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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
, D.C. 20549
FORM 10-K
(Mark One)
x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For
the fiscal year ended December 31, 2009
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT
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For
the transition period from
to
Commission file
number: 0-27527
Plug Power Inc.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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22-3672377
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(State or Other Jurisdiction
of Incorporation or Organization)
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(I.R.S. Identification
Number)
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968 ALBANY SHAKER ROAD
, LATHAM, NEW YORK 12110
(Address of Principal Executive Offices, including Zip
Code)
(518) 782-7700
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b)
of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, par value $.01 per share
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The NASDAQ Stock Market LLC
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Series A Junior Participating Cumulative Preferred
Stock, par value $.01 per share
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The NASDAQ Stock Market LLC
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Securities registered pursuant to Section 12(g)
of the Act: None
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
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No
x
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of
the Act. Yes
¨
No
x
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Sections 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
x
No
¨
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site,
if any, every Interactive Data File required to be submitted and posted
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 and post such files).
Yes
¨
No
¨
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of the registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
¨
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer, non-accelerated filer, and
smaller reporting company in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer
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Accelerated filer
x
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Non-accelerated filer
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Smaller reporting company
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Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
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No
x
The aggregate market value of the voting and
non-voting common equity of the registrant held by non-affiliates of the
registrant on June 30, 2009 was $73.3 million.
As of
March 5, 2010, 131,053,212 shares of the registrants common stock were
issued and outstanding.
DOCUMENTS INCORPORATED
BY REFERENCE
Portions
of the definitive proxy statement relating to the registrants 2010 Annual
Meeting of stockholders are incorporated by reference into Part III of this
report to the extent described therein.
Table of Contents
INDEX TO
FORM 10-K
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PART I
Forward-Looking
Statements
The
following discussion should be read in conjunction with our accompanying
Consolidated Financial Statements and Notes thereto included within this Annual
Report on Form 10-K. In addition to historical information, this Annual Report
on Form 10-K and the following discussion contain statements that are not
historical facts and are considered forward-looking within the meaning of
Section 27A of the Securities Act 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, estimate, expect, intend,
may, should, will and would or similar words. 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 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 unit orders will not ship, be installed
and/or convert to revenue, in whole or in part; the cost and timing of developing
our products and our ability to raise the necessary capital to fund such
development costs; the cost and availability of fuel and fueling
infrastructures for our products; market acceptance of our GenDrive and GenSys
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; our ability to develop commercially
viable products; our ability to reduce product and manufacturing costs; our
ability to improve system reliability for both GenDrive and GenSys; our ability
to successfully expand our product lines; competitive factors, such as price
competition and competition from other traditional and alternative energy
companies; our ability to manufacture products on a large-scale commercial
basis our ability to protect our intellectual property; the cost of complying
with current and future federal, state and international governmental
regulations; the impact of deregulation and restructuring of the electric
utility industry on demand for Plug Power's energy products; and other risks
and uncertainties discussed under Item IARisk Factors. Readers should not
place undue reliance on our forward-looking statements. These forward-looking
statements speak only as of the date on which the statements were made and are
not guarantees of future performance. Except as may be required by applicable
law, we do not undertake or intend to update any forward-looking statements
after the date of this Annual Report on Form 10-K.
Company Background
Plug
Power Inc., or the Company, is a development stage enterprise involved in the
design, development and manufacture of fuel cell systems for industrial
off-road (forklift or material handling) markets and stationary power markets
worldwide. We are a development stage enterprise because substantially all of
our resources and efforts are aimed at the discovery of new knowledge that
could lead to significant improvement in fuel cell reliability and durability,
and the establishment, expansion and stability of markets for our products. We
continue to experience significant net outflows of cash from operations and
devote significant efforts towards financial planning in order to forecast
future cash spending and the ability to continue product research and development
activities and expansion of markets for our products. Fuel cell technology
within our principal target markets, material handling power and remote prime
power, and our secondary markets, residential and backup power, is still early
in the technology adoption life cycle.
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In
2010, as the Company plans to enter the commercial adoption phase of its GenDrive™
and GenSys
®
products, with commensurate resource commitments to
selling, marketing, and service activities, it is expected that we will no
longer be a development stage enterprise.
We
are focused on proton exchange membrane, or PEM, fuel cell and fuel processing
technologies and fuel cell/battery hybrid technologies, from which multiple
products are available. A fuel cell is an electrochemical device that combines
hydrogen and oxygen to produce electricity and heat without combustion.
Hydrogen is derived from hydrocarbon fuels such as liquid petroleum gas (LPG), natural
gas, propane, methanol, ethanol, gasoline or biofuels. Hydrogen can also be
obtained from the electrolysis of water. Hydrogen can be purchased directly
from industrial gas providers or can be produced on-site at consumer locations.
We
sell our products worldwide through our direct product sales force, original
equipment manufacturers (OEMs) and their dealer networks. We sell to business,
industrial and government customers.
We
were organized in the State of Delaware on June 27, 1997 and became listed
on the NASDAQ exchange on October 29, 1999. We were originally a joint venture
between Edison Development Corporation and Mechanical Technology Incorporated.
In 2007 we merged with and acquired all the assets, liabilities and equity of
Cellex Power Products, Inc. (Cellex) and General Hydrogen Corporation (General
Hydrogen).
Unless
the context indicates otherwise, the terms Company, Plug Power, we, our
or us as used herein refers to Plug Power Inc. (the registrant) and its
subsidiaries.
Business
Strategy
We
are committed to developing effective, economical and reliable fuel cell
products and services for businesses, government agencies and, ultimately,
commercial consumers. Building on our substantial fuel cell application and
product integration experience, we are focused on building strong relationships
with customers who value increased reliability, productivity, energy security
and a sustainable future.
Our
business strategy leverages our unique fuel cell application and integration
knowledge to identify early adopter markets for which we can design and develop
innovative systems and customer solutions that provide superior value,
ease-of-use, and environmental design.
We
have made significant progress in our analysis of the material handling and
stationary power markets. We believe we have developed reliable products which
allow the end customers to eliminate incumbent power sources from their
operations.
We announced
our strategy for achieving profitability on October 8, 2009 in a presentation
that was included as an exhibit to the Companys Form 8-K dated October 8, 2009
as previously filed with the Securities and Exchange Commission.
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Our strategy is to focus our
resources on our two commercial products, GenDrive, a superior alternative to
lead-acid batteries in the material handling market, and GenSys, a
continuous-run prime power system that replaces diesel generators at remote
telecommunication sites where the grid is non-existent or unreliable.
Our strategy also includes the following objectives: decrease product costs by leveraging
the supply chain, lower manufacturing costs, improve system reliability for
both product lines, expand our sales network to effectively reach more of our
targeted customers, and provide customers with high-quality products, service
and post-sales support experience.
Our longer-term
objectives are to deliver economic, social, and environmental benefits in terms
of reliable, clean, cost-effective fuel cell solutions and, ultimately,
sustainability.
We
believe continued investment in research and development is critical to the
development and enhancement of innovative products, technologies and services.
In addition to evolving our direct hydrogen fueled systems, we continue to
capitalize on our investment in power electronics, controls, software and
reforming technology.
Business
Organization
We
manage our business as a single enterprise, emphasizing shared learning across
end-user applications and common supplier/vendor relationships.
Products
We sell
and continue to develop a range of fuel cell products and services including
hydrogen fuel cell low-temperature Proton Exchange Membrane (PEM) systems for
motive and stationary power and a high-temperature fuel cell system for
residential and light commercial co-generation.
Our
primary product lines that we sell are:
GenDrive™ Hydrogen
fueled PEM fuel cell system to provide power to industrial vehicles. We are
focusing our primary efforts on material handling applications (forklifts) at
multi-shift high volume manufacturing and high throughput distribution sites
where our products and services provide a unique combination of productivity,
flexibility and environmental benefits. In 2009, we successfully introduced a
new GenDrive product offering to augment our product suite and allow full site
conversions. During the year, we expanded our sales to commercial customers
including Walmart, FedEx Freight, Coca-Cola Bottling Co., Sysco and
Wegmans. We expect continued sales momentum in 2010 with our key target
customers.
GenSys
®
Liquid petroleum gas (LPG) fueled continuous prime power system. We continue to
develop a low-temperature (60ºC) PEM fuel cell system that supports remote
prime power applications, specifically for the telecommunications sector, where
grid power is unreliable or non-existent. The product has been improved over
the past year through standardization and increasing the power capability to
account for rising loads at telecom sites. As a result of successful field
trials at a Tata Teleservices Ltd. (TTSL) cell tower site in remote India during 2008, in May 2009 Plug Power received an anchor order from Wireless TT Info
Services Limited (WTTIL), the cell tower arm of TTSL, for the purchase, installation
and maintenance of 200 or our GenSys products.
We continue to develop
future iterations of these products aligned with our evolving product roadmap.
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In connection with
the development of our GenSys platform, we continue to develop our high-temperature
(180ºC) polybenzimidazole (PBI) combined heat and power fuel cell system for
light commercial and residential applications producing high quality heat and
supplemental electricity. We partnered with the U.S. Department of Energy and
National Grid to conduct the first field trial of the high-temperature GenSys
product in 2009. Learning from the field trial will help determine system
refinements for incorporation into the next-generation system design.
Additionally in 2009, we continued
to manufacture and support our GenCore
®
product, a hydrogen fueled
PEM fuel cell system to provide back-up power for critical infrastructure. We
continue to work with certain established customers on initiatives related to
this product.
Product
Support & Services
To
promote fuel cell adoption and maintain post-sale customer satisfaction, we
offer a range of service and support options. These options include
installation, commissioning, remote monitoring, product manuals, as well as
on-site technical support.
Additionally,
GenDrive product support and services may also include customer training and available
lift truck dealer networks service personnel. Such personnel may assist
with the commissioning and installation of GenDrive products and, in some cases,
regularly scheduled preventative maintenance.
Our GenSys product support and service is provided by our
Indian organization, Plug Power Energy India Private Limited (Plug Power India),
an affiliate of Plug Power Inc. Services that can be offered include
installation, commissioning, preventive and corrective maintenance, technical
support hotline, engineering escalation, training, and remote monitoring of
fleet performance. Additionally, Plug Power has entered into a strategic
agreement with Hindustan Petroleum Corporation Limited (HPCL) to ensure proper
fuel support at all remote cell tower locations in India.
Markets/Geography
& Order Status
Our
commercial sales for GenDrive products are in the material handling market, which
primarily consist of large fleet, multi-shift operations in high-volume
manufacturing and high-throughput distribution centers. In 2009, all of our GenDrive
product installations were in North America.
We received
584 orders for our GenDrive product during the year ending December 31, 2009.
Backlog on December 31, 2009 was 654 units representing approximately $15.6
million in billable value including approximately $700,000 related to 20
GenDrive products that were awarded under various government projects that
remain unfunded as of December 31, 2009. Backlog on December 31, 2008 was 341
units representing approximately $6.4 million in billable value which includes
approximately $1.1 million related to 45 GenDrive products that were previously
funded under various government projects.
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GenDrive
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2009
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2008
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Shipments
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271
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132
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Cancellations
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-
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4
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Orders
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584
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358
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Backlog
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654
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341
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The
assembly of GenDrive products that we sell is performed primarily at our
manufacturing facility in Latham, New York. Currently, the supply and
manufacture of several critical components used in our products are performed
by sole-sourced third-party vendors in the U.S. and Canada.
Our
commercial sales for GenSys products are in the prime power market segments in
rural locations where the grid is unreliable or non-existent. In 2009, all orders
for our GenSys product were received from India.
We
received an order for 200 of our GenSys products during the year ending
December 31, 2009. Backlog on December 31, 2009 was 199 units representing
approximately $6.9 million in billable value. We satisfied our orders for our
GenSys product during the year ending December 31, 2008; therefore, there was
no backlog on December 31, 2008.
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GenSys
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2009
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2008
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Shipments
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1
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5
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Cancellations
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-
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-
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Orders
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200
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5
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Backlog
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199
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Plug
Power India signed a five-year strategic manufacture and supply agreement with
SFO Technologies (a NeST Group Company) in 2009 for our GenSys product. The
Indian manufacturing relationship allows for the export of our GenSys product
to key markets in India, Africa and Asia.
Our commercial
sales of GenCore stationary back-up power product primarily support the
telecommunications industry. We received 2 orders during the year ending
December 31, 2009.
Backlog on
December 31, 2009 was 10 units representing approximately $130,000 in billable
value. Backlog on December 31, 2008 was 140 units representing approximately
$1.8 million in billable value. On February 23, 2009, our Distributor Agreement
with IST Telecom expired; 100 units that had been ordered pursuant to this Distributor
Agreement and in backlog have been cancelled. We continue to consider and may
accept new orders for GenCore product as received.
GenCore
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2009
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2008
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Shipments
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31
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146
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Cancellations
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101
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7
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Orders
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2
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109
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Backlog
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10
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140
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The
assembly of GenCore products that we sell is performed primarily at our
manufacturing facility in Latham, New York. Currently, the supply and
manufacture of several critical components used in our products are performed
by sole-sourced third-party vendors in the U.S. and Canada.
Under
all product lines, we have accepted orders that require certain conditions or
contingencies to be satisfied prior to shipment, some of which are outside of
our control. Historically, shipments made against these orders can occur
between thirty (30) days and twenty-four (24) months from the date of
acceptance of the order.
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Distribution,
Marketing and Strategic Relationships
We
have developed strategic relationships with well-established companies in key
areas including distribution, service, marketing, supply, technology
development and product development. We sell our products worldwide through our
direct product sales force, original equipment manufacturers (OEMs) and their
dealer networks.
Competition
We
are confronted by aggressive competition in all areas of our business. The
markets we address for motive and stationary power are characterized by the
presence of well-established commodity battery and combustion generator
products in addition to several competing fuel cell companies. Over the past
several years, there has been price competition in these markets. The
principal competitive factors in the markets in which we operate include price,
product features, relative price and performance, product quality and
reliability, design innovation, marketing and distribution capability, service
and support, and corporate reputation.
In
the material handling market, we believe our GenDrive products have an
advantage over lead acid batteries for customers who run high-throughput
distribution centers with multi shift operations by offering increased
productivity with lower operational costs. However, we expect competition in
this space to intensify as competitors attempt to imitate our approach with
their own offerings. Some of these current and potential competitors have
substantial resources and may be able to provide such products and services at
little or no profit or even at a loss to compete with our offerings.
In
the prime power market, we believe our GenSys products have an advantage over
diesel generators and advanced battery cycling for customers operating
telecommunication towers in rural locations where the grid is unreliable or
non-existent because of the lower cost of ownership due to reduced operating
costs and fuel costs. We expect that competition will continue to be a
combined solution of diesel generators and advanced battery cycling. The
attractiveness of the value proposition in telecom markets fluctuates with the
cost of diesel fuel versus LPG.
Intellectual
Property
We
believe that neither we nor our competitors can achieve a significant
proprietary position on the basic technologies currently used in PEM fuel cell
systems. However, we believe the design and integration of our system and
system components, as well as some of the low-cost manufacturing processes that
we have developed, is intellectual property that can be protected. Our
intellectual property portfolio covers among other things: fuel cell components
that reduce manufacturing part count; fuel cell system designs that lend
themselves to mass manufacturing; improvements to fuel cell system efficiency,
reliability and system life; and control strategies, such as added safety
protections and operation under extreme conditions. In general, our employees
are party to agreements providing that all inventions (whether patented or not)
made or conceived while an employee of Plug Power, which are related to or
result from work or research that Plug Power performs, will remain the sole and
exclusive property of Plug Power.
During
2009 the U.S. Patent and Trademark Office issued 5 new patents to the Company.
As of December 31, 2009 we have a total of 167 issued patents. We also
have 41 U.S. patent applications pending, 6 Canadian patent applications
pending and 17 other foreign patent applications pending. The number of
pending patent applications decreased in 2009 as we continued our 2008 efforts
to focus our intellectual property protection on our current product
offerings. Additionally, as of December 31, 2009 we have 6 trademarks
registered with the U.S. Patent and Trademark Office.
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Furthermore,
as of December 31, 2009 there are 27 pending U.S. patent applications filed on
behalf of Honda and 1 U.S. patent issued to Honda relating to joint development
work on the Home Energy Station (HES) and to which we have certain rights.
Government
Regulation
We do
not believe that we will be subject to existing federal and state regulatory
commissions governing traditional electric utilities and other regulated
entities. Our products and their installations are, however, subject to oversight
and regulation at the state and local level in accordance with state and local
statutes and ordinances relating to, among others, building codes, fire codes,
public safety, electrical and gas pipeline connections and hydrogen siting. The
level of regulation may depend, in part, upon where a system is located. For
example, the 2008 National Electrical Code (NEC) is a model code written by the
National Fire Protection Association, or NFPA, that governs the electrical
wiring of most homes, businesses and other buildings in the United States. The NEC has been adopted by local jurisdictions throughout the United States and is enforced by local officials, such as building and electrical inspectors.
Article 692 of the NEC governs the installation of stationary fuel cell systems,
such as our GenSys or GenCore products. Accordingly, all of our stationary
products installed in a jurisdiction that has adopted the NEC are installed in
accordance with Article 692.
In addition,
product safety standards have been established by the American National
Standards Institute (ANSI) covering the overall fuel cell system. Our GenCore
product has been certified by independent third-parties to be in compliance
with such ANSI standards and we will continue to assess our GenSys and GenDrive
products and design them to ANSI standards in 2010. Other than these
requirements, at this time we do not know what additional requirements, if any,
each jurisdiction will impose on our products or their installation. We also do
not know the extent to which any new regulations may impact our ability to
distribute, install and service our products. As we continue distributing our
systems to our target markets, the federal, state or local government entities
may seek to impose regulations or competitors may seek to influence regulations
through lobbying efforts.
Raw
Materials
Although
most components essential to our business are generally available from multiple
sources, we currently obtain certain key components including, but not limited
to, fuel cell stack materials and energy storage devices, from single or
limited sources. In 2008, Plug Power signed a supply agreement with Ballard
Power Systems (Ballard) through December 31, 2010. Under this agreement,
Ballard has served as the exclusive supplier of fuel cell stacks for Plug
Powers GenDrive product line.
We
believe there are several component suppliers and manufacturing vendors whose
loss to the Company could have a material adverse effect upon our business and
financial condition. At this time, such vendors include, but are not limited
to, Ballard. We attempt to mitigate these potential risks by working closely
with these and other key suppliers on product introduction plans, strategic
inventories, coordinated product introductions and internal and external
manufacturing schedules and levels.
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Research and
Development
Because
the fuel cell industry is characterized by its early state of adoption, our
ability to compete successfully is heavily dependent upon our ability to ensure
a continual and timely flow of competitive products, services, and technologies
to the marketplace. We continue to develop new products and technologies and to
enhance existing products in the areas of cost, size, weight, and in supporting
service solutions in order to drive commercialization. We may expand the range
of our product offerings and intellectual property through licensing and/or
acquisition of third-party business and technology. Our research and
development expense totaled $16.3 million, $35.0 million and $39.2 million in
2009, 2008 and 2007, respectively. We also had cost of research and development
contract revenue of $12.4 million, $21.5 million and $19.0 million in 2009, 2008
and 2007, respectively. These expenses represent the cost of research and
development programs that are partially funded under cost reimbursement
research and development arrangements with third parties.
Employees
As of
December 31, 2009, we had 212 employees.
Financial
Information About Geographic Areas
Please
refer to our Geographic Information included in our Consolidated Financial
Statements and notes thereto included in Part II, Item 8: Financial Statements
and Supplementary Data of this Form 10-K.
Available Information
Our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act are available free of charge,
other than an investors own internet access charges, on the Companys website
with an internet address of www.plugpower.com as soon as reasonably practicable
after the Company electronically files such material with, or furnishes it to
the Securities and Exchange Commission (SEC). The information contained on our
website is not included as a part of, or incorporated by reference into, this
Annual Report on Form 10-K. The public may read and copy any materials the
Company files with the SEC at the SECs Public Reference Room at 450 Fifth Street, NW., Washington, DC 20549. The public may also obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC. The SECs website address is http://www.sec.gov.
The
following factors should be considered carefully in addition to the other
information in this Form 10-K. Except as mentioned under Quantitative and
Qualitative Disclosure About Market Risk and except for the historical
information contained herein, the discussion contained in this Form 10-K
contains forward-looking statements, within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act, that involve
risks and uncertainties. Our actual results could differ materially from those
discussed in this Form 10-K. Important factors that could cause or contribute
to such differences include those discussed below, as well as those discussed
elsewhere herein.
