.1 million and $0.1 million, respectively. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Amazon Warrant during the six months ended June 30, 2022 and 2021 was $0.2 million and $0.2 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 (the “Walmart 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 was conditioned upon 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 warrant had been exercised with respect to 13,094,217 shares of the Company’s common stock as of June 30, 2022 and December 31, 2021.
At June 30, 2022 and December 31, 2021, 20,368,782 of the Walmart Warrant Shares had vested. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Walmart Warrant during the three months ended June 30, 2022 and 2021 was $2.0 million and $1.6 million, respectively. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Walmart Warrant during the six months ended June 30, 2022 and 2021 was $3.7 million and $3.2 million, respectively. During the three and six months ended June 30, 2022 and 2021, respectively, the Walmart Warrant was exercised with respect to 0 and 7,274,565 shares of common stock.
Operating and Finance Lease Liabilities
As of June 30, 2022, the Company had operating 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 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. At the end of the lease term, the leased assets may be returned to the lessor by the Company, the Company may negotiate with the lessor to purchase the assets at fair market value, or the Company may negotiate with the lessor to renew the lease at market rental rates. No residual value guarantees are contained in the leases. No financial covenants are contained within the lease; however, the lease contains customary operational covenants such as the requirement that the Company properly maintain the leased assets and carry appropriate insurance. The leases include credit support in the form of either cash, collateral or letters of credit. See Note 19, “Commitments and Contingencies” for a description of cash held as security associated with the leases.
The Company has finance leases associated with its property and equipment in Latham, New York and at fueling customer locations. The fair value of this finance obligation approximated the carrying value as of June 30, 2022.
Finance Obligation
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 June 30, 2022 was $251.7 million, $43.7 million and $208.0 million of which was classified as short-term and long-term, respectively, on the
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accompanying unaudited interim condensed consolidated balance sheet. The outstanding balance of this obligation at December 31, 2021 was $236.6 million, $37.5 million and $199.1 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 June 30, 2022 and December 31, 2021.
In prior periods, the Company entered into sale/leaseback transactions that were accounted for as financing transactions and reported as part of finance obligations. The outstanding balance of finance obligations related to sale/leaseback transactions at June 30, 2022 was $14.7 million, $3.0 million and $11.7 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, 2021 was $17.0 million, $4.5 million and $12.5 million of which was classified as short-term and long-term, respectively on the accompanying consolidated balance sheets. The fair value of this finance obligation approximated the carrying value as of both June 30, 2022 and December 31, 2021.
Restricted Cash
In connection with certain of the above noted sale/leaseback agreements, cash of $270.9 million and $275.1 million was required to be restricted as security as of June 30, 2022 and December 31, 2021, respectively, which restricted cash will be released over the lease term. As of June 30, 2022 and December 31, 2021, the Company also had certain letters of credit backed by security deposits totaling $331.7 million and $286.0 million, respectively, that are security for the above noted sale/leaseback agreements. As of June 30, 2022, the Company also had certain customs related letters of credit totaling $13.7 million.
As of June 30, 2022 and December 31, 2021, the Company had $67.7 million, held in escrow related to the construction of certain hydrogen plants.
The Company also had $5.0 million and $2.3 million of consideration held by our paying agent in connection with the Applied Cryo and Joule acquisitions, respectively, reported as restricted cash as of June 30, 2022, with a corresponding accrued liability on the Company’s unaudited interim condensed consolidated balance sheet. Additionally, the Company had $14.5 million in restricted cash as collateral resulting from the Frames acquisition as of June 30, 2022.
Investments
Our investment portfolio, including cash and cash equivalents, totaled $3.1 billion at June 30, 2022. Purchases of fixed maturity securities are classified as available-for-sale at the time of purchase based on individual security.
The composition of our investment portfolio, including cash and cash equivalents, as of June 30, 2022, is shown in the following table (in thousands):
Carrying | Percentage of | ||||
| Amount |
| Portfolio | ||
Fixed maturity securities - available-for-sale | |||||
U.S. Treasuries | $ | 490,185 | 15.8% | ||
Corporate bonds | 225,721 | 7.3% | |||
Total fixed maturity securities - available-for-sale | $ | 715,906 | 23.0% | ||
Equity securities | 134,342 | 4.3% | |||
Cash and cash equivalents | 2,255,951 | 72.6% | |||
Total investments, including cash and cash equivalents | $ | 3,106,199 | 100.0% | ||
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
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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 | |
Critical Accounting Estimates
Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these unaudited interim condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of and during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, bad debts, inventories, goodwill and intangible assets, valuation of long-lived assets, accrual for service loss contracts, operating and finance leases, product warranty accruals, unbilled revenue, common stock warrants, income taxes, stock-based compensation and contingencies. We base our estimates and judgments on historical experience and on various other factors and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about (1) the carrying values of assets and liabilities and (2) the amount of revenue and expenses realized that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no changes in our critical accounting estimates from those reported in our 2021 Form 10-K.
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.
Item 3 — Quantitative and Qualitative Disclosures about Market Risk
There has been no material change from the information provided in the Company’s 2021 Form 10-K under the section titled “Item 7A: Quantitative and Qualitative Disclosures About Market Risk.”
Item 4 — Controls and Procedures
| (a) | Disclosure Controls and Procedures |
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our
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management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer) as appropriate, to allow for timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective in 2018, 2019, 2020 and 2021 because of the material weaknesses in internal control over financial reporting described in Part II, Item 9A “Controls and Procedures” of our 2021 Form 10-K. The material weaknesses have not been remediated as of June 30, 2022.