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We have incurred losses, anticipate
continuing to incur losses and might never achieve or maintain profitability.
As of
December 31, 2009 we had an accumulated deficit of $680.4 million. We have
not achieved profitability in any quarter since our formation and may continue
to incur net losses until we can produce sufficient revenue to cover our costs.
We anticipate that we will continue to incur losses until we can produce and
sell our products on a large-scale and cost-effective basis. On October 8,
2009, we announced our path to profitability; however, we cannot guarantee when
we will operate profitably, if ever. In order to achieve profitability, among
other factors, management must successfully execute our planned path to
profitability in the early adoption markets on which we are focused, the
hydrogen infrastructure that is needed to support our growth readiness and cost
efficiency must be available and cost efficient, we must increasingly shorten
cycles in our product roadmap with the product reliability and performance our
customers expect and successfully introduce our products into the market, we
must accurately evaluate our markets for, and react to, competitive threats in
both other technologies (such as advanced batteries) and our technology field,
and we must continue to lower our products build costs and lifetime service
costs. If we are unable to successfully take these steps, we may never operate
profitably, even if we do achieve profitability, we may be unable to sustain or
increase our profitability in the future.
We are still a development stage company
and therefore have limited experience in manufacturing and marketing our
products and, as a result, may be unable to successfully commercialize our
products.
We
were formed in June 1997 to further the research and development of stationary
fuel cell systems. While we delivered our initial GenSys product in the third
quarter of 2001, our initial GenCore product in the fourth quarter of 2003 and
our GenDrive product in the third quarter of 2007, we do not have extensive experience
in manufacturing and marketing our products. Before investing in our common
stock, you should consider the challenges, expenses and difficulties that we
will face as a development stage company seeking to commercialize our new and
existing products. In conjunction with our announced path to profitability, we
intend to end development stage accounting as we commercialize our products;
however, if we are unable to successfully commercialize our products, we may
never be able to change our financial accounting practices, and that failure to
successfully commercialize would have a material adverse effect on our
business, prospects, financial condition and results of operations.
Our
purchase orders may not ship, be commissioned or installed, or convert to
revenue, in whole or in part; and o
ur
pending orders may not convert to purchase orders, in whole or in part.
We have accepted orders from certain customers, which
may include firm orders, stocking orders and orders that require certain
conditions or contingencies to be satisfied prior to shipment or prior to
commissioning or installation, some of which are outside of our control.
Historically, shipments made against these orders have occurred between thirty
(30) days and twenty- four (24) months from the date of acceptance of
the order. Orders received during the year ended December 31, 2009 totaled
786 units. Backlog on December 31, 2009 was 863 units. Of the unit orders
in backlog on December 31, 2009, orders for 166 units were older than 12
months. The time periods from receipt of an order to shipment date and
installation vary widely and are determined by a number of factors, including
the terms of the customer contract and the customers deployment plan. Due to
certain redesign elements to be satisfied prior to shipment of units under
certain of our agreements, some of which are outside of our control, some or
all of our orders may not ship or convert to revenue. We also have publicly
discussed anticipated, pending orders
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with
potential customers; however, those potential customers may require certain
conditions or contingencies to be satisfied prior to issuing a purchase order
to the Company, some of which are outside of our control. Such conditions or
contingencies that may be required to be satisfied before the Companys receipt
of a purchase order may include, but are not limited to, successful product
demonstrations or field trials. Some conditions or contingencies that are out
of our control may include, but are not limited to, government tax policy,
government funding programs, and government incentive programs. Additionally,
some conditions and contingencies may extend for several years. We may have to
compensate customers, by either reimbursement, forfeiting portions of
associated revenue, or other methods depending on the terms of the customer
contract, based on the failure on any of these conditions or contingencies.
This could have an adverse impact on our revenue and cash flow.
Our
stock price has been and could remain volatile.
The market price of our common stock has historically
experienced and may continue to experience significant volatility. In 2009 the
market price of our common stock fluctuated from a high of $1.19 per share in
the fourth quarter of 2009 to a low of $0.67 per share in the third quarter of
2009. Our progress in developing and commercializing our products, our
quarterly operating results, announcements of new products by us or our
competitors, our perceived prospects, changes in securities analysts
recommendations or earnings estimates, changes in general conditions in the
economy or the financial markets, adverse events related to our strategic
relationships, significant sales of our common stock by existing stockholders,
including one or more of our strategic partners, and other developments affecting
us or our competitors could cause the market price of our common stock to
fluctuate substantially. In addition, in recent years, the stock market has
experienced significant price and volume fluctuations. This volatility has
affected the market prices of securities issued by many companies for reasons
unrelated to their operating performance and may adversely affect the price of
our common stock. In addition, we may be subject to additional securities class
action litigation as a result of volatility in the price of our common stock,
which could result in substantial costs and diversion of managements attention
and resources and could harm our stock price, business, prospects, results of
operations and financial condition.
A
failure to comply with NASDAQs listing standards could result in the delisting
of our common stock by NASDAQ from the NASDAQ Global Market and severely limit
the ability to trade our common stock.
Our
common stock is currently traded on the NASDAQ Global Market. Under NASDAQs
listing maintenance standards, if the closing bid price of our common stock is
under $1.00 per share for 30 consecutive trading days, NASDAQ will notify us
that we may be delisted from the NASDAQ Global Market. If the closing bid price
of our common stock does not thereafter regain compliance for a minimum of ten
consecutive trading days during the 180 days following notification by NASDAQ,
NASDAQ may delist our common stock from trading on the NASDAQ Global Market. On
December 8, 2009, we were notified by NASDAQ that we were not in compliance
with the minimum bid price listing requirement and therefore had 180 days
within which to regain compliance. On March 5, 2010, the per share price of our
common stock closed at $0.55 on the NASDAQ Global Market. There can be no
assurance that our common stock will continue to remain eligible for trading on
the NASDAQ Global Market. If our common stock is delisted and we are unable to
list on another exchange, the ability to trade in our common stock would be
severely, if not completely, limited.
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OJSC
(Third Generation Company of the Wholesale Electricity Market) (OGK-3) has
substantial control over us and could limit stockholders ability to influence
the outcome of key transactions, including a change of control.
OGK-3 and its affiliates own approximately 34% of the
outstanding shares of our common stock. As a result, these stockholders can
significantly influence or control certain matters requiring approval by our
stockholders, including the approval of mergers or other extraordinary
transactions. The interests of these stockholders may differ from ours and
these stockholders may vote in a way with which we disagree and which may be
adverse to our interests. This concentration of ownership may have the effect
of delaying, preventing or deterring a change of control of our Company, could
deprive our stockholders of an opportunity to receive a premium for their
common stock as part of a sale of our Company and might ultimately affect the
market price of our common stock.
If
a substantial number of shares of the Companys common stock become available
for sale and are sold in a short period of time, the market price of our common
stock could decline.
OGK-3 holds 44,626,939 shares of common stock, which
represent in the aggregate approximately 34% of the Companys outstanding
common stock. If OGK-3 or its affiliates sell substantial amounts of our common
stock in the public market, the market price of our common stock could decrease
significantly. The perception in the public market that OGK-3 might sell shares
of common stock could also depress the trading price of our common stock. A
decline in the price of shares of our common stock might impede our ability to
raise capital through the issuance of additional shares of our common stock or
other equity securities.
Our
GenDrive product is fueled by hydrogen and we do not control the availability
of such fuel.
We
are dependant upon hydrogen suppliers for success with the commercialization of
our GenDrive product. Although we will continue to work with hydrogen suppliers
to mutually agree on terms for our customers, including, but not limited to,
price of the hydrogen molecules, liquid hydrogen, hydrogen infrastructure and
service costs, to the benefit of our GenDrive product value proposition,
ultimately we have no control over such third parties. If hydrogen suppliers
elect not to participate in the material handling market or are difficult to
negotiate with, then that could negatively affect our sales and deployment of
our GenDrive product.
A
viable market for our products may never develop or may take longer to develop
than we anticipate.
Our products represent emerging markets, and we do not
know the extent to which our targeted customers will want to purchase them and
whether end-users will want to use them. If a viable market fails to develop or
develops more slowly than we anticipate, we may be unable to recover the losses
we will have incurred to develop our products and may be unable to achieve
profitability. The development of a viable market for our products may be
impacted by many factors which are out of our control, including: (i) the cost
competitiveness of our products; (ii) the future costs of natural gas, propane,
hydrogen and other fuels expected to be used by our products; (iii) consumer
reluctance to try a new product; (iv) consumer perceptions of our products
safety; (v) regulatory requirements; (vi) barriers to entry created by existing
energy providers; and (vii) the emergence of newer, more competitive
technologies and products.
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We
may be unable to establish or maintain relationships with third parties for
certain aspects of product development, manufacturing, distribution and
servicing and the supply of key components for our products.
We will need to enter into additional strategic
relationships in order to complete our current product development and
commercialization plans. We will also require partners to assist in the sale,
servicing and supply of components for our anticipated products, which are in
development. If we are unable to identify or enter into satisfactory agreements
with potential partners, including those relating to the distribution, service
and support of our anticipated products, we may not be able to complete our
product development and commercialization plans on schedule or at all. We may
also need to scale back these plans in the absence of needed partners, which
would adversely affect our future prospects for development and
commercialization of future products. In addition, any arrangement with a
strategic partner may require us to issue a significant amount of equity
securities to the partner, provide the partner with representation on our board
of directors and/or commit significant financial resources to fund our product
development efforts in exchange for their assistance or the contribution to us of
intellectual property. Any such issuance of equity securities would reduce the
percentage ownership of our then current stockholders. While we have entered
into relationships with suppliers of some key components for our products, we
do not know when or whether we will secure supply relationships for all
required components and subsystems for our products, or whether such
relationships will be on terms that will allow us to achieve our objectives.
Our business, prospects, results of operations and financial condition could be
harmed if we fail to secure relationships with entities which can develop or
supply the required components for our products and provide the required
distribution and servicing support. Additionally, the agreements governing our
current relationships allow for termination by our partners under certain
circumstances, some of which are beyond our control. If any of our current
strategic partners were to terminate any of its agreements with us, there could
be a material adverse impact on the development and commercialization of our
products and the operation of our business, financial condition, results of
operations and prospects.
We
rely on our partners to develop and provide components for our products.
A suppliers failure to develop and supply components
in a timely manner or at all, or to develop or supply components that meet our
quality, quantity or cost requirements, or our inability to obtain substitute
sources of these components on a timely basis or on terms acceptable to us, could
harm our ability to manufacture our products. In addition, to the extent that
our supply partners use technology or manufacturing processes that are
proprietary, we may be unable to obtain comparable components from alternative
sources. We have supply agreements with certain key suppliers, including, but
not limited to, Ballard Power Systems, that we rely on for critical components
in our products and there are numerous other components for our products that
are sole sourced.
We
have not developed and produced certain products that we have agreed to sell to
some of our customers.
We have not developed or produced certain products
that are required by some of our sales and customer agreements. There can be no
assurance that we will complete development of products meeting specifications
required by our sales and customer agreements and deliver them on schedule.
Pursuant to certain agreements, the customers have the right to provide notice
to us if, in their good faith judgment, we have materially deviated from the
agreement. Should a customer provide such notice, and we cannot mutually agree
to a modification to the agreement, then the customer may have the right to
terminate the agreement, which could adversely affect our future business.
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We
must lower the cost of our products and demonstrate their reliability.
The initial capital cost of our fuel cell systems is
currently significantly more than many established competing technologies. If
we are unable to develop products that are competitive with competing
technologies in terms of price, reliability and longevity, consumers will be
unlikely to buy our products. The profitability of our products depends largely
on material and manufacturing costs. We cannot guarantee that we will be able
to lower these costs to the level where we will be able to produce a
competitive product or that any product produced using lower cost materials and
manufacturing processes will not suffer from a reduction in performance,
reliability and longevity.
We
face risks associated with our plans to market, distribute and service our
products internationally.
We intend to market, distribute and service our
products internationally. We have limited experience developing and
manufacturing our products to comply with the commercial and legal requirements
of international markets. Our success in international markets will depend, in
part, on our ability and that of our partners to secure relationships with
foreign sub-distributors, and our ability to manufacture products that meet
foreign regulatory and commercial requirements. Additionally, our planned
international operations are subject to other inherent risks, including
potential difficulties in enforcing contractual obligations and intellectual
property rights in foreign countries and fluctuations in currency exchange
rates. Also, to the extent our operations and assets are located in foreign
countries, they are potentially subject to nationalization actions over which
we will have no control.
Our
international sales and operations may be adversely affected by local government
laws, regulations and policies and changes to the same.
Our international sales and operations are subject to
risks associated with changes in local government laws, regulations and
policies, including those related to tariffs and trade barriers, investments,
taxation, exchange controls, employment regulations, and repatriation of
earnings. Our international sales and operations are also sensitive to changes
in foreign national priorities, including government budgets, as well as to
political and economic instability. International transactions may involve
increased financial and legal risks due to differing legal systems and customs
in foreign countries. For example, as a condition of sale or to the awarding of
a contract, some international customers require us to agree to offset
arrangements, which may include in-country purchases, manufacturing and
financial support arrangements. The contract may provide for penalties in the
event we fail to perform in accordance with the offset requirements. In
addition, as part of our globalization strategy, we have invested in certain
countries which may carry high levels of currency, political and economic risk.
While these factors or the impact of these factors are difficult to predict,
any one or more of them could adversely affect our business, financial
condition or operating results.
Delays
in our product development could have a material impact on the
commercialization of our products.
If we experience delays in meeting our development
goals, our products exhibit technical defects, or if we are unable to meet cost
or performance goals, including power output, useful life and reliability, the
commercialization of our products will be delayed. In this event, potential
purchasers of our products may choose alternative technologies and any delays
could allow potential competitors to gain market advantages. We cannot assure
you that we will successfully meet our commercialization schedule in the
future.
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We
may never complete the research and development of certain commercially viable
products.
We are a development stage company. Other than certain
products within our GenCore, GenSys and GenDrive product families, which we
believe to be commercially viable at this time, we do not know when or whether
we will successfully complete research and development of other commercially
viable products. If we are unable to develop additional commercially viable
products, we will not be able to generate sufficient revenue to become
profitable. The commercialization of our products depends on our ability to reduce
the costs of our components and subsystems, and we cannot assure you that we
will be able to sufficiently reduce these costs. In addition, the
commercialization of our products requires achievement and verification of
their overall reliability, efficiency and safety targets, and we cannot assure
you that we will be able to develop, acquire or license the technology
necessary to achieve these targets. Although we increased the number of units
sold in our GenCore, GenSys and GenDrive product families, we must complete
additional research and development to fill out
product portfolios and deliver enhanced functionality and reliability before we
will be able to manufacture commercially viable products in commercial
quantities. In addition, while we are conducting tests to predict the overall
life of our products, we may not have run our products over their projected
useful life prior to large-scale commercialization. As a result, we cannot be
sure that our products will last as long as predicted, resulting in possible
warranty claims and commercial failures.
Failure
of our field tests could negatively impact demand for our products.
We are currently field-testing a number of our
products, and we plan to conduct additional field tests in the future. We may
encounter problems and delays during these field tests for a number of reasons,
including the failure of our technology or the technology of third parties, as
well as our failure to maintain and service our products properly. Many of
these potential problems and delays are beyond our control. Any problem or
perceived problem with our field tests could materially harm our reputation and
impair market acceptance of, and demand for, our products.
Product
liability or defects could negatively impact our results of operations.
Any liability for damages resulting from malfunctions
or design defects could be substantial and could materially adversely affect
our business, financial condition, results of operations and prospects. In
addition, a well-publicized actual or perceived problem could adversely affect
the markets perception of our products resulting in a decline in demand for
our products and could divert the attention of our management, which may
materially and adversely affect our business, financial condition, results of
operations and prospects.
We
face intense competition and may be unable to compete successfully.
The markets for energy products are intensely
competitive. Some of our competitors in the fuel cell sector are much larger
than we are and may have the manufacturing, marketing and sales capabilities to
complete research, development and commercialization of commercially viable
fuel cell products more quickly and effectively than we can. In addition,
there are many companies engaged in all areas of traditional and alternative
energy generation in the United States, Canada and abroad, including, among
others, major electric, oil, chemical, natural gas, battery, generator and
specialized electronics firms, as well as universities, research institutions
and foreign government-sponsored companies. These firms are engaged in forms of
power generation such as solar and wind power, reciprocating engines and micro
turbines, advanced battery technologies, as well as traditional grid-supplied
electric power. Many of these entities have substantially greater financial,
research and development, manufacturing and marketing resources than we do.
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Alternatives
to our technology or improvements to traditional energy technologies could make
our products less attractive or render them obsolete.
Our products are among a number of alternative energy
products being developed. A significant amount of public and private funding is
currently directed toward development of micro turbines, solar power, wind
power, advanced batteries and generator sets, fast charged technologies and
other types of fuel cell technologies. Improvements are also being made to the
existing electric transmission system and battery based systems. Technological
advances in alternative energy products, improvements in the electric power grid,
battery systems or other fuel cell technologies may make our products less
attractive or render them obsolete.
We
depend on only a few customers for the majority of our revenues and the loss of
any one or more of these customers, or a significant loss, reduction or
rescheduling of orders from any of these customers, would have a material
adverse effect on our business, financial condition and results of operations.
We
sell most of our products to a small number of customers, and while we are
continually seeking to expand our customer base, we expect this will continue
for the next several years. Any decline in business with these small numbers of
customers could have an adverse impact on our business, financial condition and
results of operations. Our future success is dependent upon the continued
purchases of our products by a small number of customers. Any fluctuations in
demand from such customers or other customers may negatively impact our
business, financial condition and results of operations. If we are unable to
broaden our customer base and expand relationships with potential customers,
our business will continue to be impacted by unanticipated demand fluctuations
due to our dependence on a small number of customers. Unanticipated demand fluctuations
can have a negative impact on our revenues and business, and an adverse effect
on our business, financial condition and results of operations. In addition,
our dependence on a small number of major customers exposes us to numerous
other risks, including: (i) a slowdown or delay in a customers deployment of
our products could significantly reduce demand for our products; (ii)
reductions in a single customers forecasts and demand could result in excess
inventories; (iii) the current economic crisis could negatively affect one or
more of our major customers and cause them to significantly reduce operations,
or file for bankruptcy; (iv) consolidation of customers can reduce demand as
well as increase pricing pressure on our products due to increased purchasing
leverage; (v) each of our customers has significant purchasing leverage over us
to require changes in sales terms including pricing, payment terms and product
delivery schedules; and (vi) concentration of accounts receivable credit risk,
which could have a material adverse effect on our liquidity and financial
condition if one of our major customers declared bankruptcy or delayed payment
of their receivables.
The
hydrocarbon fuels and other raw materials on which our products rely may not be
readily available or available on a cost-effective basis.
Our products depend largely on the availability of
natural gas, liquid propane and hydrogen gas. If these fuels are not readily
available or if their prices are such that energy produced by our products
costs more than energy provided by other sources, then our products could be
less attractive to potential users and our products value proposition could be
negatively affected. In addition, platinum is a key material in our PEM fuel
cells. Platinum is a scarce natural resource and we are dependent upon a
sufficient supply of this commodity. Any shortages could adversely affect our
ability to produce commercially viable fuel cell systems and significantly
raise our cost of producing our fuel cell systems.
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We
may have difficulty managing change in our operations.
We continue to undergo rapid change in the scope and
breadth of our operations as we advance the development and commercialization
of our products. Such rapid change is likely to place a significant strain on
our senior management team and other resources. We will be required to make
significant investments in our engineering, logistics, financial and management
information systems and to motivate and effectively manage our employees. Our
business, prospects, results of operations and financial condition could be
harmed if we encounter difficulties in effectively managing the budgeting,
forecasting and other process control issues presented by such a rapid change.
Our
future plans could be harmed if we are unable to attract or retain key
personnel.
We have attracted a highly skilled management team and
specialized workforce, including scientists, engineers, researchers,
manufacturing, marketing and sales professionals. Our future success will
depend, in part, on our ability to attract and retain qualified management and
technical personnel. We do not know whether we will be successful in hiring or
retaining qualified personnel. Our inability to hire qualified personnel on a
timely basis, or the departure of key employees, could materially and adversely
affect our development and commercialization plans and, therefore, our business
prospects, results of operations and financial condition.
Provisions
in our charter documents and Delaware law may prevent or delay an acquisition
of us, which could decrease the value of our common stock.