Material Weakness
Management identified that the following deficiency existed in internal control over financial reporting in 2018, 2019, 2020 and 2021: the Company did not maintain a sufficient complement of trained, knowledgeable resources to execute its responsibilities with respect to internal control over financial reporting for certain financial statement accounts and disclosures. As a consequence, the Company did not conduct an effective risk assessment process that was responsive to changes in the Company's operating environment and did not design and implement effective process-level controls in the following areas:
| (a) | presentation of operating expenses; |
| (b) | accrual for loss contracts related to service; and |
| (c) | identification of adjustments to physical inventory. |
As of December 31, 2021, management identified additional deficiencies which were also the result of the Company not maintaining a sufficient complement of trained, knowledgeable resources to execute its responsibilities and conduct an effective risk assessment. Specifically, the process-level controls to ensure proper capitalization of inventory costs were not performed with an appropriate level of precision to detect and prevent a material misstatement. Additionally, management identified ineffective general information technology control activities over an information technology system that is used in calculating fuel billings, due to the ineffective risk assessment in identifying the relevant system. Management did not design and implement general information technology control activities in response to the current year growth in fuel delivered to customers.
The control deficiency, related to the accrual for loss contracts related to service, resulted in a material misstatement that was corrected prior to the filing of the 2021 Form 10-K. We did not identify any other material misstatements to the consolidated financial statements and there were no changes to previously issued financial results as a result of the other control deficiencies; however, the control deficiencies described above created a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis. As a result, we concluded the deficiencies described above represent material weaknesses in our internal control over financial reporting, and our internal control over financial reporting was not effective as of December 31, 2021.
The Company acquired Applied Cryo Technologies and Frames Holdings B.V. (together, the “Acquired Companies”) during 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, the Acquired Companies’ internal control over financial reporting associated with total assets of $369.1 million and total revenues of $15.8 million included in the consolidated financial statements of the Company as of and the year ended December 31, 2021.
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Remediation Activities
As reported on our 2021 Form 10-K, we continue to take steps to remediate this material weakness and will continue to take further steps until such remediation is complete. These steps include the following:
| a) | Hiring additional resources, including third-party resources, with the appropriate technical accounting expertise, and strengthening internal training, to assist us in identifying and addressing any complex technical accounting issues that affect our consolidated financial statements. |
| b) | Designing and implementing a comprehensive and continuous risk assessment process to identify and assess risks of material misstatements, and ensure that the impacted financial reporting processes and related internal controls are properly designed, maintained, and documented to respond to those risks in our financial reporting. |
| c) | Implementing more structured analysis and review procedures and documentation for the application of GAAP, complex accounting matters, and key accounting policies. |
| d) | Augmenting our current estimation policies and procedures to be more robust and in-line with overall market dynamics, including an evaluation of our operating environment, in order to ensure operating effectiveness of certain process-level control activities. |
| e) | Deploying new tools and tracking mechanisms to help enhance and maintain the appropriate documentation surrounding our classification of operating expenses. |
| f) | Further enhancing our policies, procedures, and controls related to physical inventory counting both in interim periods and at year-end. |
| g) | Implementing general information technology controls over our information technology system used in calculating fuel billings. |
| h) | Implementing structured analysis and review procedures around the manual processes related to capitalization of inventory costs. |
| i) | Reporting regularly to the Company’s Audit Committee on the progress and results of the remediation plan, including the identification, status, and resolution of internal control deficiencies. |
As we work to improve our internal control over financial reporting, we may modify our remediation plan and may implement additional measures as we continue to review, optimize, and enhance our financial reporting controls and procedures in the ordinary course. The material weaknesses will not be considered remediated until the remediated controls have been operating for a sufficient period of time and can be evidenced through testing that these controls are operating effectively.
(c) Changes in internal control over financial reporting
Exclusive of the steps taken as part of the remediation activities, there were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II. OTHER INFORMATION
Item 1 – Legal Proceedings
See “Note 19: Commitments and Contingencies” within Item 1 of this Form 10-Q for a discussion regarding material legal proceedings.
Except as otherwise noted, there have been no material developments in legal proceedings. For previously reported information about legal proceedings, refer to Part I, Item 3, “Legal Proceedings,” of the Company’s 2021 Form 10-K.
Item 1A – Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that could materially affect the Company’s business, financial condition or future results discussed in the Company’s 2021 Form 10-K in Part I, Item 1A. “Risk Factors.” The risks described in the 2021 Form 10-K are not the only risks that could affect the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and/or operating results in the future. There have been no material changes to our risk factors since December 31, 2021.
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
(a) Not applicable.
(b) Not applicable.
(c) None.
Item 3 — Defaults Upon Senior Securities
None.
Item 4 — Mine Safety Disclosures
None.
Item 5 — Other Information
None.
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Item 6 — Exhibits
3.1 | |
3.2 | |
3.3 | |
3.4 | |
3.5 | |
3.6 | |
3.7 | |
3.8 | |
3.9 | |
10.1 | |
31.1* | |
31.2* | |
32.1** | |
32.2** | |
101.INS* | Inline XBRL Instance Document |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* | Submitted electronically herewith. |
** | Pursuant to Item 601(b)(32)(ii) of Regulation S-K, this certification is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
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Signatures
Pursuant to requirements 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. | ||
Date: August 9, 2022 | By: | /s/ Andrew Marsh |
Andrew Marsh | ||
President, Chief Executive | ||
Date: August 9, 2022 | By: | /s/ Paul B. Middleton |
Paul B. Middleton | ||
Chief Financial Officer (Principal | ||
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