Our certificate of incorporation, our bylaws, and
Delaware corporate law contain provisions that could make it harder for a third
party to acquire us without the consent of our board of directors. These provisions
include those that: (i) authorize the issuance of up to 5,000,000 shares of
preferred stock in one or more series without a stockholder vote; (ii) limit
stockholders ability to call special meetings; (iii) establish advance notice
requirements for nominations for election to our board of directors or for
proposing matters that can be acted on by stockholders at stockholder meetings;
and (iv) provide for staggered terms for our directors. We have a shareholders
rights plan that may be triggered if a person or group of affiliated or
associated persons acquires beneficial ownership of 15% or more of the
outstanding shares of our common stock. In addition, in certain circumstances, Delaware law also imposes restrictions on mergers and other business combinations between
us and any holder of 15% or more of our outstanding common stock.
Adverse
changes in general economic conditions in the United States or any of the major
countries in which we do business could adversely affect our operating results.
As a global company, we are subject to the risks
arising from adverse changes in global economic conditions. For example, as a
result of the ongoing financial crisis in the credit markets, softness in the
housing markets, difficulties in the financial services sector and continuing
economic uncertainties, the direction and relative strength of the U.S. economy has become increasingly uncertain. If economic growth in the United States and other countries continues to slow or recede, our current or potential customers
may delay or reduce technology purchases. This could result in reductions in
sales of our products, longer sales cycles, slower adoption of new technologies
and increased price competition, which could materially and adversely affect
our business, results of operations and financial condition.
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We
have no experience manufacturing our products on a large-scale commercial basis
and may be unable to do so.
To date, we have focused primarily on research,
development and low volume manufacturing and have no experience manufacturing
our products on a large-scale commercial basis. In 2000, we completed
construction of our 50,000 square foot manufacturing facility and have
continued to develop our manufacturing capabilities and processes. In 2009, we
engaged a contract manufacturer in India to augment our manufacturing
capabilities. We do not know whether or when we will be able to develop
efficient, low-cost manufacturing capabilities and processes that will enable
us to manufacture our products in commercial quantities while meeting the quality,
price, engineering, design, and production standards required to successfully
market our products. Our failure to develop such manufacturing processes and
capabilities could have a material adverse effect on our business, financial
condition and results of operations. Even if we are successful in developing
our manufacturing capabilities and processes, we do not know whether we will do
so in time to meet our product commercialization schedule or to satisfy the
requirements of our distributors or customers.
Our
financial results could be negatively impacted by impairments of goodwill or
other intangible assets required by Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) No. 350, Intangibles Goodwill and
Other and the application of future accounting policies or interpretations of
existing accounting policies.
In accordance with FASB ASC No. 350, we perform an
annual assessment on goodwill and other intangible assets for impairment and
also an assessment if an event occurs or circumstances change that would more
likely than not reduce the fair value of a reporting unit below its carrying
amount. A downward revision in the fair value of one of our acquired businesses
could result in impairments of goodwill under FASB ASC No. 350 and non-cash
charges. Any charge resulting from the application of FASB ASC No. 350 could
have a significant negative effect on our reported net loss. In addition, our
financial results could be negatively impacted by the application of existing
and future accounting policies or interpretations of existing accounting
policies, any continuing impact of FASB ASC No. 350 or any negative impact
relating to the application of FASB ASC No. 360-10-35-15, Impairment or
Disposal of Long-Lived Assets.
Regulatory
changes may affect demand for our products.
The
market for electric power generation products is heavily influenced by federal,
state and international governmental regulations and policies. A change in the
current regulatory policies could result in a significant reduction in the
demand for our products or could deter further investment in the research and
development of alternative energy sources, including fuel cells. Government regulatory
changes may affect the market for our products. Similarly, utility companies
could place barriers on our entry into the marketplace where customers depend
on traditional grid supplied energy, such as the fees that may be charged to
industrial companies for disconnecting from the grid or for using less electricity
and this could affect customers decisions. The imposition of such fees could
increase the cost to grid-connected customers of using our products and could
make our products less desirable, thereby harming our revenue and
profitability.
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Our business may
become subject to future government regulation, which may impact our ability to
market our products.
Our
products are subject to certain federal, local, and non-U.S. laws and
regulations, including, for example, state and local ordinances relating to
building codes, public safety, electrical and gas pipeline connections,
hydrogen transportation and siting and related matters. Further, as products
are introduced into the market commercially, governments may impose new
regulations. We do not know the extent to which any such regulations may impact
our ability to distribute, install and service our products. Any regulation of
our products, whether at the federal, state, local or foreign level, including
any regulations relating to installation and servicing of our products, may
increase our costs and the price of our products.
Our products
use flammable fuels that are inherently dangerous substances.
Our
fuel cell systems use natural gas, liquid propane and hydrogen gas in catalytic
reactions, which produce less heat than a typical gas furnace. While our
products do not use this fuel in a combustion process, natural gas, liquid
propane and hydrogen gas are flammable fuels that could leak in a home or
office and combust if ignited by another source. Further, while we are not
aware of any accidents involving our products, any such accidents involving our
products or other products using similar flammable fuels could materially
suppress demand for, or heighten regulatory scrutiny of, our products.
We may not be able
to identify suitable acquisition candidates; and if we do identify suitable
candidates, we may not be able to acquire them on commercially acceptable terms
or at all.
As
part of our business strategy we may engage in acquisitions that we believe
will provide us with complementary technologies, products, channels, revenue
streams, expertise and/or other valuable assets. Future acquisitions may be
difficult to integrate, add additional burden to our management and reduce the
percentage ownership of our stockholders. If we acquire another company, we may
not be able to successfully integrate the acquired business into our existing
business in a timely and non-disruptive manner. We may have to devote a
significant amount of time, management and financial resources to do so. Even
with this investment of management and financial resources, an acquisition may
not produce the desired revenues, earnings or business synergies. In addition,
an acquisition involving our stock may reduce the percentage ownership of our
then current stockholders. If we fail to integrate the acquired business
effectively or if key employees of that business leave, the anticipated
benefits of the acquisition would be jeopardized. The time, capital, management
and other resources spent on an acquisition that fails to meet our expectations
could cause our business and financial condition to be materially and adversely
affected. In addition, from an accounting perspective, acquisitions can lead to
non-recurring charges and amortization or impairment of significant amounts of
intangible assets that could adversely affect our results of operations.
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We may not be able
to protect important intellectual property and we could incur substantial costs
defending against claims that our products infringe on the proprietary rights
of others.
PEM fuel cell technology was first developed in the 1950s, and fuel processing
technology has been practiced on a large scale in the petrochemical industry for
decades. Accordingly, we do not believe that we can establish a significant
proprietary position in the fundamental component technologies in these areas.
However, our ability to compete effectively will depend, in part, on our ability
to protect our proprietary system-level technologies, systems designs and
manufacturing processes. We rely on patents, trademarks, and other policies and
procedures related to confidentiality to protect our intellectual property.
However, some
of our intellectual property is not covered by any patent or patent
application. Moreover, we do not know whether any of our pending patent
applications will issue or, in the case of patents issued or to be issued, that
the claims allowed are or will be sufficiently broad to protect our technology
or processes. Even if all of our patent applications are issued and are
sufficiently broad, our patents may be challenged or invalidated. We could
incur substantial costs in prosecuting or defending patent infringement suits
or otherwise protecting our intellectual property rights. While we have
attempted to safeguard and maintain our proprietary rights, we do not know whether
we have been or will be completely successful in doing so. Moreover, patent
applications filed in foreign countries may be subject to laws, rules and
procedures that are substantially different from those of the United States, and any resulting foreign patents may be difficult and expensive to enforce. In
addition, we do not know whether the U.S. Patent & Trademark Office
will grant federal registrations based on our pending trademark applications.
Even if federal registrations are granted to us, our trademark rights may be
challenged. It is also possible that our competitors or others will adopt
trademarks similar to ours, thus impeding our ability to build brand identity
and possibly leading to customer confusion. We could incur substantial costs in
prosecuting or defending trademark infringement suits.
Further,
our competitors may independently develop or patent technologies or processes
that are substantially equivalent or superior to ours. If we are found to be
infringing third party patents, we could be required to pay substantial
royalties and/or damages, and we do not know whether we will be able to obtain
licenses to use such patents on acceptable terms, if at all. Failure to obtain
needed licenses could delay or prevent the development, manufacture or sale of
our products, and could necessitate the expenditure of significant resources to
develop or acquire non-infringing intellectual property.
Asserting,
defending and maintaining our intellectual property rights could be difficult
and costly and failure to do so may diminish our ability to compete effectively
and may harm our operating results.
We
may need to pursue lawsuits or legal action in the future to enforce our
intellectual property rights, to protect our trade secrets and domain names,
and to determine the validity and scope of the proprietary rights of others. If
third parties prepare and file applications for trademarks used or registered
by us, we may oppose those applications and be required to participate in
proceedings to determine the priority of rights to the trademark. Similarly,
competitors may have filed applications for patents, may have received patents
and may obtain additional patents and proprietary rights relating to products
or technology that block or compete with ours. We may have to participate in
interference proceedings to determine the priority of invention and the right
to a patent for the technology. Litigation and interference proceedings, even
if they are successful, are expensive to pursue and time consuming, and we
could use a substantial amount of our financial resources in either case.
We rely, in part,
on contractual provisions to protect our trade secrets and proprietary
knowledge.
Confidentiality
agreements to which we are party may be breached, and we may not have adequate
remedies for any breach. Our trade secrets may also be known without breach of
such agreements or may be independently developed by competitors. Our inability
to maintain the proprietary nature of our technology and processes could allow our
competitors to limit or eliminate any competitive advantages we may have.
21
Table of Contents
Our government
contracts could restrict our ability to effectively commercialize our
technology.
Some
of our technology has been developed with state and federal government funding in
the United States, Canada and other countries. The United States and Canadian
governments have a non-exclusive, royalty-free, irrevocable world-wide license
to practice or have practiced any of our technology developed under contracts
funded by the respective government. In some cases, government agencies in the United States or Canada can require us to obtain or produce components for our systems from sources
located in the United States or Canada, respectively, rather than foreign
countries. Our contracts with government agencies are also subject to the risk
of termination at the convenience of the contracting agency, potential
disclosure of our confidential information to third parties and the exercise of
march-in rights by the government. March-in rights refer to the right of the United States or Canadian governments or government agency to license to others any
technology developed under contracts funded by the government if the contractor
fails to continue to develop the technology. The implementation of restrictions
on our sourcing of components or the exercise of march-in rights could harm our
business, prospects, results of operations and financial condition. In
addition, under the Freedom of Information Act, any documents that we have
submitted to the government or to a contractor under a government funding
arrangement are subject to public disclosure that could compromise our
intellectual property rights unless such documents are exempted as trade
secrets or as confidential information and treated accordingly by such
government agencies.
Item 1B.
|
Unresolved Staff
Comments
|
We
have received no written comments regarding our periodic or current reports
from the staff of the Securities and Exchange Commission that were issued 180
days or more preceding the end of our 2009 fiscal year.
Our
principal executive offices are located in Latham, New York. At our 36-acre
campus, we own a 56,000 square foot research and development center, a 32,000
square foot office building and a 50,000 square foot manufacturing facility and
believe that these facilities are sufficient to accommodate our anticipated
production volumes for at least the next two years. Our principal
executive office also leases a 25,000 square foot warehouse facility in Latham, New York.
In
connection with the acquisitions of Cellex and General Hydrogen, we also lease
two facilities in Richmond, British Columbia with combined square footage of
approximately 70,200 square feet to accommodate office, prototyping, and
research and development activities.
The Company
also leases approximately 9,000, 6,000, 900 and 9,600 square feet of space in Ohio, Tennessee, Washington D.C. and India, respectively.
Item 3.
|
Legal
Proceedings
|
In July 2008, Soroof Trading Development Company Ltd.
(Soroof) filed a demand for arbitration against GE Fuel Cell Systems, LLC
(GEFCS). Prior to GEFCS dissolution in 2006, the Company held a 40% membership
interest and GE Microgen, Inc. (GEM) held a 60% membership interest in GEFCS.
In January 2010, Soroof requested, and GEM and
Plug Power Inc. agreed, that the arbitration proceeding be administratively
closed pending final resolution of the matter in United States District Court,
Southern District of New York. On January 22, 2010, Soroof filed a complaint in
United States District Court, Southern District of New York naming, among
others, Plug Power Inc., GEFCS, and GEM as defendants.
22
Table of Contents
Accordingly, while there continues to be on-going
discussions between the parties, we believe that it is too early to determine
(i) that there is likely exposure to an adverse outcome and (ii) whether or not
the probability of an adverse outcome is more than remote.
Item 4.
|
Removed and Reserved
|
PART II
During
the years ended December 31, 2009 and 2008, we issued 607,553 and 379,189
shares of our common stock in connection with matching contributions under our
401(k) Savings & Retirement Plan. The issuance of these shares is
exempt from registration under Section 3(a)(2) of the Securities Act of
1933, as amended.
Market
Information.
Our common stock is
traded on the NASDAQ Global Market under the symbol PLUG. As of March 5, 2010,
there were approximately 2,811 record holders of our common stock. However,
management believes that a significant number of shares are held by brokers
under a nominee name and that the number of beneficial shareholders of our
common stock exceeds 49,000. The following table sets forth high and low last
reported sale prices for our common stock as reported by the NASDAQ Global
Market for the periods indicated:
|
|
|
|
|
|
|
|
|
Sales prices
|
|
|
High
|
|
Low
|
2009
|
|
|
|
|
|
|
1st Quarter
|
|
$
|
1.10
|
|
$
|
0.68
|
2nd Quarter
|
|
$
|
1.14
|
|
$
|
0.73
|
3rd Quarter
|
|
$
|
0.89
|
|
$
|
0.67
|
4th Quarter
|
|
$
|
1.19
|
|
$
|
0.68
|
2008
|
|
|
|
|
|
|
1st Quarter
|
|
$
|
4.17
|
|
$
|
2.52
|
2nd Quarter
|
|
$
|
3.58
|
|
$
|
2.32
|
3rd Quarter
|
|
$
|
2.91
|
|
$
|
0.90
|
4th Quarter
|
|
$
|
1.55
|
|
$
|
0.69
|
Dividend
Policy.
We have never declared
or paid cash dividends on our common stock and do not anticipate paying cash
dividends in the foreseeable future. Any future determination as to the payment
of dividends will depend upon capital requirements and limitations imposed by
our credit agreements, if any, and such other factors as our board of directors
may consider.
23
Table of Contents
Five-Year
Performance Graph
. Below is a line
graph comparing the percentage change in the cumulative total return on the
Companys common stock, based on the market price of the Companys common
stock, with the total return of companies included within the NASDAQ Market
Index and the companies included within the Russell 300 Technology Index for
the period commencing December 31, 2004 and ending December 31, 2009.
The calculation of the cumulative total return assumes a $100 investment in the
Companys common stock, the NASDAQ Market Index and the Russell 300 Technology
Index on December 31, 2004 and the reinvestment of all dividends.
Index
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
PLUG POWER INC.
|
|
100.00
|
|
83.96
|
|
63.67
|
|
64.65
|
|
16.69
|
|
11.62
|
RUSSELL 300 TECHNOLOGY INDEX
|
|
100.00
|
|
101.55
|
|
111.49
|
|
127.91
|
|
73.07
|
|
107.50
|
NASDAQ MARKET INDEX
|
|
100.00
|
|
101.37
|
|
111.03
|
|
121.92
|
|
72.49
|
|
104.31
|
See
also Part III Item 12 in this Annual Report on Form 10-K for additional detail
related to security ownership and related stockholder matters, and for
additional detail on equity compensation plan matters.
24
Table of Contents
Item 6.
|
Selected
Financial Data
|
The
following tables set forth selected financial data and other operating
information of the Company. The selected statements of operations and balance
sheet data for 2009, 2008, 2007, 2006, and 2005 as set forth below are derived
from the audited consolidated financial statements of the Company. The
information is only a summary and you should read it in conjunction with the
Companys audited consolidated financial statements and related notes and other
financial information included herein and Managements Discussion and Analysis
of Financial Condition and Results of Operations.
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(in thousands, except per share data)
|
|
Statements Of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service revenue
|
|
$
|
4,833
|
|
|
$
|
4,667
|
|
|
$
|
3,082
|
|
|
$
|
2,657
|
|
|
$
|
4,881
|
|
Research and development contract revenue
|
|
|
7,460
|
|
|
|
13,234
|
|
|
|
13,189
|
|
|
|
5,179
|
|
|
|
8,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
12,293
|
|
|
|
17,901
|
|
|
|
16,271
|
|
|
|
7,836
|
|
|
|
13,487
|
|
Cost of product and service revenues
|
|
|
7,246
|
|
|
|
11,442
|
|
|
|
9,399
|
|
|
|
4,833
|
|
|
|
4,098
|
|
Cost of research and development contract revenues
|
|
|
12,433
|
|
|
|
21,505
|
|
|
|
19,045
|
|
|
|
7,637
|
|
|
|
12,076
|
|
Research and development expense
|
|
|
16,324
|
|
|
|
34,987
|
|
|
|
39,218
|
|
|
|
41,577
|
|
|
|
35,632
|
|
Selling, general and administrative expenses
|
|
|
15,427
|
|
|
|
28,333
|
|
|
|
19,323
|
|
|
|
12,268
|
|
|
|
8,973
|
|
Goodwill impairment charge
|
|
|
|
|
|
|
45,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
2,132
|
|
|
|
2,225
|
|
|
|
1,614
|
|
|
|
|
|
|
|
687
|
|
Other income (expense), net
|
|
|
560
|
|
|
|
4,734
|
|
|
|
11,757
|
|
|
|
8,169
|
|
|
|
(3,764
|
)
|
Net loss
|
|
$
|
(40,709
|
)
|
|
$
|
(121,700
|
)
|
|
$
|
(60,571
|
)
|
|
$
|
(50,310
|
)
|
|
$
|
(51,743
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share, basic and diluted
|
|
$
|
(0.32
|
)
|
|
$
|
(1.36
|
)
|
|
$
|
(0.69
|
)
|
|
$
|
(0.58
|
)
|
|
$
|
(0.66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
129,111
|
|
|
|
89,383
|
|
|
|
87,342
|
|
|
|
86,100
|
|
|
|
78,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(at end of the
period)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrestricted cash, cash equivalents and available-for-sale securities
|
|
$
|
62,541
|
|
|
$
|
104,688
|
|
|
$
|
165,701
|
|
|
$
|
269,123
|
|
|
$
|
97,563
|
|
Trading securities auction rate debt securities
|
|
|
53,397
|
|
|
|
52,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
164,185
|
|
|
|
209,112
|
|
|
|
268,392
|
|
|
|
307,920
|
|
|
|
139,784
|
|
Borrowings under line of credit
|
|
|
59,375
|
|
|
|
62,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term obligations
|
|
|
533
|
|
|
|
401
|
|
|
|
1,384
|
|
|
|
|
|
|
|
527
|
|
Long-term obligations
|
|
|
2,426
|
|
|
|
1,313
|
|
|
|
4,580
|
|
|
|
1,112
|
|
|
|
4,659
|
|
Stockholders equity
|
|
|
88,269
|
|
|
|
125,864
|
|
|
|
248,900
|
|
|
|
294,528
|
|
|
|
124,955
|
|
Working capital
|
|
|
60,009
|
|
|
|
86,171
|
|
|
|
163,906
|
|
|
|
267,002
|
|
|
|
95,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Table of Contents
The
discussion contained in this Form 10-K contains forward-looking statements,
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act, that involve risks and uncertainties. Our actual results could differ
materially from those discussed in this Form 10-K. In evaluating these
statements, you should review Part I, Item 1A: Risk Factors and our
Consolidated Financial Statements and notes thereto included in Part II, Item
8: Financial Statements and Supplementary Data of this Form 10-K.
Overview
Plug
Power Inc. is a development stage enterprise involved in the design,
development and manufacture of fuel cell systems for industrial off-road
(forklift or material handling) markets and stationary power markets worldwide.
We are a development stage enterprise because substantially all of the
Companys resources and efforts are aimed at the discovery of new knowledge
that could lead to significant improvement in fuel cell reliability and
durability, and the establishment, expansion and stability of markets for the
Companys products. The Company continues to experience significant net
outflows of cash from operations and devotes significant efforts towards
financial planning in order to forecast future cash spending and the ability to
continue product research and development activities and expansion of markets
for its products. We continue to leverage our unique fuel cell application and
integration knowledge to identify early adopter markets for which we can design
and develop innovative systems and customer solutions that provide superior
value, ease-of-use, and environmental design. We have made significant progress
in the material handling and stationary power markets and believe we have
developed reliable products for our end customers.
In
2009, we successfully introduced a new GenDrive product offering to augment our
product suite and allow full site conversions. We have sold, on commercial
terms, product offerings to target customers including Walmart, FedEx Freight,
Coca-Cola Bottling Co., Sysco Foods and Central Grocers. Our sales to Central
Grocers and Sysco Foods involve greenfield conversion sites. Greenfield sites offer the potential for the greatest financial benefits to our customers
by eliminating the need for customers to make capital investments in batteries
and the associated chargers, storage and changing systems. Additionally in
2009, we continued to develop our low-temperature remote-prime power GenSys
product to support telecommunications applications where gird power is
unreliable or non-existent. As a result of successful field trials at a Tata
Teleservices Ltd. (TTSL) cell tower site in remote India during 2008, we
received an anchor order from WTTIL, the cell tower arm of TTSL, for 200 of our
GenSys products. Furthermore, we continued to develop our high-temperature
GenSys product and in 2009 started field trials of the high-temperature GenSys
product with the U.S. Department of Energy and National Grid. Our learning
from these field trials will help develop system refinements for incorporation
into the next-generation system design.
26
Table of Contents
Recent
Developments
Debt
and Lease Arrangement.
In March,
2009, the Company signed a $1.7 million promissory note issued by Key
Equipment Finance Inc. for the purpose of financing its investment in property
that was leased to Central Grocers beginning on April 1, 2009. On April 1,
2009, the Company began leasing this same equipment to its customer, Central
Grocers. In July 2009, the Company signed a letter of credit with Key Bank in
the amount of $525,000. The standby letter of credit is required by the
agreement negotiated between Air Products and Chemicals, Inc. (Air Products)
and the Company to supply hydrogen infrastructure and hydrogen to Central
Grocers at their distribution center.
The
standby letter of credit is collateralized by cash held in a restricted
account.
In
October 2009, the Company entered into a 15 month financing arrangement for an
electrolyzer.
See
Note 8 (Debt and Lease Arrangement) of the Consolidated Financial Statements
for more detail.
Commercialization
Agreement
. On February 4, 2010, the
Company signed a commercialization agreement with CITIC GuoAn Mengguli Power
Science & Technology Co., Ltd. (MGL), a leader in advanced lithium-ion
batteries and materials, for the joint marketing and sales of their co developed
high power lithium-ion battery systems into automotive applications. In its
on-going effort to improve performance and reduce cost of its GenDrive™
products for the material handling market, Plug Power began the development of
a lithium based hybrid battery system to replace its nickel-metal hydride
hybrid batteries. Based on the successful introduction of the lithium battery
systems into GenDrive products, it became evident that other adjacent markets
could also benefit from this sophisticated and configurable technology. Through
this agreement, Plug Power and MGL will first introduce their products to the
Chinese automotive industry, where New Energy sponsored programs are
supporting the deployment of at least 500,000 hybrid and pure electric vehicles
over the next four years.
Shareholder
Rights Plan.
On June 22, 2009, t
he Company adopted a Shareholder Rights Plan, the
purpose of which is, among other things, to enhance the Boards ability to
protect shareholder interests and to ensure that shareholders receive fair
treatment in the event any coercive takeover attempt of the Company is made in
the future. The Shareholder Rights Plan could make it more difficult for a
third party to acquire, or could discourage a third party from acquiring, the
Company or a large block of the Companys Common Stock. The Shareholder Rights
Plan was filed as an exhibit to the Companys Registration Statement on
Form 8A and Form 8-K dated June 24, 2009, as previously filed with the Securities
and Exchange Commission.
Long Term Incentive Plan.
On October 28, 2009, the Compensation Committee recommended
and the Board of Directors approved a Long Term Incentive (LTI) Plan pursuant
to the terms of the Companys 1999 Stock Option and Incentive Plan. Designed as
an incentive vehicle to support employee efforts, the LTI Plan seeks to
increase shareholder value by encouraging Plug Power employees to continue to
work diligently to further the Companys long term goals, particularly the
recently announced three year plan to achieve profitability in 2012. See Note 14
(Employee Benefit Plans) of the Consolidated Financial Statements and the
Companys Form 8-K dated October 28, 2009 as previously filed with the
Securities and Exchange Commission for more detail.
1999 Employee Stock Purchase Plan.
Effective July 1, 2009, the Company suspended this
plan. Factors taken into consideration were the expense of administering the
plan, participation rate and the introduction of the Company-wide stock option
grant as an alternative means of promoting employee stock ownership.
27
Table of Contents
Results of Operations
Product
and service revenue.
We defer
recognition of product and service revenue at the time of shipment and
recognize revenue as the continued service, maintenance and other support
obligations expire.
Many
of our initial sales of product contain multiple obligations that may include a
combination of fuel cell systems, continued service, maintenance, fueling and
other support. While contract terms generally require payment shortly after
shipment or delivery and installation of the fuel cell system and are not
contingent on the achievement of specific milestones or other substantive
performance, the multiple obligations within our contractual arrangements are
generally not accounted for separately based on our limited experience and lack
of evidence of fair value of the different components. As a result, we defer
recognition of product and service revenue and recognize revenue on a
straight-line basis as the continued service, maintenance and other support
obligations expire, which are generally for periods of twelve to thirty months,
or which can extend over multiple years. In the case of our limited
consignment sales, we do not begin recognizing revenue on a deferred basis
until the customer has accepted the product, at which time the risks and rewards
of ownership have transferred, the price is fixed and we have a reasonable
expectation of collecting upon billing. See Critical Accounting Policies and
EstimatesRevenue Recognition.
As
we gain experience, including field experience relative to service and warranty
of our initial products, the fair values for the multiple elements within our
future contracts may become determinable and we may, in future periods,
recognize product revenue upon delivery or installation of the product, or we
may continue to defer recognition, based on application of appropriate guidance
within the Financial Accounting Standards Board (FASB) Accounting Standard
Codification (ASC) No. 605-25-25, Revenue Recognition Multiple-Element
Arrangements Recognition, or changes in the manner in which we structure
contractual agreements, including our agreements with distribution partners.
Product
and service revenue for the year ended December 31, 2009 increased $165,000
or 3.5%, to $4.8 million from $4.7 million for the year ended December 31,
2008. The increase is primarily related to an increase in non-deferred revenue partially
offset by decreased system shipments and the revenue recognized on those
shipments. The non-deferred revenue represents revenue associated with replacement
parts or services not covered by service agreements or other similar types of
sales where the Company has no continuing obligation after the parts are
shipped or delivered or after services are rendered.
In the
product and service revenue category, during the year ended December 31,
2009, we shipped 257 fuel cell systems (117 are related to sales to end
customers and 140 were delivered to Central Grocers under a lease arrangement
whereby Plug Power retains title and ownership of the equipment) as compared to
273 fuel cell systems during the year ended December 31, 2008. In the year
ended December 31, 2009, we recognized $1.7 million of revenue for products
shipped or delivered or services rendered in the year ended December 31, 2009,
which includes $1.4 million of non-deferred revenue as compared to $2.3 million
of revenue recognized in the year ended December 31, 2008 for products shipped
or delivered or services rendered in the year ended December 31, 2008, which
includes $1.1 million of non-deferred revenue. Additionally, in the year ended
December 31, 2009 we recognized approximately $3.1 million of product and
services revenue originally deferred at December 31, 2008, whereas in the
year ended December 31, 2008 we recognized $2.4 million of revenue originally
deferred at December 31, 2007.
28
Table of Contents
Product
and service revenue for the year ended December 31, 2008 increased $1.6
million, or 51%, to $4.7 million from $3.1 million for the year ended
December 31, 2007. The increase is related to increased system shipments
and the revenue recognized on those shipments as well as an increase in
non-deferred revenue. The non-deferred revenue represents revenue associated
with replacement parts or services not covered by service agreements or other
similar types of sales where the Company has no continuing obligation after the
parts are shipped or delivered or after services are rendered.
In the
product and service revenue category, during the year ended December 31,
2008, we shipped 273 fuel cell systems compared to 204 fuel cell systems during
the year ended December 31, 2007. In the year ended December 31, 2008, we
recognized $2.3 million of revenue for products shipped or delivered or
services rendered in the year ended December 31, 2008, which includes $1.1
million of non-deferred revenue as compared to $1.1 million of revenue
recognized in the year ended December 31, 2007 for products shipped or
delivered or services rendered in the year ended December 31, 2007, which
includes $365,000 of non-deferred revenue. Additionally, in the year ended
December 31, 2008 we recognized approximately $2.4 million of product and
services revenue originally deferred at December 31, 2007, whereas in the
year ended December 31, 2007 we recognized $2.0 million of revenue originally
deferred at December 31, 2006.
Research
and development contract revenue.
Research
and development contract revenue primarily relates to cost reimbursement
research and development contracts associated with the development of PEM fuel
cell technology. We generally share in the cost of these programs with our
cost-sharing percentages generally ranging from 20% to 50% of total project
costs. Revenue from time and material contracts is recognized on the basis of
hours expended plus other reimbursable contract costs incurred during the
period. Revenue from fixed fee contracts is recognized on the basis of
percentage of completion. We expect to continue certain research and
development contract work that is directly related to our current product
development efforts.
Research
and development contract revenue for year ended December 31, 2009 was $7.5
million compared to $13.2 million in 2008. The decrease of $5.8 million or 43.6%
is primarily related to the completion and near completion of funded projects
in both the United States and Canada as well as a delay in the timing of
deliverables in new programs. In the research and development contract revenue
category, during the twelve months ended December 31, 2009 we shipped 45
GenDrive fuel cell systems that were previously funded under various government
projects.
Research
and development contract revenue for the year ended December 31, 2008 was
$13.2 million compared to $13.2 million in 2007. The
acquisitions in 2007 increased research and development contract revenue $2.2
million as a result of twelve full months of operations in 2008 versus 2007,
offset by a decrease of $2.2 million related to a completion of contracts from
prior years. In the research and development contract revenue category,
during the twelve months ended December 31, 2008 we shipped 5 GenSys fuel
cell systems and 5 GenDrive fuel cell systems.
Cost
of product and service revenue.
Cost
of product and service revenue includes the direct material and labor cost
incurred in the manufacture of the products we sell as well as the labor and
material costs incurred for product maintenance, replacement parts and service
under our contractual obligations.
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Cost
of product and service revenue for the year ended December 31, 2009 decreased $4.2
million, or 36.7%, to $7.2 million compared to $11.4 million in 2008. The
decrease is attributable to $2.3 million in inventory write-offs associated
with the corporate restructuring plan announced in December 2008 and a decrease
in product and service fuel cell system shipments from the prior year. There were
257 fuel cell system shipments for the year ended December 31, 2009 as compared
to 273 for the year ended December 31, 2008. Further contributing to the
decrease in 2009, 140 of the 257 fuel cell system shipments are being accounted
for under a lease arrangement which commenced in the second quarter of
2009. Therefore, the cost recognized on those 140 shipments consists of
depreciation of approximately $206,000 in the year ended December 31, 2009.
Cost
of product and service revenue for the year ended December 31, 2008
increased $2.0 million to $11.4 million compared to $9.4 million in 2007.
The increase was related to $2.3 million in inventory write-offs
associated with the corporate restructuring plan announced in December 2008,
coupled with higher cost of product and service revenues recorded due to an
increase in shipments in 2008. This was partially offset by one-time
charges of $2.0 million for certain future expected service and warranty costs
for existing units in the field recorded in the second quarter of 2007. Also
contributing to the increase was an increase in servicing costs of the larger
installed base.
Cost
of research and development contract revenue
. Cost of research and development contract revenue includes costs
associated with research and development contracts including: cash and non-cash
compensation and benefits for engineering and related support staff, fees paid
to outside suppliers for subcontracted components and services, fees paid to
consultants for services provided, materials and supplies used and other directly
allocable general overhead costs allocated to specific research and development
contracts.
Cost
of research and development contract revenue for the year ended December 31,
2009 decreased $9.1 million, or 42.2%, to $12.4 million compared to $21.5 million
in 2008. This decrease reflects a reduced effort on funded contracts due to the
completion or near completion of several major contracts in the United States and Canada as well as a delay in the timing of deliverables for new programs.
Cost
of research and development contract revenue for the year ended
December 31, 2008 increased $2.5 million to $21.5 million from $19.0
million in 2007. This increase is primarily related to a higher percentage of
cost sharing on research and development contracts in 2008.
Research
and development expense.
Research and
development expense includes: materials to build development and prototype
units, cash and non-cash compensation and benefits for the engineering and
related staff, expenses for contract engineers, fees paid to outside suppliers
for subcontracted components and services, 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 year ended December 31, 2009 decreased
$18.7 million, or 53.3%, to $16.3 million compared to $35.0 million in 2008. This
decrease was a direct result of the corporate restructuring plans announced in
June and December of 2008, which included a reduced workforce and a reduction
in non-strategic research and development projects.
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Research
and development expense decreased to $35.0 million for the year ended
December 31, 2008 from $39.2 million in 2007. This decrease was a direct
result of the corporate restructuring plans announced in June and December of
2008, which included a reduced workforce and a reduction in non-strategic
research and development projects. This decrease was partially offset by an
increase of $2.0 million, primarily due to a full twelve month period of
expense in 2008 related to the acquisition of Cellex and General Hydrogen
versus a partial twelve month period in 2007.
Selling,
general and administrative expenses.
Selling, general and administrative expenses includes cash and non-cash
compensation, benefits 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 year ended December 31, 2009
decreased $12.9 million, or 45.6%, to $15.4 million compared to $28.3 million
in 2008. This decrease was a direct result of the corporate restructuring plans
announced in June and December of 2008.
Selling,
general and administrative expenses for the year ended December 31, 2008
increased $9.0 million, or 46.6%, to $28.3 million compared to $19.3 million in
2007. Approximately $7.0 million of the increase is related to the corporate
restructuring plans announced in June and December of 2008. The remainder of
the increase is a direct result of a full twelve month period of expense in
2008 related to the acquisition of Cellex and General Hydrogen, versus a
partial twelve month period in 2007.
Goodwill
Impairment.
The Company performs its
annual goodwill assessment under FASB ASC No. 350, Intangibles - Goodwill and
Other, at the date of its fiscal year end. As a result of this
assessment, during the year ended 2008, the Company determined that a goodwill
impairment occurred and recorded an impairment charge of $45.8 million. See
Note 6 (Goodwill and Other Intangible Assets) of the Notes to Consolidated
Financial Statements.
Amortization
of intangible assets.
Amortization of
intangible assets represents the amortization associated with the Companys
acquired identifiable intangible assets from Cellex and General Hydrogen,
including acquired technology and customer relationships, which are being
amortized over eight years.
Amortization
of intangible assets decreased to $2.1 million for the year ended
December 31, 2009, compared to $2.2 million for the year ended
December 31, 2008. The decrease is related to foreign currency
fluctuations.
Amortization
of intangible assets increased to $2.2 million for the year ended
December 31, 2008, compared to $1.6 million for the year ended
December 31, 2007. The increase is related to a full twelve month period
of amortization of intangible assets in 2008 as compared to a partial twelve
month period in 2007.
Interest
and other income and net realized gains from available-for-sale securities.
Interest and other income and net realized gains from
available-for-sale securities consists primarily of interest earned on our
cash, cash equivalents, available-for-sale and trading securities, other
income, and the net realized gain/loss from the sale of available-for-sale
securities.
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Interest
and other income and net realized gains from available-for-sale securities
decreased to $1.7 million for the year ended December 31, 2009 from $5.1
million for the year ended December 31, 2008. This decrease is primarily
related to lower cash balances coupled with lower yields on our investments due
to a declining rate environment. Total net realized gains/losses from the sale
of available-for-sale securities was $0 for the year ended December 31, 2009
and a net gain of approximately $389,000 for the year ended December 31, 2008.
Interest income on trading securities and available-for-sale securities for the
year ended December 31, 2009 was approximately $906,000 and $307,000, respectively.
Interest income on trading securities and available-for-sale securities for the
year ended December 31, 2008 was approximately $1.9 million and $1.5 million, respectively.
Also included in the year ended December 31, 2008 is a $1.2 million gain
relating to the termination of Technology Partnerships Canada (TPC) agreements
as discussed in Note 10 (Repayable Government Assistance) of the Notes to
Consolidated Financial Statements.
Interest
and other income and net realized gains from available-for-sale securities
decreased $7.2 million to $5.1 million for the year ended December 31,
2008 from $12.3 million for the year ended December 31, 2007. This
decrease is primarily related to lower cash balances coupled with lower yields
on our investments due to a declining rate environment. In addition, the yield
on auction rate debt securities declined significantly in 2008 as compared to
2007 due primarily to the impact of failed auctions related to these securities
which began in February 2008. This was partially offset by a $1.2 million gain
relating to the termination of TPC agreements as discussed in Note 10
(Repayable Government Assistance) of the Notes to Consolidated Financial
Statements. Total net realized gains/losses from the sale of available-for-sale
securities was a gain of $389,000 and $118,000 for the years ended
December 31, 2008 and 2007, respectively.
Gain
on auction rate debt securities repurchase agreement.
In December 2008, the Company entered into a
Repurchase Agreement with the third-party lender such that the Company may
require the third-party lender to repurchase the auction rate debt securities
pledged as collateral for the Credit Line Agreement, at their par value, from
June 30, 2010 through July 2, 2012. As a result of the Repurchase Agreement
entered into with a third party lender in December 2008, the Company
reclassified the auction rate debt securities from available-for-sale securities
to trading securities. The Company has elected to record this item at its fair
value in accordance with FASB ASC No. 825-10-25, Fair Value Option. At December
31, 2009, the fair value of this item is $6.0 million. The change in fair
value of $4.2 million during the year ended December 31, 2009 was recorded as a
loss in the consolidated statements of operations which is offset by the change
in fair value of the auction rate debt securities held as collateral of $4.2
million that is recorded as a gain in the consolidated statements of operations
for the year ended December 31, 2009. At December 31, 2008, the fair value of
this item was $10.2 million and was recorded as a gain on auction rate debt
securities repurchase agreement in the consolidated statements of operations. The
change in the fair value of these trading securities from the date of their
transfer into trading through December 31, 2008 was not significant.
Impairment
loss on available-for-sale securities.
Due to the liquidity issues in the
credit and capital markets, the market for auction rate debt securities began
experiencing auction failures in February 2008, and there have been no
successful auctions for the securities held in our portfolio since the failures
began. Given the lack of liquidity in the market for auction rate debt securities,
the Company concluded that the estimated
fair value of these securities has become lower than the cost of these
securities, and, based on an analysis of the other-than-temporary impairment
factors, management has determined that this difference represents a decline in
fair value that is other-than-temporary. Accordingly, the Company recorded an other-than-temporary
impairment charge of $10.2 million in the twelve months ended December 31, 2008.
There were no securities deemed other-than-temporarily impaired during 2009.
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Interest
and other expense.
Interest and other
expense consists of interest on repayable government assistance amounts related
to the activities of Cellex and General Hydrogen, interest related to the
Credit Line Agreement and long term debt, and foreign currency exchange
gain/(loss).
Interest
and other expense for the year ended December 31, 2009 was approximately $1.1
million, compared to approximately $401,000 for the year ended December 31,
2008. Interest expense related to the Credit Line Agreement was approximately $915,000
for the year ended December 31, 2009 and was not significant for the year ended
December 31, 2008.
Interest
and other expense for the year ended December 31, 2008 was approximately
$401,000, compared to $580,000 for the year ended December 31, 2007. The
decrease is related to foreign currency exchange losses from our Canadian
operations. Interest expense related to the Credit Line Agreement entered into
in December 2008 was not significant.
Income
taxes.
We did not report a benefit
for federal and state income taxes in the consolidated financial statements as
the deferred tax asset generated from our 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.
Critical
Accounting Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles and related disclosures requires management to make
estimates and assumptions.
We
believe that the following are our most critical accounting estimates and
assumptions the Company must make in the preparation of its consolidated
financial statements and related disclosures:
Revenue
recognition:
We are a development
stage enterprise currently performing field testing and selling and marketing
of our products to a limited number of customers, including distribution center
operators, manufacturing facilities, telecom, utilities, and government
entities. Our fuel cell systems are designed to replace incumbent
electric power technologies in material handling equipment, serve as
complementary or replacement power in prime power applications and serve as
complementary quality power sources in back-up applications. Our current
product offerings are intended to offer complementary, quality power while
demonstrating the market value of fuel cells as a preferred form of alternative
distributed power generation. Subsequent enhancements to our initial product
are expected to expand the market opportunity for fuel cells by lowering the
installed cost, decreasing operating and maintenance costs, increasing
efficiency, improving reliability, and adding features such as grid
independence and co-generation as well as UPS applications.
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We
apply the guidance within FASB ASC No. 605-10-S99, Revenue Recognition Overall
- SEC Materials, to our initial sales contracts to determine when to properly
recognize revenue. Many of our initial sales of product contain multiple
obligations that may include a combination of fuel cell systems, continued
service, maintenance, a supply of hydrogen and other support. While contract
terms generally stipulate that title and risk of ownership pass and require
payment upon shipment or delivery of the fuel cell system, or acceptance in the
case of certain consignment sales, and also stipulate that payment is not
contingent on the achievement of specific milestones or other substantive
performance, the multiple obligations within our contractual arrangements are
generally not accounted for separately based on our limited experience and lack
of evidence of fair value of the different components. As a result, we defer
recognition of product and service revenue and recognize revenue on a
straight-line basis over the stated contractual term, as the continued service,
maintenance and other support obligations expire, which may be for periods of
twelve to thirty months or which may extend over multiple years. In the case of
our limited consignment sales, we do not begin recognizing revenue on a
deferred basis until the customer has accepted the product, at which time the
risks and rewards of ownership have transferred, the price is fixed and we have
a reasonable expectation of collection upon billing. The costs associated with
the product, service and other obligations are generally expensed as they are
incurred.
As we
gain experience, including field experience relative to service and warranty
obligations based on the sales of our initial products, the fair values for the
multiple elements within our future contracts may become determinable and we
may, in future periods, recognize revenue upon shipment or delivery of the
product or we may continue to defer recognition, based on application of
appropriate guidance within FASB ASC No. 605-25-25, Revenue Recognition
Multiple-Element Arrangements Recognition, or changes in the manner in which
we structure contractual agreements, including our agreements with distribution
partners.
Additionally,
our research and development contract revenue primarily relates to cost
reimbursement research and development contracts associated with the
development of PEM fuel cell technology. The Company generally shares in the
cost of these programs with our cost-sharing percentages generally ranging from
20% and 50% of total project costs. Revenue from time and material contracts is
recognized on the basis of hours expended plus other reimbursable contract
costs incurred during the period. Revenue from fixed fee contracts is
recognized on the basis of percentage of completion.
Valuation
of long-lived assets:
We value
long-lived assets at their fair value at the date of acquisition. We utilize
third-party valuation experts in our assessments of the fair values of acquired
long-lived assets and allocate purchase price to the acquired assets and
liabilities assumed accordingly. We assess the impairment of long-lived assets,
including identifiable intangible assets, whenever events or changes in
circumstances indicate that the carrying value may not be recoverable and, for
goodwill, at least annually. Factors we consider important that could trigger
an impairment review include, but are not limited to, the following:
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-
significant underperformance
relative to expected historical or projected future operating results;
-
significant changes in the manner
of our use of the acquired assets or the strategy for our overall business;
-
significant negative industry or
economic trends;
-
significant decline in our stock
price for a sustained period; and
-
our market capitalization relative
to net book value.
When
we determine that the carrying value of long-lived assets, including
identifiable intangible assets, may not be recoverable based upon the existence
of one or more of the above indicators of impairment, we would measure any
impairment based upon the provisions of FASB ASC No. 350, Intangibles - Goodwill
and Other and FASB ASC No. 360-10-35-15, Impairment or Disposal of Long-Lived
Assets, as appropriate. Any resulting impairment loss could have a material
adverse impact on our financial condition and results of operations.
Goodwill
impairment testing is performed at the segment (or reporting unit) level. The
Companys goodwill is evaluated at the entity level as there is only one
reporting unit. Goodwill is assigned to reporting units at the date the
goodwill is initially recorded. Once goodwill has been assigned to reporting
units, it no longer retains association with a particular acquisition, and all
of the activities within a reporting unit, whether acquired or organically
grown, are available to support the value of the goodwill.
The
Company performs its annual goodwill impairment assessment under FASB ASC No.
350, Intangibles - Goodwill and Other at the date of its fiscal year end or whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. As of December 31, 2009, the Company had no goodwill on its
consolidated balance sheet as a result of the full impairment charge recorded
in 2008. If goodwill exists, our impairment test is based on a set of
assumptions regarding discounted future cash flows, which represent the
Companys best estimate of future performance at this time, as well as
consideration of the Companys market capitalization.
The goodwill impairment analysis is dependent on many
variables used to determine fair value of the Company overall and the fair
value of the Companys assets and liabilities. Please see Note 6 (Goodwill
and Other Intangible Assets) of the Notes to Consolidated Financial Statements
for a description of the valuation methods and related estimates and
assumptions used in our impairment testing. The complexity of the analysis does
not permit a simplistic determination of the impact of changes in assumptions.
Stock
Based Compensation
: We recognize
stock-based compensation expense associated with the vesting of share based
instruments in the consolidated statements of operations. Determining the
amount of stock-based compensation to be recorded requires us to develop
estimates to be used in calculating the grant-date fair value of stock options.
We calculate the grant-date fair values using the Black-Scholes valuation
model. The Black-Scholes model requires us to make estimates of the following
assumptions:
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Expected
volatilityThe estimated stock price volatility was derived based upon a blend
of implied volatility (i.e. managements expectation of volatility) and the
Companys actual historic stock prices over the expected life of the options,
which represents the Companys best estimate of expected volatility.
Expected
option lifeThe Companys estimate of an expected option life was calculated in
accordance with the simplified method for calculating the expected term
assumption. The simplified method is a calculation based on the contractual
life of the associated options.
Risk-free
interest rateWe use the yield on zero-coupon U.S. Treasury securities for a
period that is commensurate with the expected life assumption as the risk-free
interest rate.
The
amount of stock-based compensation recognized during a period is based on the
value of the portion of the awards that are ultimately expected to vest. FASB
ASC No. 718-10-55, Compensation - Stock Compensation Overall
Implementation and Guidance Illustrations, requires forfeitures to be estimated
at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. The term forfeitures is distinct
from cancellations or expirations and represents only the unvested portion
of the surrendered option. We review historical forfeiture data and determine
the appropriate forfeiture rate based on that data. We re-evaluate this
analysis periodically and adjust the forfeiture rate as necessary. Ultimately,
we will recognize the actual expense over the vesting period only for the
shares that vest.
Auction
rate securities and auction rate debt securities repurchase agreement:
We value our auction rate debt securities and
auction rate debt securities repurchase agreement based upon factors specific
to these securities, including duration, tax status (taxable or tax-exempt),
credit quality, the existence of insurance wraps, and the composition of the
underlying student loans (Federal Family Education Loan Program or private
loans). Assumptions are made about future cash flows based upon interest
rate formulas as described in Note 3, Fair Value Measurements. Also, our
valuation includes estimates of market data including yields or spreads of
similar trading instruments, when available, or assumptions believed to be
reasonable. Illiquid credit markets and volatile equity markets have
combined to increase the uncertainty inherent in our estimates and
assumptions. As future events cannot be determined with precision, actual
results could differ significantly from our estimates.
Recent
Accounting Pronouncements
A
discussion of recently adopted and new accounting pronouncements is included in
Note 2 (Summary of Significant Accounting Policies) of the Consolidated
Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
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Liquidity
and Capital Resources
Although
we anticipate incurring substantial additional losses, we believe that our
current cash, cash equivalents and available-for-sale securities balances will
provide sufficient liquidity to fund operations for at least the next twelve
months including anticipated increased working capital needs.
Our cash requirements depend on
numerous factors, including completion of our product development activities,
our ability to commercialize our energy products, market acceptance of our
systems and other factors. We expect to devote substantial capital resources to
continue our development programs directed at commercializing our energy
products for worldwide use, building a sales base and expanding market
channels, hiring and training production staff, developing and better utilizing our
manufacturing capacity, production and research and development activities. We
expect to pursue the expansion of our operations through internal growth and
strategic acquisitions and expect that such activities will be funded from
existing cash, cash equivalents, trading securities, available-for-sale
securities, and the issuance of additional equity or debt securities or additional
borrowings subject to market and other conditions. The failure to raise the
funds necessary to finance our future cash requirements or consummate future
acquisitions could adversely affect our ability to pursue our strategy and
could negatively affect our operations in future periods.
Several
key indicators of liquidity are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
Years ended or at December 31,
|
(in thousands)
|
|
2009
|
|
2008
|
|
2007
|
Cash and cash equivalents at end of period
|
|
$
|
14,581
|
|
$
|
80,845
|
|
$
|
12,077
|
Trading securities auction rate debt securities
|
|
|
53,397
|
|
|
52,651
|
|
|
-
|
Available-for-sale securities at end of period
|
|
|
47,960
|
|
|
23,844
|
|
|
153,624
|
Working capital at end of period
|
|
|
60,009
|
|
|
86,171
|
|
|
163,906
|
Net loss
|
|
|
40,709
|
|
|
121,700
|
|
|
60,571
|
Net cash used in operating activities
|
|
|
38,228
|
|
|
56,596
|
|
|
49,311
|
Purchase of property, plant and equipment
|
|
|
533
|
|
|
1,419
|
|
|
2,944
|
Included
in trading securities and working capital at December 31, 2009 and 2008,
respectively, is $53.4 million and $52.7 million of auction rate debt
securities. The auction rate debt securities are secured by student loans which
are generally guaranteed by the Federal government. These auction rate debt
securities are structured to be tendered at par, at the investors option, at
auctions occurring every 27-30 days. However, due to the liquidity issues in
the credit and capital markets, the market for auction rate debt securities
began experiencing auction failures in February 2008 and there have been no
successful auctions for the securities held in our portfolio since the failures
began. We continue to receive interest on these securities, subject to an
interest rate cap formula for each security as periodically adjusted in
accordance with the respective securities agreement. At December 31, 2009,
the interest rates ranged from 0.61% to 3.48% on the auction rate debt
securities as compared to the interest rate range at December 31, 2008 from
1.55% to 3.43%.
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The
Company has pledged these securities as collateral to a third-party lender for
a Credit Line Agreement (See Note 7, Credit Line Agreement and Auction Rate
Debt Securities Repurchase Agreement) entered into in December 2008. Given the
lack of liquidity in the market for auction rate debt securities, the fair
value of these auction rate debt securities have become lower than their cost
and, based on an analysis of other than temporary impairment factors,
management has determined, beginning in the first quarter of 2008, that
this difference represents a decline in value that is other-than-temporary.
Accordingly, the Company recorded an other-than-temporary impairment charge of
$10.2 million for the year ended December 31, 2008 in the consolidated
statements of operations. In December 2008, the Company entered into a
Repurchase Agreement with a third-party lender such that the Company may
require the third-party lender to repurchase the auction rate debt securities
pledged as collateral for the Credit Line Agreement at their par value, from
June 30, 2010 through July 2, 2012. The fair value of the Repurchase Agreement
at its origination was $10.2 million and was recorded as a gain in the 2008
consolidated statement of operations. The fair value of the Repurchase
Agreement at December 31, 2009 was $6.0 million. The change in fair value of
approximately $4.2 million during the year ended December 31, 2009 was recorded
as a loss in the consolidated statements of operations which is offset by the
change in fair value of the auction rate debt securities held as collateral of
approximately $4.2 million that is recorded as a gain for the year ended December
31, 2009.
We
continue to monitor the market for auction rate debt securities and will be
required to mark the securities to fair value which could negatively affect our
financial condition, liquidity and reported operating results. We will also be
monitoring and marking to fair value the auction rate debt securities
repurchase agreement. The Company expects that the fair adjustments
of the auction rate debt securities will generally be offset by the fair value
adjustments of the auction rate debt securities repurchase agreement.
In May
2008, the Company filed a lawsuit against UBS Financial Services Inc. and UBS
AG in the United States District Court, Northern District of New York, the
financial advisor that placed the Company in certain auction rate debt
securities held in the Company's investment portfolio. The lawsuit seeks a
return of the $62.9 million of Company funds UBS invested in auction rate debt
securities in contravention to the Company's investment policy, among other
damages.
On
December 15, 2008, Plug Power Inc. (Plug or the Company) accepted an offer
by UBS AG (UBS) of certain rights to cause UBS to purchase, at a future date,
auction rate debt securities owned by the Company. The repurchase rights are
offered in connection with UBSs obligations under settlement agreements with
the U.S. Securities and Exchange Commission and other federal and state
regulatory authorities. The offering, the settlement agreements, and the
respective rights and obligations of the parties, are described in a prospectus
issued by UBS dated October 7, 2008, File No. 333-153882 (the
Prospectus). As a result of accepting UBSs offer, the Company can require UBS
to repurchase at par value all of the auction rate debt securities held by the
Company at any time during the period from June 30, 2010 through
July 2, 2012 (if the Companys auction rate debt securities have not
previously been sold by the Company or by UBS on its behalf), and pending
litigation between the parties has been dismissed with prejudice.
In
connection with the Prospectus offering, the Company also entered into a loan
agreement with UBS Credit Corp. that provides the Company with a credit line of
up to $62.875 million with the Companys auction rate debt securities pledged
as collateral. The Company has drawn down the full amount of the credit line.
In accordance with the offering by UBS, the loan will be treated as a no net
cost loan as defined in the Prospectus. The loan will bear interest at a rate
equal to the average rate of interest paid to Plug Power on the pledged auction
rate debt securities such that the net interest cost to Plug Power will be
zero. Though the loan is payable on demand, if UBS Credit Corp. should exercise its right
to demand repayment of any portion of the loan prior to the date the Company
can exercise its repurchase rights, UBS and certain of its affiliates will
arrange for alternative financing on terms and conditions substantially the
same as those contained in the loan. If alternative financing cannot be
established, then UBS or one of its affiliates will purchase the Companys
pledged auction rate debt securities at par. As a result, the loan and any
alternative financing will not be payable by the Company prior to the time that
the Company can require UBS to repurchase the pledged auction rate debt
securities. Proceeds of sales of the Companys auction rate debt securities
will first be applied to repayment of the credit line with the balance, if any,
for the Companys account. UBS has previously provided investment management
services for a portion of the Companys investment portfolio.
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Debt
and Lease Arrangement.
In
March, 2009, the Company signed a $1.7 million promissory note issued by
Key Equipment Finance Inc. for the purpose of financing its investment in
property that was leased to Central Grocers beginning on April 1, 2009. On
April 1, 2009, the Company began leasing this same equipment to its customer,
Central Grocers. In July 2009, the Company signed a letter of credit with Key
Bank in the amount of $525,000. The standby letter of credit is required by the
agreement negotiated between Air Products and Chemicals, Inc. (Air Products)
and the Company to supply hydrogen infrastructure and hydrogen to Central
Grocers at their distribution center.
The
standby letter of credit is collateralized by cash held in a restricted
account.
In
October 2009, the Company entered into a 15 month financing arrangement for an
electrolyzer.
See
Note 8 (Debt and Lease Arrangement) of the Consolidated Financial Statements
for more detail.
Under Internal Revenue Code (IRC) Section 382, the use
of loss carryforwards may be limited if a change in ownership of a company
occurs. If it is determined that due to transactions involving the Companys
shares owned by its 5 percent shareholders a change of ownership has occurred
under the provisions of IRC Section 382, the Company's net operating loss
carryforwards could be subject to significant IRC Section 382 limitations.
At December 31, 2009, the Company has approximately
$536.1 million in Federal and state net operating loss carryforwards and $15
million in Federal research and experimentation tax credit carryforwards (of
which $5.7 million represents an uncertain tax position), which resulted in
$203.7 million and $9.3 million, respectively, in deferred tax assets that are
recorded on the Companys balance sheet at December 31, 2009. These deferred
tax assets are fully reserved for through a valuation allowance. During the
fourth quarter of 2009, as a result of certain equity transactions, the Company
may have had an ownership change for IRC Section 382 purposes. If a change
occurred in the fourth quarter, an IRC Section 382 limitation could result in
as much as approximately $458.6 million of the Company's Federal and state net
operating loss carryforwards expiring prior to utilization, which would result
in the Companys deferred tax asset and valuation allowance decreasing by
approximately $174.3 million. Additionally, if a change in control occurred
during the fourth quarter an IRC Section 382 limitation could result in as much
as approximately $15 million of Federal research and experimentation tax credit
carryforwards expiring prior to utilization, which would result in the
Company's deferred tax asset and valuation allowance decreasing by approximately
$9.3 million. These decreases would have no impact on the Companys financial
position, results of operations, or cash flows. However, these potential
future tax benefits would no longer be available to the Company. The Company is
in the process of completing a formal Section 382 study to determine if an
ownership change has occurred.
Our
cash requirements depend on numerous factors, including completion of our
product development activities, ability to commercialize our fuel cell systems,
market acceptance of our systems and other factors. We expect to pursue the
expansion of our operations through internal growth and strategic acquisitions.
As of December 31, 2009, we had cash and cash equivalents of $14.6 million,
available-for-sale securities of $48.0 million and working capital of $60.0
million.
During
the year ended December 31, 2009, cash used for operating activities was
$38.2 million, consisting primarily of a net loss of $40.7 million and a
$324,000 gain on repayable government assistance offset, in part, by non-cash
expenses in the amount of $8.0 million, including $5.8 million for amortization
and depreciation, $1.9 million for stock based compensation, $504,000 for loss
on disposals of property, plant and equipment and $93,000 in bad debt. Cash used
for investing activities for the year ended December 31, 2009 was $25.8
million, consisting of $3.5 million in proceeds from trading securities and
$223,000 of proceeds from disposals of property, plant and equipment offset by
$24.2 million of maturities (net of purchases) of available-for-sale
securities, $533,000 used to purchase property, plant and equipment, $2.5
million used as an investment in leased property, and $2.3 million in
restricted cash. Cash used for financing activities was approximately $2.4
million consisting of $3.5 million in repayment of borrowings under line of
credit, $534,000 for the purchase of treasury stock and $230,000 in principal
payments on long-term debt and line of credit partially offset by proceeds from
borrowings of long term debt and employee stock purchase plan of $1.9 million.
We
have financed our operations from inception through December 31, 2009
primarily from the sale of equity (including those related to stock-based
compensation less stock issuance costs), which has provided cash in the amount
of $636.4 million. Also since inception, cumulative net cash used in operating
activities has been $492.5 million, and cash used in investing activities has
been $180.7 million, including our purchase of property, plant and equipment of
$38.9 million, our net investments in available-for-sale securities in the
amount of $110.7 million, and cash used for acquisitions of $19.3 million, net
of cash received.
39
Table of Contents
Subsequent
to December 31, 2009, we issued 2,028,572 shares of common stock for the
achievement of performance objectives in 2009.
Other significant transactions impacting our liquidity
and capital resources have been as follows:
Mergers &
Acquisitions
On
April 3, 2007, the Company completed the acquisition of all of the
outstanding shares of Cellex, a development stage enterprise, for an aggregate
purchase price, including acquisition costs, of $46.1 million. As part of this
acquisition, we acquired technology and certain other assets of Cellex. The
entire $10 million balance of intangible assets has been assigned to acquired
technology, which is being amortized over 8 years.
The results of Cellexs operations have been included
in the consolidated financial statements since that date. Cellex, based in Richmond, British Columbia, develops and commercializes fuel cell solutions that replace
the industrial lead acid battery system used today in powering electric lift
truck fleets in large-scale distribution centers.
On
May 4, 2007, the Company completed the acquisition of all of the
outstanding shares of General Hydrogen, a development stage enterprise, for an
aggregate purchase price of $12.4 million. The purchase price includes the
settlement of $3.0 million in senior secured loans previously made by the
Company to General Hydrogen, as well as 571,429 warrants granted to
shareholders of General Hydrogen that were valued at $1.4 million. The warrants
become exercisable when Plug Powers Common Stock trades at a volume weighted
average price of $7.00 or more for 10 consecutive trading days. The warrants
carry an exercise price of $.01 per share and expire four years from the date
of issuance. As part of this acquisition, we acquired technology and customer
relationships and certain other assets of General Hydrogen. Of the $6.9 million
of intangible assets, $5.9 million has been assigned to acquired technology and
$1.0 million has been assigned to customer relationships, both of which are
being amortized over 8 years.
The results
of General Hydrogens operations have been included in the consolidated
financial statements since May 4, 2007. General Hydrogen is located in Richmond, British Columbia, Canada within close proximity to Cellex.
Public
Offerings
In
November 1999, we completed an initial public offering of 6,782,900 shares of
common stock, which includes additional shares purchased pursuant to exercise
of the underwriters over allotment option. We received proceeds of $93.0
million, which was net of $8.7 million of expenses and underwriting discounts
relating to the issuance and distribution of the securities.
In July
2001, we completed a follow-on public offering of 4,575,000 shares of common
stock, which includes additional shares purchased pursuant to exercise of the
underwriters over allotment option. We received proceeds of $51.6 million,
which was net of $3.3 million of expenses and underwriting discounts relating
to the issuance and distribution of the securities.
In
November 2003, the Company completed a public offering of 11,700,000 shares of
common stock. We received proceeds of $55.0 million, net of $3.5 million of
expenses and placement fees relating to the issuance and distribution of the
securities.
In
August 2005, the Company completed a public offering of 12,000,000 shares of
common stock. We received proceeds of $70.6 million, net of expenses and placement
fees relating to the issuance and distribution of the securities.
40
Table of Contents
Private
Placements
In
July 2001, simultaneous with the closing of the follow-on public offering, we
closed a private equity financing of 416,666 shares of common stock to GE Power
Systems Equities, Inc., an indirect wholly owned subsidiary of General Electric
Company, and 416,666 shares of common stock to Edison Development Corporation,
an indirect wholly owned subsidiary of DTE Energy Company, raising an
additional $9.6 million in net proceeds.
In June 2006, the Company completed a private
placement with Smart Hydrogen Inc. whereby the Company sold 395,000 shares of
Class B Capital Stock, a class of preferred stock of the Company, which were
convertible into 39,500,000 shares of common stock of the Company, and 11,240
shares of common stock of the Company to Smart Hydrogen for an aggregate net
purchase price of approximately $214.4 million. The purchase price per share of
the shares sold to Smart Hydrogen, on an as-converted into common stock basis,
was $5.50. The Buyer also contemporaneously purchased 1,825,000 shares of
common stock of the Company from DTE Energy Foundation. Following the closing
of these transactions, the Buyer owned approximately 35% of the Companys
outstanding common stock on an if-converted basis.
In
December 2008, Smart Hydrogen Inc. sold to OJSC (Third Generation Company of
the Wholesale Electricity Market) (OGK-3) all 395,000 shares of the Company's
Class B Capital Stock as well as 5,126,939 shares of the Company's common stock
(representing an approximately 35% ownership stake in aggregate). This sale
triggered the automatic conversion of the Company's Class B Capital Stock into
39,500,000 shares of common stock, and the termination of all the rights and
obligations attached to the Class B Capital Stock. The rights and obligations
attached to the Class B Capital Stock that terminated include, but are not
limited to, the right to appoint directors, veto rights and voting support
obligations under the Investor Rights Agreement dated as of June 29, 2006, as
amended (the Investor Rights Agreement). OGK-3 has executed a joinder agreement
to the Investor Rights Agreement and is prohibited from transferring its shares
of the Company's Common Stock to a competitor of the Company. OGK-3 is also
bound by the same standstill provisions that applied to Smart Hydrogen, as set
forth in the Investor Rights Agreement. This transfer and conversion
triggered a change of control pursuant to Section 17 of our 1999 Stock Option
and Incentive Plan; and, therefore, each outstanding Stock Option Right
automatically became fully exercisable and conditions and restrictions on each
outstanding Restricted Stock Award, Deferred Stock Award and Performance Share
Award that relate solely to the passage of time and continued employment were
removed.
Initial Capital
Contributions
We
were formed in June 1997 as a joint venture between Mechanical Technology
Incorporated and Edison Development Corporation, an indirect wholly owned
subsidiary of DTE Energy Company. At formation, Mechanical Technology
Incorporated contributed assets related to its fuel cell program, including
intellectual property, 22 employees, equipment and the right to receive
government contracts for research and development of PEM fuel cell systems, if
awarded. Edison Development Corporation contributed or committed to contribute
$9.0 million in cash, expertise in distributed power generation and marketplace
presence to distribute and sell stationary fuel cell systems.
41
Table of Contents
In
aggregate, Mechanical Technology Incorporated has made cash contributions of
$27.0 million plus non-cash contributions of $14.2 million, while Edison
Development Corporation has made aggregate cash contributions of $46.2 million,
including $5.0 million in connection with the closing of a private placement of
our common stock in July, 2001. Mechanical Technology Incorporated and Edison
Development Corporation have not made any additional cash or non-cash
contributions since October 1999 and July 2001, respectively.
Grant
Agreements
Since
our inception we have been awarded, or participated in, federal and state
government contracts related to research, development, test and demonstration
of our PEM fuel cell technology. These contracts are primarily cost
reimbursement contracts associated with the development of our PEM fuel cell
technology. We have recognized research and development contract revenue of
approximately $96.2 million related to federal and state government contracts,
and commercial contracts. We generally share in the cost of these programs,
with cost-sharing percentages generally ranging from 20% and 50% of total
project costs. We expect to continue certain research and development contract
work that is directly related to our current product development efforts.
Contractual Obligations
Contractual
obligations as of December 31, 2009, under agreements with non-cancelable
terms are as follows:
|
Total
|
<1 Year
|
1-3 Years
|
3-5 Years
|
<5 Years
|
Long-term
debt obligations
|
$
1,564,116
|
$ 413,708
|
$ 679,904
|
$ 470,504
|
$ -
|
Operating
lease obligations
|
4,262,855
|
1,248,557
|
1,266,798
|
559,200
|
1,188,300
|
Purchase
obligations
|
819,420
|
809,420
|
10,000
|
-
|
|
Other
obligations
(A)
,
(B)
,
(C)
|
484,297
|
484,297
|
-
|
-
|
|
Total
|
$ 7,130,688
|
$ 2,955,982
|
$ 1,956,702
|
$ 1,029,704
|
$ 1,188,300
|
(A)
|
The
Company has a contractual obligation to NYSERDA, a New York State Government
agency, to pay royalties to NYSERDA based on 0.5% of net sales of our GenCore
and GenSys products if product is manufactured in the state of New York. See Note 18 (Commitments and Contingencies) of the Consolidated Financial Statements
for more detail.
|
(B)
|
The
Company has a contractual obligation to the National Research Council of
Canada (NRC), a Canadian Government agency, through an Industrial Research
Assistance Program (IRAP) agreement, to pay royalties to NRC based on 3.5% of
gross revenues. See Note 10 (Repayable Government Assistance) of the
Consolidated Financial Statements for more detail.
|
42
Table of Contents
(C)
|
The
Company has a contractual obligation with General Electric Company (GE) acting
through its Global Research unit pursuant to a development collaboration agreement
as amended. The Company and GE mutually agreed to extend the terms of the
development collaboration agreement such that the Company is obligated to
purchase $1 million of services from GE in connection with this collaboration
prior to December 31, 2009. As of December 31, 2009, the
approximately $363,000 obligation remaining under the extended development
collaboration agreement became due and payable; however, the Company and GE
d/b/a GE Global Research entered into a Lease Agreement dated October 6, 2009
for space in the Companys Latham, New York facility whereby the parties
mutually agreed that pursuant to section 4 of the Lease Agreement the amount
owed by the Company to GE under the development collaboration agreement would
be offset by the rent owed by GE to the Company each month. The development
collaboration agreement is scheduled to terminate on the earlier of
(i) December 31, 2014 or (ii) upon the completion of a certain
level of program activity. See Note 18 (Commitments and Contingencies) of the
Consolidated Financial Statements for more detail.
|
Item 7A.
|
Quantitative and
Qualitative Disclosures about Market Risk
|
We
invest our excess cash in government, government backed and interest-bearing
investment-grade securities that we generally hold for the duration of the term
of the respective instrument. We do not utilize derivative financial
instruments, derivative commodity instruments or other market risk sensitive
instruments, positions or transactions in any material fashion. Accordingly, other
than with respect to auction rate debt securities, we believe that, while the
investment-grade securities we hold are subject to changes in the financial
standing of the issuer of such securities, we are not subject to any material
risks arising from changes in interest rates, foreign currency exchange rates,
commodity prices, equity prices or other market changes that affect market risk
sensitive instruments.
A portion of the Companys total financial performance
was attributable to our operations in Canada. Our exposure to changes in
foreign currency rates primarily arises from short-term inter-company
transactions with our Canadian subsidiaries and from client receivables in
different currencies. Foreign sales are mostly made by our Canadian subsidiaries
in their respective countries and are typically denominated in Canadian
dollars. Our foreign subsidiaries incur most of their expenses in their local
currency as well, which helps minimize our risk of exchange rate fluctuations.
Accordingly, the Companys financial results are affected by risks such as
currency fluctuations, particularly between the U.S. dollar and the Canadian
dollar. As exchange rates vary, the Companys results can be materially
affected.
In
addition, the Company may source inventory among its worldwide operations. This
practice can give rise to foreign exchange risk resulting from the varying cost
of inventory to the receiving location as well as from the revaluation of
intercompany balances. The Company mitigates this risk through local sourcing
efforts.
Item 8.
|
Financial
Statements and Supplementary Data
|
The
Companys consolidated financial statements included in this report beginning
at page F-1 are incorporated in this Item 8 by reference.
43
Table of Contents
Item 9.
|
C
hanges in and
Disagreements with Accountants on Accounting and Financial Disclosure
|
None.
Item 9A.
|
Controls and
Procedures
|
(a)
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures.
Under
the supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of our disclosure controls and procedures, as
such term is defined under Rule 13a-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation,
our principal executive officer and our principal financial officer concluded
that, as of the end of the period covered by this annual report, our disclosure
controls and procedures were effective, in that they provide reasonable
assurance that information required to be disclosed by us in the reports we
file or submit, under the Exchange Act, is recorded, processed, summarized and
reported within the time period specified in the Securities and Exchange
Commissions rules and forms.
(b)
Managements Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules
13a-15(f) and 15d-15(f). Under the supervision and with the participation of
our management, including our principal executive officer and principal
financial officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting based on the framework in
Internal
ControlIntegrated Framework
issued by the Committee of Sponsoring
Organization of the Treadway Commission. Based on our evaluation under the
framework in
Internal ControlIntegrated Framework
, our management
concluded that the Company maintained effective internal control over financial
reporting as of December 31, 2009.
(c) Attestation Report of the Registered Public
Accounting Firm
The
attestation report of the Companys independent registered public accounting
firm regarding internal control over financial reporting is included on page
F-3 of this Annual Report on Form 10-K and incorporated herein by reference.
(d)
Changes in Internal Control Over Financial Reporting
There
were no changes in the Companys internal control over financial reporting
identified in connection with the evaluation of such internal control that
occurred during the Companys last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.
Item 9B.
|
Other
Information
|
Not
applicable.
44
Table of Contents
PART III
(a)
Directors
Incorporated
herein by reference is the information appearing under the captions
Information about our Directors and Compliance with Section 16(a) of
the Securities Exchange Act of 1934 in the Companys definitive Proxy
Statement for its 2010 Annual Meeting of Stockholders to be filed with the
Security and Exchange Commission.
(b)
Executive Officers
Incorporated
herein by reference is the information appearing under the captions Executive
Officers and Compliance with Section 16(a) of the Securities Exchange
Act of 1934 in the Companys definitive Proxy Statement for its 2010 Annual
Meeting of Stockholders to be filed with the Security and Exchange Commission.
(c)
Code of Business Conduct and Ethics
We
have adopted a Code of Business Conduct and Ethics that applies to all
officers, directors, employees and consultants of the Company. The Code of
Business Conduct and Ethics is intended to comply with Item 406 of
Regulation S-K of the Securities Exchange Act of 1934 and with applicable rules
of The NASDAQ Stock Market, Inc. Our Code of Business Conduct and Ethics is
posted on our Internet website under the Investor page. Our Internet website
address is www.plugpower.com. To the extent required or permitted by the rules
of the SEC and NASDAQ, we will disclose amendments and waivers relating to our
Code of Business Conduct and Ethics in the same place as our website.
(d)
Audit Committee
Incorporated
herein by reference is the information appearing under the caption Audit
Committee in the Companys definitive Proxy Statement for its 2010 Annual
Meeting of Stockholders to be filed with the Securities and Exchange
Commission.
Item 11.
|
Executive
Compensation
|
Incorporated
herein by reference is the information appearing under the caption Executive
Compensation in the Companys definitive Proxy Statement for its 2010 Annual
Meeting of Stockholders to be filed with the Security and Exchange Commission.
45
Table of Contents
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
|
Incorporate-d
herein by reference is the information appearing under the caption Principal
Stockholders in the Companys definitive Proxy Statement for its 2010 Annual
Meeting of Stockholders to be filed with the Securities and Exchange
Commission.
Securities Authorized for Issuance Under Equity
Compensation Plans
The
following table gives information about the shares of Common Stock that may be
issued upon the exercise of options, restricted stock and warrants under the
Plug Power, L.L.C. Second Amendment and Restatement of the Membership Option
Plan (1997 Plan), the Companys 1999 Stock Option and Incentive Plan, as
amended (1999 Stock Option Plan) and the Companys 1999 Employee Stock Purchase
Plan, as of December 31, 2009.
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of shares to be issued
upon exercise of outstanding
options, warrants and rights (a)
|
|
Weighted average
exercise price of
outstanding options,
warrants and rights (b)
|
|
Number of shares
remaining available for
future issuance under
equity compensation
plans (excluding shares
reflected in column (a))(c)
|
|
Equity compensation plans approved by security holders
|
|
14,663,952
|
(1)
|
$
|
2.84
|
|
2,529,777
|
(2)
|
Equity compensation plans not approved by security holders
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
|
|
14,663,952
|
|
$
|
2.84
|
|
2,529,777
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents 5,981,286
outstanding options and 8,682,666 shares of unvested restricted stock issued under
the 1997 Plan and 1999 Stock Option Plan.
|
(2)
|
Includes 2,440,451
shares available for future issuance under the 1999 Stock Option Plan and 89,326
shares available for future issuance under the 1999 Employee Stock Purchase
Plan. The 1999 Stock Option Plan incorporates an evergreen formula pursuant
to which the aggregate number of shares reserved for issuance under the 1999
Stock Option Plan will increase on the first day of January and July each
year. On each January 1 and July 1, the aggregate number of shares
reserved for issuance under the 1999 Stock Option Plan increases by 16.4% of
any net increase in the total number of outstanding shares since the
preceding July 1 or January 1, as the case may be. In accordance
with this formula, on January 1, 2010, the maximum number of shares
remaining available for future issuance under the 1999 Stock Option Plan is 2,511,733.
|
Item 13.
|
Certain
Relationships and Related Transactions and Director Independence
|
Incorporated
herein by reference is the information appearing under the caption Certain
Relationships and Related Transactions in the Companys definitive Proxy
Statement for its 2010 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission.
46
Table of Contents
Item 14.
|
Principal
Accounting Fees and Services
|
Incorporated
herein by reference is the information appearing under the caption Independent
Auditors Fees in the Companys definitive Proxy Statement for its 2010 Annual
Meeting of Stockholders to be filed with the Securities and Exchange
Commission.
PART IV
Item 15.
|
Exhibits and
Financial Statement Schedules
|
15(a)(1) Financial
Statements
The
financial statements and notes are listed in the Index to Consolidated
Financial Statements on page F-1 of this Report.
15(a)(2)
Financial Statement Schedules
Consolidated
financial statement schedules not filed herein have been omitted as they are
not applicable or the required information or equivalent information has been
included in the consolidated financial statements or the notes thereto.
15(a)(3)
Exhibits
Exhibits
are as set forth in the List of Exhibits which immediately precedes the Index
to Consolidated Financial Statements on page F-1 of this Report.
47
Table of Contents
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
|
|
P
LUG
P
OWER
I
NC
.
|
|
|
By:
|
|
/s/ A
NDREW
M
ARSH
|
|
|
Andrew Marsh,
|
|
|
Chief Executive Officer
|
Date: March 16, 2010
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
/s/ A
NDREW
M
ARSH
Andrew Marsh
|
|
Chief Executive Officer and Director (Principal
Executive Officer)
|
|
March 16, 2010
|
|
|
|
/s/ G
ERALD
A. A
NDERSON
Gerald A. Anderson
|
|
Chief Financial Officer
|
|
March 16, 2010
|
|
|
|
/s/ J
EFFREY
M. D
RAZAN
Jeffrey M. Drazan
|
|
Director
|
|
March 16, 2010
|
|
|
|
/s/ L
ARRY
G. G
ARBERDING
Larry G. Garberding
|
|
Director
|
|
March 16, 2010
|
|
|
|
/s/ M
AUREEN
O. H
ELMER
Maureen O. Helmer
|
|
Director
|
|
March 16, 2010
|
|
|
|
/s/ G
EORGE
C. M
c
N
AMEE
George C. McNamee
|
|
Director
|
|
March 16, 2010
|
|
|
|
/s/ G
ARY K. WILLIS
Gary K. Willis
|
|
Director
|
|
March 16, 2010
|
|
|
|
48
Table of Contents
Certain
exhibits indicated below are incorporated by reference to documents of Plug
Power on file with the Commission. Exhibits nos. 10.1, 10.2, 10.3, 10.5, 10.7
and 10.12 through 10.26 represent the management contracts and compensation
plans and arrangements required to be filed as exhibits to this Annual Report
on Form 10-K.
Exhibit No.
and Description
|
|
|
3.1
|
|
Amended and
Restated Certificate of Incorporation of Plug Power Inc.(9)
|
|
|
3.2
|
|
Third Amended and
Restated By-laws of Plug Power Inc.(10)
|
|
|
3.3
|
|
Certificate of
Amendment to Amended and Restated Certificate of Incorporation of Plug Power
Inc.(9)
|
|
|
|
3.4
|
|
Certificate of
Designations, Preferences and Rights of a Series of Preferred Stock of Plug
Power Inc. classifying and designating the Series A Junior Participating
Cumulative Preferred Stock.(11)
|
|
|
4.1
|
|
Specimen
certificate for shares of common stock, $.01 par value, of Plug Power.(2)
|
|
|
4.2
|
|
Shareholder Rights
Agreement, dated as of June 23, 2009, between Plug Power Inc. and Registrar
and American Stock Transfer & Trust Company, LLC, as Rights Agent.(11)
|
|
|
|
10.1
|
|
Second Amendment
and Restatement of the Membership Option Plan dated February 15, 1999
and First Amendment to Second Amendment and Restatement of the Membership
Option Plan dated October 1, 1999.(3)
|
|
|
10.2
|
|
1999 Stock Option
and Incentive Plan.(2)
|
|
|
10.3
|
|
Employee Stock Purchase
Plan.(2)
|
|
|
10.4
|
|
Registration Rights
Agreement to be entered into by the Registrant and the stockholders of the
Registrant.(9)
|
|
|
10.5
|
|
Severance
Agreement, dated as of July 12, 2007, by and between Plug Power Inc. and
Gerald A. Anderson.(6)
|
|
|
10.6
|
|
Joint Development
Agreement, dated as of June 2, 2000, between Plug Power Inc. and
Engelhard Corporation.(9)
|
|
|
10.7
|
|
Executive Severance
Agreement, dated as of July 9, 2007, by and between Plug Power Inc. and
Gerald A. Anderson.(6)
|
|
|
10.8
|
|
Indemnification
Agreement, dated as of July 9, 2007, by and between Plug Power Inc. and
Gerald A. Anderson.(6)
|
|
|
49
Table of Contents
Exhibit No.
and Description
|
|
|
10.9
|
|
Investor Rights
Agreement, dated as of June 29, 2006, by and among Plug Power Inc.,
Smart Hydrogen Inc. and the other parties named therein.(1)
|
|
|
|
10.10
|
|
Registration Rights
Agreement, dated as of June 29, 2006, by and between Plug Power Inc. and
Smart Hydrogen Inc.(1)
|
|
|
|
10.11
|
|
Form of
Indemnification Agreement entered into with each director.(1)
|
|
|
|
10.12
|
|
Form of Incentive
Stock Option Agreement.(4)
|
|
|
|
10.13
|
|
Form of
Non-Qualified Stock Option Agreement for Employees.(4)
|
|
|
|
10.14
|
|
Form of
Non-Qualified Stock Option Agreement for Independent Directors.(4)
|
|
|
10.15
|
|
Form of Restricted
Stock Award Agreement.(4)
|
|
|
10.16
|
|
Amendment to the
1999 Stock Option and Incentive Plan.(13)
|
|
|
|
10.17
|
|
Amendment to the
1999 Stock Option and Incentive Plan.(13)
|
|
|
|
10.18
|
|
Amendment to the
1999 Stock Option and Incentive Plan.(4)
|
|
|
10.19
|
|
Plug Power
Executive Incentive Plan.(5)
|
|
|
10.20
|
|
Employment
Agreement, dated as of April 7, 2008, by and between Andrew Marsh and Plug
Power Inc.(7)
|
|
|
10.21
|
|
Form of
Non-Qualified Stock Option Agreement for Employees.(7)
|
|
|
10.22
|
|
Executive
Employment Agreement, dated as of May 5, 2008, by and between Gerard L.
Conway, Jr. and Plug Power Inc.(8)
|
|
|
10.23
|
|
Executive
Employment Agreement, dated as of May 5, 2008, by and between Mark A. Sperry
and Plug Power Inc.(8)
|
|
|
10.24
|
|
Executive
Employment Agreement, dated as of October 28, 2009, by and between Erik J.
Hansen and Plug Power Inc.(12)
|
|
|
|
10.25
|
|
Executive
Employment Agreement, dated as of February 9, 2010, by and between Adrian
Corless and Plug Power Inc.(12)
|
|
|
|
10.26
|
|
Form of Restricted
Stock Unit Award Agreement for Employees.(13)
|
50
Table of Contents
Exhibit No.
and Description
|
|
|
23.1
|
|
Consent of KPMG
LLP.(13)
|
|
|
|
31.1 and 31.2
|
|
Certifications
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(13)
|
|
|
|
32.1 and 32.2
|
|
Certifications
pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.(13)
|
|
|
|
(1)
|
Incorporated by
reference to the Companys current Report on Form 8-K dated June 29,
2006.
|
(2)
|
Incorporated by
reference to the Companys Registration Statement on Form S-1 (File Number
333-86089).
|
(3)
|
Incorporated by
reference to the Companys Registration Statement on Form S-1/A (File Number
333-86089).
|
(4)
|
Incorporated by
reference to the Companys Form 10-Q for the period ended June 30, 2006.
|
(5)
|
Incorporated by
reference to the Companys current Report on Form 8-K dated February 15,
2007.
|
(6)
|
Incorporated by
reference to the Companys current Report on Form 8-K dated July 9,
2007.
|
(7)
|
Incorporated by
reference to the Companys current Report on Form 8-K dated April 2, 2008.
|
(8)
|
Incorporated by
reference to the Companys Form 10-Q for the period ended June 30, 2008.
|
(9)
|
Incorporated by
reference to the Companys Form 10-K for the period ended December 31, 2008.
|
(10)
|
Incorporated by
reference to the Companys current Report on Form 8-K dated October 28, 2009.
|
(11)
|
Incorporated by
reference to the Companys Registration Statement on Form 8-A dated June 24,
2009.
|
(12)
|
Incorporated by
reference to the Companys current Report on Form 8-K dated October 28, 2009.
|
(13)
|
Filed herewith.
|
51
Table of Contents
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
52
Table of Contents
Report of Independent Registered Public Accounting
Firm
The Board of Directors and
Stockholders
Plug
Power Inc.:
We
have audited the accompanying consolidated balance sheets of Plug Power Inc.
and subsidiaries (a development stage enterprise) (the Company) as of December 31, 2009 and
2008, and the related consolidated statements of operations, stockholders'
equity and comprehensive loss, and cash flows for each of the years in the
three-year period ended December 31, 2009, and the information included in the
cumulative from inception presentations for the period January 1, 2001 to
December 31, 2009 (not separately presented herein). These consolidated
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Plug Power Inc. and
subsidiaries (a development stage enterprise) as of December 31, 2009 and 2008,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 2009, and the information included
in the cumulative from inception presentations for the period January 1, 2001
to December 31, 2009 (not separately presented herein), in conformity with U.S.
generally accepted accounting principles.
We
also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Company's
internal control over financial reporting as of December 31, 2009, based on criteria
established in
Internal ControlIntegrated Framework
issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and
our report dated March 16, 2010, expressed an unqualified opinion on the
effectiveness of the Company's internal control over
financial reporting.
/s/
KPMG LLP
Albany
, New York
March 16, 2010
F-1
Table of Contents
Report
of Independent Registered Public Accounting Firm
The Board of Directors and
Stockholders
Plug
Power Inc.:
We
have audited internal control over financial reporting of Plug Power Inc. and
subsidiaries (a development stage enterprise) as of December 31, 2009, based on
criteria established in
Internal Control ‑ Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO)
.
The Companys management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the
accompanying Managements Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Companys internal control
over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing
such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control
over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the companys assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In
our opinion, Plug Power Inc. and subsidiaries (a development stage enterprise)
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2009, based on criteria
established in
Internal Control ‑ Integrated Framework
issued by
COSO.
We
also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
Plug Power Inc. and subsidiaries as of December 31, 2009 and 2008, and the
related consolidated statements of operations, stockholders equity and
comprehensive loss, and cash flows for each of the years in the three-year
period ended December 31, 2009, and the information included in the cumulative
from inception presentations for the period January 1, 2001 to December 31,
2009 (not separately presented herein), and our report dated March 16, 2010
expressed an unqualified opinion on those consolidated financial statements.
/s/
KPMG LLP
Albany
, New York
March
16, 2010
F-2
Table of Contents
|
PLUG POWER INC. AND SUBSIDIARIES
|
|
(A DEVELOPMENT STAGE ENTERPRISE)
|
|
CONSOLIDATED BALA
NCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
2009
|
|
2008
|
|
|
|
Assets
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
14,580,983
|
$
|
80,844,500
|
|
|
Trading securities -
auction rate debt securities
|
|
53,397,179
|
|
52,650,654
|
|
|
Available-for-sale
securities
|
|
47,959,920
|
|
23,843,950
|
|
|
Accounts receivable, less
allowance of $92,560 in 2009 and $75,148 in 2008
|
|
2,004,670
|
|
2,151,121
|
|
|
Inventory
|
|
6,360,755
|
|
6,264,372
|
|
|
Auction rate debt
securities repurchase agreement
|
|
5,977,822
|
|
-
|
|
|
Prepaid expenses and other
current assets
|
|
3,217,446
|
|
2,350,738
|
|
|
|
Total current assets
|
|
133,498,775
|
|
168,105,335
|
|
Restricted cash
|
|
2,265,405
|
|
-
|
|
Property, plant and
equipment, net
|
|
14,342,740
|
|
17,769,974
|
|
Investment in leased
property
|
|
2,255,772
|
|
-
|
|
Auction rate debt
securities repurchase agreement
|
|
-
|
|
10,224,346
|
|
Intangible assets, net
|
|
11,821,830
|
|
12,843,182
|
|
Other assets
|
|
-
|
|
169,130
|
|
|
|
Total assets
|
$
|
164,184,522
|
$
|
209,111,967
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
$
|
2,877,270
|
$
|
3,274,972
|
|
|
Accrued expenses
|
|
5,847,541
|
|
9,945,316
|
|
|
Borrowings under line of
credit
|
|
59,375,000
|
|
62,875,000
|
|
|
Current portion long term
debt
|
|
413,708
|
|
-
|
|
|
Deferred revenue
|
|
4,596,717
|
|
5,425,270
|
|
|
Other current liabilities
|
|
379,584
|
|
413,837
|
|
|
|
Total current liabilities
|
|
73,489,820
|
|
81,934,395
|
|
|
Repayable government
assistance
|
|
-
|
|
173,138
|
|
|
Long term debt
|
|
1,150,408
|
|
-
|
|
|
Other liabilities
|
|
1,275,541
|
|
1,140,312
|
|
|
|
Total liabilities
|
|
75,915,769
|
|
83,247,845
|
|
Stockholders equity:
|
|
|
|
|
|
|
Common stock, $0.01 par
value per share; 245,000,000 shares authorized;
|
|
|
|
Issued (including
shares in treasury):
|
|
|
|
|
130,591,236 at
December 31, 2009 and 128,164,003 at December31, 2008
|
|
1,305,913
|
|
1,281,640
|
|
|
Additional paid-in capital
|
|
767,808,572
|
|
765,347,706
|
|
|
Accumulated other
comprehensive income (loss)
|
|
803,209
|
|
(359,253)
|
|
|
Deficit accumulated during
the development stage
|
|
(680,370,937)
|
|
(639,662,385)
|
|
|
Less common stock in
treasury:
|
|
|
|
|
|
|
986,199 shares at
December 31, 2009 and 402,114 shares at December31, 2008
|
|
(1,278,004)
|
|
(743,586)
|
|
|
|
Total stockholders equity
|
|
88,268,753
|
|
125,864,122
|
|
|
|
Total liabilities and
stockholders equity
|
$
|
164,184,522
|
$
|
209,111,967
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the
consolidated financial statements.
F-3
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED
STATE
MENTS OF OPERATIONS
For the years ended December31, 2009, 2008 and
2007 and Cumulative Amounts from Inception
|
|
|
|
|
|
|
|
|
Cumulative
Amounts
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
from Inception
|
Product
and service revenue
|
$
|
4,832,773
|
$
|
4,667,295
|
$
|
3,081,956
|
$
|
44,941,949
|
Research
and development contract revenue
|
|
7,459,783
|
|
13,234,022
|
|
13,188,667
|
|
96,161,038
|
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
12,292,556
|
|
17,901,317
|
|
16,270,623
|
|
141,102,987
|
Cost
of product and service revenue
|
|
7,246,453
|
|
11,442,232
|
|
9,398,774
|
|
62,217,896
|
Cost
of research and development contract
|
|
|
|
|
|
|
|
|
revenue
|
|
12,433,361
|
|
21,504,926
|
|
19,044,847
|
|
141,772,772
|
In-process
research and development
|
|
-
|
|
-
|
|
-
|
|
12,026,640
|
Research
and development expense
|
|
16,324,373
|
|
34,987,207
|
|
39,218,349
|
|
421,807,632
|
Selling,
general and administrative expenses
|
|
15,426,806
|
|
28,333,151
|
|
19,323,158
|
|
143,857,997
|
Goodwill
Impairment
|
|
-
|
|
45,842,656
|
|
-
|
|
45,842,656
|
Amortization
of intangible assets
|
|
2,132,333
|
|
2,224,954
|
|
1,614,103
|
|
21,095,891
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
(41,270,770)
|
|
(126,433,809)
|
|
(72,328,608)
|
|
(707,518,497)
|
Interest
and other income and net realized gains
|
|
|
|
|
|
|
|
|
(losses) from available-for-sale securities
|
|
1,689,299
|
|
5,134,442
|
|
12,337,792
|
|
49,181,183
|
Change
in fair value of auction rate securities repurchase agreement
|
|
(4,246,524)
|
|
10,224,346
|
|
-
|
|
5,977,822
|
Net
trading gain
|
|
4,246,524
|
|
-
|
|
-
|
|
4,246,524
|
Impairment
loss on available-for-sale securities
|
|
-
|
|
(10,224,346)
|
|
-
|
|
(10,224,346)
|
Interest
and other expense
|
|
(1,127,081)
|
|
(400,657)
|
|
(580,000)
|
|
(3,455,873)
|
|
|
|
|
|
|
|
|
|
Loss
before equity in losses of affiliates
|
|
(40,708,552)
|
|
(121,700,024)
|
|
(60,570,816)
|
|
(661,793,187)
|
Equity
in losses of affiliates
|
|
-
|
|
-
|
|
-
|
|
(18,577,750)
|
|
|
|
|
|
|
|
|
|
Net
loss
|
$
|
(40,708,552)
|
$
|
(121,700,024)
|
$
|
(60,570,816)
|
$
|
(680,370,937)
|
|
|
|
|
|
|
|
|
|
Loss
per share:
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
$
|
(0.32)
|
$
|
(1.36)
|
$
|
(0.69)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares
|
|
|
|
|
|
|
|
|
outstanding
|
|
129,110,661
|
|
89,383,480
|
|
87,341,717
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the
consolidated financial statements.
F-4
Table of Contents
PLUG
POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH
FLOWS
For the years ended December31, 2009, 2008 and
2007 and cumulative amounts from inception
|
Twelve months ended December 31,
|
|
Cumulative Amounts
|
|
|
2009
|
|
2008
|
|
2007
|
|
from Inception
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
$
|
(40,708,552)
|
$
|
(121,700,024)
|
$
|
(60,570,816)
|
$
|
(680,370,937)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
3,634,668
|
|
4,398,147
|
|
3,847,024
|
|
42,063,390
|
Equity
in losses of affiliates
|
|
-
|
|
-
|
|
-
|
|
18,577,750
|
Amortization
of intangible assets
|
|
2,132,333
|
|
2,224,954
|
|
1,614,103
|
|
21,095,891
|
Noncash
prepaid development costs
|
|
-
|
|
-
|
|
-
|
|
10,000,000
|
Loss
(gain) on disposal of property, plant and equipment
|
|
504,397
|
|
(2,701)
|
|
12,421
|
|
541,610
|
In-kind
services
|
|
-
|
|
-
|
|
-
|
|
1,340,000
|
Stock-based
compensation
|
|
1,928,501
|
|
8,590,573
|
|
5,422,745
|
|
45,236,932
|
Provision
for bad debts
|
|
92,560
|
|
75,148
|
|
57,000
|
|
260,378
|
Amortization
of deferred grant revenue
|
|
-
|
|
-
|
|
-
|
|
(1,000,000)
|
Amortization
and write-off of deferred rent
|
|
-
|
|
-
|
|
-
|
|
2,000,000
|
Goodwill
impairment charge
|
|
-
|
|
45,842,656
|
|
-
|
|
45,842,656
|
Impairment
loss on available-for-sale securities
|
|
-
|
|
10,224,346
|
|
-
|
|
10,224,346
|
Net
unrealized gains on trading securities
|
|
(4,246,524)
|
|
-
|
|
-
|
|
(4,246,524)
|
Change
in fair value of auction rate debt securities repurchase agreement
|
|
4,246,524
|
|
(10,224,346)
|
|
-
|
|
(5,977,822)
|
Gain
on repayable government assistance
|
|
(324,300)
|
|
(1,232,522)
|
|
-
|
|
(1,556,822)
|
In-process
research and development
|
|
-
|
|
-
|
|
-
|
|
7,042,640
|
Changes
in assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
65,440
|
|
2,281,723
|
|
(2,738,263)
|
|
(1,100,070)
|
Inventory
|
|
(95,935)
|
|
(521,253)
|
|
655,753
|
|
(5,165,572)
|
Prepaid
expenses and other current assets
|
|
(684,277)
|
|
256,448
|
|
1,223,756
|
|
(3,988,641)
|
Accounts
payable and accrued expenses
|
|
(3,944,407)
|
|
1,103,013
|
|
518,297
|
|
1,094,613
|
Deferred
revenue
|
|
(828,675)
|
|
2,087,370
|
|
647,218
|
|
5,598,233
|
Net
cash used in operating activities
|
|
(38,228,247)
|
|
(56,596,468)
|
|
(49,310,762)
|
|
(492,487,949)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
Cash
paid for acquisitions, net
|
|
-
|
|
-
|
|
(47,732,866)
|
|
(19,267,125)
|
Purchase
of property, plant and equipment
|
|
(532,960)
|
|
(1,418,641)
|
|
(2,944,405)
|
|
(38,875,181)
|
Investment
in leased property
|
|
(2,461,526)
|
|
-
|
|
-
|
|
(2,461,526)
|
Restricted
cash
|
|
(2,265,405)
|
|
-
|
|
-
|
|
(2,265,405)
|
Proceeds
from disposal of property, plant and equipment
|
|
223,000
|
|
14,587
|
|
13,963
|
|
567,216
|
Purchase
of intangible asset
|
|
-
|
|
-
|
|
-
|
|
(9,624,500)
|
Investment
in affiliate
|
|
-
|
|
-
|
|
-
|
|
(1,500,000)
|
Proceeds
from trading securities
|
|
3,500,000
|
|
-
|
|
-
|
|
3,500,000
|
Proceeds
from maturities and sales of available-for-sale securities
|
|
137,555,930
|
|
266,774,180
|
|
556,640,568
|
|
2,733,755,388
|
Purchases
of available-for-sale securities
|
|
(161,803,208)
|
|
(199,713,772)
|
|
(472,899,139)
|
|
(2,844,494,512)
|
Net
cash (used in) provided by investing activities
|
|
(25,784,169)
|
|
65,656,354
|
|
33,078,121
|
|
(180,665,645)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common and preferred stock
|
|
-
|
|
-
|
|
-
|
|
428,529,602
|
Proceeds
from initial public offering, net
|
|
-
|
|
-
|
|
-
|
|
201,911,705
|
Stock
issuance costs
|
|
-
|
|
-
|
|
-
|
|
(5,548,027)
|
Purchase
of treasury stock
|
|
(534,418)
|
|
(618,642)
|
|
-
|
|
(1,153,060)
|
Proceeds
from stock option exercises and employee stock purchase plan
|
|
76,493
|
|
202,875
|
|
480,654
|
|
11,521,718
|
Repayment
of loans due to General Hydrogen Shareholders
|
|
-
|
|
-
|
|
(400,000)
|
|
(400,000)
|
(Repayment)
proceeds from borrowings under line of credit
|
|
(3,500,000)
|
|
62,875,000
|
|
-
|
|
59,375,000
|
Proceeds
from long term debt
|
|
1,793,461
|
|
-
|
|
-
|
|
1,793,461
|
Principal
payments on long-term debt
|
|
(229,602)
|
|
-
|
|
-
|
|
(7,016,289)
|
Repayment
of government assistance
|
|
-
|
|
(2,235,244)
|
|
-
|
|
(2,235,244)
|
Net
cash (used in) provided by financing activities
|
|
(2,394,066)
|
|
60,223,989
|
|
80,654
|
|
686,778,866
|
Effect
of exchange rate changes on cash
|
|
142,965
|
|
(516,313)
|
|
1,329,059
|
|
955,711
|
Increase
(decrease) in cash and cash equivalents
|
|
(66,263,517)
|
|
68,767,562
|
|
(14,822,928)
|
|
14,580,983
|
Cash and cash equivalents, beginning of period
|
|
80,844,500
|
|
12,076,938
|
|
26,899,866
|
|
|
Cash and cash equivalents, end of period
|
$
|
14,580,983
|
$
|
80,844,500
|
$
|
12,076,938
|
$
|
14,580,983
|
The accompanying notes are an integral part of the
consolidated financial statements.
F-5
Table of Contents
PLUG
POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS EQUITY
AND
COMPREHENSIVE LOSS
For the years ended December 31, 2009, 2008 and
2007
|
Preferred Stock
|
Common Stock
|
|
|
|
Treasury Stock
|
|
|
|
Shares
|
Amount
|
Shares
|
Amount
|
Additional
Paid-in-
Capital
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Deficit
Accumulated
During the
Development
Stage
|
Shares
|
Amount
|
Total
Stockholders'
Equity
|
Total
Comprehensive
Loss
|
December 31,
2006
|
395,000
|
$ 3,950
|
86,794,915
|
$ 867,952
|
$751,118,315
|
$ (70,480)
|
$(457,391,545)
|
-
|
$
-
|
$294,528,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(60,570,816)
|
-
|
-
|
(60,570,816)
|
(60,570,816)
|
Foreign
currency translation gain
|
-
|
-
|
-
|
-
|
-
|
7,739,141
|
-
|
-
|
-
|
7,739,141
|
7,739,141
|
Unrealized
gain on available-for-sale securities, net of reclassification adjustments
for realized net losses and gains
|
-
|
-
|
-
|
-
|
-
|
141,897
|
-
|
-
|
-
|
141,897
|
141,897
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
$(52,689,778)
|
Stock
based compensation
|
-
|
-
|
871,255
|
8,710
|
5,290,590
|
-
|
-
|
-
|
-
|
5,299,300
|
|
Stock
option exercises
|
-
|
-
|
151,237
|
1,512
|
149,725
|
-
|
-
|
-
|
-
|
151,237
|
|
Stock
issued under employee stock purchase plan
|
-
|
-
|
65,515
|
655
|
205,153
|
-
|
-
|
-
|
-
|
205,808
|
|
Warrants
|
-
|
-
|
-
|
-
|
1,405,715
|
-
|
-
|
-
|
-
|
1,405,715
|
|
December 31,
2007
|
395,000
|
$ 3,950
|
87,882,922
|
$878,829
|
$758,169,498
|
$ 7,810,558
|
$(517,962,361)
|
-
|
$
-
|
$248,900,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(121,700,024)
|
-
|
-
|
(121,700,024)
|
(121,700,024)
|
Foreign
currency translation loss
|
-
|
-
|
-
|
-
|
-
|
(8,325,499)
|
-
|
-
|
-
|
(8,325,499)
|
(8,325,499)
|
Unrealized
gain on available-for-sale securities, net of reclassification adjustments
for realized net losses and gains
|
-
|
-
|
-
|
-
|
-
|
155,688
|
-
|
-
|
-
|
155,688
|
155,688
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
$(129,869,835)
|
Stock
based compensation
|
-
|
-
|
665,744
|
6,658
|
7,258,897
|
-
|
-
|
-
|
-
|
7,265,555
|
|
Conversion
of Preferred Stock
|
(395,000)
|
(3,950)
|
39,500,000
|
395,000
|
(391,050)
|
-
|
-
|
-
|
-
|
-
|
|
Treasury
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
402,114
|
(743,586)
|
(743,586)
|
|
Stock
option exercises
|
-
|
-
|
3,935
|
39
|
3,896
|
-
|
-
|
-
|
-
|
3,935
|
|
Stock
issued under employee stock purchase plan
|
-
|
-
|
111,402
|
1,114
|
306,465
|
-
|
-
|
-
|
-
|
307,579
|
|
December 31,
2008
|
-
|
$
-
|
128,164,003
|
$1,281,640
|
$765,347,706
|
$ (359,253)
|
$(639,662,385)
|
402,114
|
$ (743,586)
|
$125,864,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(40,708,552)
|
-
|
-
|
(40,708,552)
|
(40,708,552)
|
Foreign
currency translation gain
|
-
|
-
|
-
|
-
|
-
|
1,293,770
|
-
|
-
|
-
|
1,293,770
|
1,293,770
|
Unrealized
loss on available-for-sale securities, net of reclassification adjustments
for realized net losses and gains
|
-
|
-
|
-
|
-
|
-
|
(131,308)
|
-
|
-
|
-
|
(131,308)
|
(131,308)
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
$(39,546,090)
|
Stock
based compensation
|
-
|
-
|
2,218,993
|
22,190
|
2,264,858
|
-
|
-
|
-
|
-
|
2,287,048
|
|
Treasury
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
584,085
|
(534,418)
|
(534,418)
|
|
Stock
issued under employee stock purchase plan
|
-
|
-
|
208,240
|
2,083
|
196,008
|
-
|
-
|
-
|
-
|
198,091
|
|
December 31,
2009
|
-
|
$
-
|
130,591,236
|
$1,305,913
|
$767,808,572
|
$ 803,209
|
$(680,370,937)
|
986,199
|
$ (1,278,004)
|
$88,268,753
|
|
The accompanying notes are an integral part of the
consolidated financial statements.
F-6
Table of Contents
PLUG
POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of
Operations
Description of
Business
Plug
Power Inc. is a development stage enterprise involved in the design,
development and manufacture of fuel cell systems for industrial off-road
(forklift or material handling) markets and stationary power markets worldwide.
The Company is a development stage enterprise because substantially all of the
Companys resources and efforts are aimed at the discovery of new knowledge
that could lead to significant improvement in fuel cell reliability and
durability, and the establishment, expansion and stability of markets for the
Companys products. The Company continues to experience significant net
outflows of cash from operations and devotes significant efforts towards
financial planning in order to forecast future cash spending and the ability to
continue product research and development activities and expansion of markets
for its products. Fuel cell technology within the Companys principal target
markets, material handling power and remote prime power, and our secondary
markets, residential and backup power, is still early in the technology
adoption life cycle.
In
2010, as the Company plans to enter the commercial adoption phase of its GenDrive™
and GenSys
®
products, with commensurate resource commitments to
selling, marketing, and service activities, it is expected that we will no
longer be a development stage enterprise.
The
Company is focused on proton exchange membrane, or PEM, fuel cell and fuel
processing technologies and fuel cell/battery hybrid technologies, from which
multiple products are available. A fuel cell is an electrochemical device that
combines hydrogen and oxygen to produce electricity and heat without
combustion. Hydrogen is derived from hydrocarbon fuels such as liquid petroleum
gas (LPG), natural gas, propane, methanol, ethanol, gasoline or biofuels.
Hydrogen can also be obtained from the electrolysis of water. Hydrogen can be
purchased directly from industrial gas providers or can be produced on-site at
consumer locations.
The
Company sells its products worldwide through our direct product sales force,
original equipment manufacturers (OEMs) and their dealer networks. We sell to
business, industrial and government customers.
The
Company was organized in the State of Delaware on June 27, 1997 and became
listed on the NASDAQ exchange on October 29, 1999. The Company was originally
formed as a joint venture between Edison Development Corporation and Mechanical
Technology Incorporated. In 2007, the Company merged with and acquired all the
assets, liabilities and equity of Cellex Power Products, Inc. (Cellex) and
General Hydrogen Corporation (General Hydrogen).
Unless
the context indicates otherwise, the terms Company, Plug Power, we, our
or us as used herein refers to Plug Power Inc. (the registrant) and its
subsidiaries.
Although
the Company has a significant amount of available-for-sale securities, as
described further below, as of December 31, 2009, neither the Company nor
any of its subsidiaries was an investment company pursuant to the Investment
Company Act of 1940, as amended.
F-7
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Liquidity
Although
the Company anticipates incurring substantial additional losses, we believe
that our current cash, cash equivalents, trading securities and
available-for-sale securities balances will provide sufficient liquidity to
fund operations for at least the next twelve months including anticipated
increased working capital needs. The Companys cash
requirements depend on numerous factors, including completion of our product
development activities, our ability to commercialize our energy products,
market acceptance of our systems and other factors. The Company expects to
devote substantial capital resources to continue its development programs
directed at commercializing our energy products for worldwide use, building a
sales base and expanding market channels, hiring and training production staff,
developing and better utilizing our manufacturing capacity, production and research and
development activities. The Company expects to pursue the expansion of its
operations through internal growth and strategic acquisitions and expects that
such activities will be funded from existing cash, cash equivalents, trading
securities, available-for-sale securities, and the issuance of additional
equity or debt securities or additional borrowings subject to market and other
conditions. The failure to raise the funds necessary to finance future cash
requirements or consummate future acquisitions could adversely affect the
Companys ability to pursue its strategy and could negatively affect its
operations in future periods.
Included
in trading securities and working capital at December 31, 2009 and 2008,
respectively, is $53.4 million and $52.7 million of auction rate debt
securities. The auction rate debt securities are secured by student loans which
are generally guaranteed by the Federal government. These auction rate debt
securities are structured to be tendered at par, at the investors option, at
auctions occurring every 27-30 days. However, due to the liquidity issues in
the credit and capital markets, the market for auction rate debt securities
began experiencing auction failures in February 2008 and there have been no
successful auctions for the securities held in our portfolio since the failures
began. We continue to receive interest on these securities, subject to an
interest rate cap formula for each security as periodically adjusted in accordance
with the respective securities agreement. At December 31, 2009, the interest
rates ranged from 0.61% to 3.48% on the auction rate debt securities as
compared to the interest rate range at December 31, 2008 from 1.55% to 3.43%.
The
Company has pledged these securities as collateral to a third-party lender for
a Credit Line Agreement (See Note 7, Credit Line Agreement and Auction Rate
Debt Securities Repurchase Agreement) entered into in December 2008. Given the
lack of liquidity in the market for auction rate debt securities, the fair
value of these auction rate debt securities have become lower than their cost
and, based on an analysis of other than temporary impairment factors,
management has determined, beginning in the first quarter of 2008, that this
difference represents a decline in value that is other-than-temporary.
Accordingly, the Company recorded an other-than-temporary impairment charge of
$10.2 million for the year ended December 31, 2008 in the consolidated
statements of operations. In December 2008, the Company entered into a
Repurchase Agreement with a third-party lender such that the Company may
require the third-party lender to repurchase the auction rate debt securities
pledged as collateral for the Credit Line Agreement, at their par value, from
June 30, 2010 through July 2, 2012 as full settlement for the advances on the
Credit Line
Agreement. The Company has elected to record the Repurchase Agreement at its fair
value in accordance with Accounting Standard Codification No. 825-10-25 to
allow consistent treatment of the agreement and the underlying collateral. At
December 31, 2009 and 2008, the fair value of this item is approximately $6.0
million and $10.2 million, respectively, and is recorded as an asset on the
consolidated balance sheets. The change in the fair value of the Repurchase
Agreement for the year ended December 31, 2009 was $4.2 million and is
recorded as a net unrealized loss on the consolidated statements of
operations. The fair value change of the Repurchase Agreement of $10.2
million was recorded as a gain in the 2008 consolidated statement of
operations.
F-8
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Under Internal Revenue Code (IRC) Section 382, the use
of loss carryforwards may be limited if a change in ownership of a company
occurs. If it is determined that due to transactions involving the Companys
shares owned by its 5 percent shareholders a change of ownership has occurred
under the provisions of IRC Section 382, the Company's net operating loss
carryforwards could be subject to significant IRC Section 382 limitations.
At December 31, 2009, the Company has approximately
$536.1 million in Federal and state net operating loss carryforwards and $15
million in Federal research and experimentation tax credit carryforwards (of
which $5.7 million represents an uncertain tax position), which resulted in
$203.7 million and $9.3 million, respectively, in deferred tax assets that are
recorded on the Companys balance sheet at December 31, 2009. These deferred
tax assets are fully reserved for through a valuation allowance. During the
fourth quarter of 2009, as a result of certain equity transactions, the Company
may have had an ownership change for IRC Section 382 purposes. If a change
occurred in the fourth quarter, an IRC Section 382 limitation could result in
as much as approximately $458.6 million of the Company's Federal and state net
operating loss carryforwards expiring prior to utilization, which would result
in the Companys deferred tax asset and valuation allowance decreasing by
approximately $174.3 million. Additionally, if a change in control occurred
during the fourth quarter an IRC Section 382 limitation could result in as much
as approximately $15 million of Federal research and experimentation tax credit
carryforwards expiring prior to utilization, which would result in the
Company's deferred tax asset and valuation allowance decreasing by approximately
$9.3 million. These decreases would have no impact on the Companys financial
position, results of operations, or cash flows. However, these potential
future tax benefits would no longer be available to the Company. The Company is
in the process of completing a formal Section 382 study to determine if an
ownership change has occurred.
As
of December 31, 2009, we had cash and cash equivalents of $14.6 million,
available-for-sale securities of $48.0 million and working capital of $60.0
million.
Mergers
and Acquisitions
On
April 3, 2007, we purchased all of the outstanding capital stock of
Cellex, a development stage enterprise, from its equity holders for an
aggregate cash purchase price of $46.1 million, including acquisition costs.
On
May 4, 2007, the Company completed the acquisition of all of the
outstanding shares of General Hydrogen, a development stage enterprise, for an
aggregate purchase price of $12.4 million, including acquisition costs. The
purchase price includes the settlement of $3 million in senior secured loans
previously made by Plug Power to General Hydrogen, as well as 571,429 warrants
granted to shareholders of General Hydrogen that were valued at $1.4 million.
The warrant price was based on a Monte Carlo simulation which was performed,
and the mean value was selected. The warrants become exercisable when Plug
Powers Common Stock trades at a volume weighted average price of $7.00 or more
for 10 consecutive trading days. The warrants carry an exercise price of $.01
per share and expire four years from the date of issuance.
Private
Placements
In
June 2006, the Company completed a private placement with Smart Hydrogen
Inc. (the Buyer) whereby the Company sold 395,000 shares of Class B Capital
Stock, a class of preferred stock of the Company, which were convertible into
39,500,000 shares of common stock, and 11,240 shares of common stock to the
Buyer for a net purchase price of approximately $214.4 million, after payment
of expenses relating to the issuance. The Buyer also contemporaneously
purchased 1,825,000 shares of common stock of the Company from DTE Energy
Foundation.
Change
in Control
In
December 2008, Smart Hydrogen Inc. sold to OJSC (Third Generation Company of
the Wholesale Electricity Market) (OGK-3) all 395,000 shares of the Company's
Class B Capital Stock as well as 5,126,939 shares of the Company's common
stock. This sale triggered the automatic conversion of the Company's Class B
Capital Stock into 39,500,000 shares of common stock, and the termination of
all the rights and obligations attached to the Class B Capital Stock. The
rights and obligations attached to the Class B Capital Stock that terminated
included, but were not limited to, the right to appoint directors, veto rights
and voting support obligations under the Investor Rights Agreement dated as of
June 29, 2006, as amended (the Investor Rights Agreement). OGK-3 has executed a
joinder agreement to the Investor Rights Agreement and is prohibited from
transferring its shares of the Company's Common Stock to a competitor of the
Company. OGK-3 is also bound by the same standstill provisions that applied to
Smart Hydrogen, as set forth in the Investor Rights Agreement. This transfer
and conversion triggered a change of control pursuant
to Section 17 of our 1999 Stock Option and Incentive Plan; and, therefore, each
outstanding Stock Option Right automatically became fully exercisable and
conditions and restrictions on each outstanding Restricted Stock Award,
Deferred Stock Award and Performance Share Award that relates solely to the
passage of time and continued employment were removed.
F-9
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
2.
Summary of Significant Accounting Policies
Principles of
Consolidation
The
consolidated financial statements include the financial statements of Plug
Power Inc. and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation. It is the
Companys policy to reclassify prior year consolidated financial statements to
conform to current year presentation.
Cash
Equivalents
Cash
equivalents consist of money market accounts and overnight repurchase
agreements with an initial term of less than three months. For purposes of the
consolidated statements of cash flows, the Company considers all highly-liquid
debt instruments with original maturities of three months or less to be cash
equivalents.
Investment
Securities
Investment
securities at December 31, 2009 and 2008 consist of U.S. Treasury,
corporate debt, auction rate debt securities, and government agency securities.
The Company classifies its securities in one of two categories: trading or
available‑for‑sale. Trading securities consist of auction rate debt
securities. All other securities not included in trading are classified as
available‑for‑sale.
Trading
and available‑for‑sale securities are recorded at fair value.
Unrealized holding gains and losses on trading securities are included in
earnings. Unrealized holding gains and losses, net of the related tax effect,
on available‑for‑sale securities are excluded from earnings and are
reported as a separate component of accumulated other comprehensive income
until realized. Realized gains and losses from the sale of available‑for‑sale
securities are determined on a specific‑identification basis.
A
decline in the fair value of any available for sale debt security below cost that is
deemed to be other than temporary, and management does not intend to sell the
security and believes it is more likely than not the company will not be
required to sell the security prior to recovery of cost or amortized cost, the
portion of the total impairment attributable to the credit loss is recognized
in earnings, and the remaining difference between the securitys amortized cost
basis and its fair value is included in other comprehensive income.
F-10
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
For
impaired available for sale debt securities that management intends to sell, or
where management believes it is more than likely than not that the Company will
be required to sell, and does not expect the fair value of a security to
recover to cost or amortized cost prior to the expected date of sale, an other
than temporary impairment charge is recognized in earnings equal to the
difference between the fair value and cost or amortized cost basis of the
security. The fair value of the other than temporarily impaired security
becomes the new cost basis.
To
determine whether an impairment is other than temporary the Company considers
the reasons for the impairment, the severity and duration of the impairment,
changes in value subsequent to period-end, forecasted performance of the
investee, and the general market conditions in the geographic area or industry
the investee operates in.
Premiums
and discounts are amortized or accreted over the life of the related available‑for‑sale
security as an adjustment to yield using the interest method. Interest income
is recognized when earned.
Accounts
Receivable
Accounts
receivable related to product and service arrangements are recorded when
products are shipped or delivered to customers, as appropriate. Accounts
receivable related to contract research and development arrangements are
recorded when work is completed under government contracts. Accounts receivable
are stated at the amount billed to customers. Interest and late charges billed
to customers are not material, and because collection is uncertain, are not
recognized until collected. Accounts receivable are ordinarily due between 30
and 60 days after the issuance of the invoice. Accounts are considered
delinquent when more than 90 days past due. Delinquent receivables are reserved
or written off based on individual credit evaluation and specific circumstances
of the customer. The allowance for doubtful accounts and related receivable are
reduced when the amount is deemed uncollectible.
Inventory
Inventory
is stated at the lower of cost or market value and consists primarily of raw
materials. In the case of our limited consignment arrangements, we do not
relieve inventory until the customer has accepted the product, at which time
the risks and rewards of ownership have transferred. At December 31, 2009
and 2008, inventory on consignment was valued at approximately $0 and $45,000,
respectively.
Goodwill
and Other Intangible Assets
The
Company accounts for goodwill pursuant to Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) No. 805, Business Combinations
and FASB ASC No. 350, Intangibles Goodwill and Other. Goodwill is tested for
impairment annually or more frequently when events or circumstances indicate
that the carrying value more likely than not exceeds its fair value. Goodwill
impairment testing is performed at the segment (or reporting unit) level. The
Companys goodwill is evaluated at the entity level as there is only one
reporting unit. Goodwill is assigned to
reporting units at the date the goodwill is initially recorded. Once goodwill
has been assigned to reporting units, it no longer retains association with a
particular acquisition, and all of the activities within a reporting unit,
whether acquired or organically grown, are available to support the value of
the goodwill. The goodwill impairment analysis is a two-step test. The first
step, used to identify potential impairment, involves comparing the reporting
units fair value to its carrying value including goodwill. If the fair value
of a reporting unit exceeds its carrying value, applicable goodwill is
considered not to be impaired. If the carrying value exceeds fair value, there
is an indication of impairment and the second step is performed to measure the
amount of impairment, if any. The Company performs its annual goodwill
assessment under FASB ASC No. 350 at the date of its fiscal year end. As of
December 31, 2009, the Company has no goodwill. See Note 6, Goodwill and
Other Intangible Assets for more information.
F-
11
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
FASB ASC
No. 350 also requires that intangible assets with estimable useful lives be
amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment when certain triggering events
occur in accordance with FASB ASC No. 360-10-35-15, Impairment or Disposal of Long-Lived
Assets. Intangible assets consisting of acquired technology and customer
relationships related to Cellex and General Hydrogen are amortized using a
straight-line method over their useful lives of 8 years. As a result of the
uncertain economic environment in general and the further decline in our stock
price, the Company performed an impairment assessment in accordance with FASB ASC
No. 360-10-35-15 as of December 31, 2009 and has determined that no impairment
exists.
Product and Service
Revenue
The
Company applies the guidance within FASB ASC No. 605-10-S99, Revenue
Recognition Overall SEC Materials, in the evaluation of its contracts to
determine when to properly recognize
revenue.
Under FASB ASC No. 605-10-S99 revenue is recognized when title and risk of loss
have passed to the customer, there is persuasive evidence of an arrangement,
delivery has occurred or services have been rendered, the sales price is
determinable, and collectibility is reasonably assured.
The
Companys initial sales of products are contract-specific arrangements containing
multiple obligations that may include a combination of fuel cell systems,
continued service, maintenance, a supply of hydrogen and other support. While
contract terms generally stipulate that title and risk of ownership pass and
require payment upon shipment or delivery of the fuel cell system, or
acceptance in the case of certain consignment sales, and also stipulate that
payment is not contingent on the achievement of specific milestones or other
substantive performance, the multiple obligations within the Companys
contractual arrangements are not accounted for separately based on the Companys
limited commercial experience and lack of evidence of fair value of the separate
elements. As a result, the Company defers recognition of product and service
revenue and recognizes revenue on a straight-line basis over the stated
contractual terms, as the continued service, maintenance and other support
obligations expire, which are generally for periods of twelve (12) to thirty (30)
months or which may extend over multiple years. Our customers have no special
right of return, price protection allowances or other sales incentives. We do
offer a discount from our manufacturers suggested retail price to resellers to
allow for mark-up of the reseller. In the case of the Companys limited
consignment sales, the Company does not begin recognizing revenue on a deferred
basis until the customer has accepted the product, at which time the risks and
rewards of ownership have transferred, the price is fixed and the Company has a
reasonable expectation of collection upon billing. The costs
associated with the product, service and other obligations are generally
expensed as they are incurred. At December 31, 2009 and 2008, the Company had
unbilled amounts from product and service revenue in the amount of
approximately $33,000 and $18,000, respectively. At December 31, 2009 and
2008, the Company had deferred product and service revenue in the amount of $4.6
million and $5.4 million, respectively.
F-12
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
As the
Company gains experience, including field experience relative to service and
warranty obligations based on the sales of initial products, the fair values
for the multiple elements within future contracts may become determinable and
the Company may, in future periods, recognize revenue upon shipment, delivery or
installation of the product, or may continue to defer recognition, based on
application of appropriate guidance within FASB ASC No. 605-25-25, Revenue Recognition
Multiple-Element Arrangements - Recognition.
Research
and Development Contract Revenue
Research
and development contract revenue primarily relates to cost reimbursement
research and development contracts associated with the development of PEM fuel
cell technology. The Company generally shares in the cost of these programs
with cost sharing percentages generally ranging from 20% to 50% of total
project costs. Revenue from time and material contracts is recognized on the
basis of hours expended plus other reimbursable contract costs incurred during
the period. Revenue from fixed fee contracts is recognized on the basis of
percentage of completion. Our percentage-of-completion contracts are best
efforts contracts with essentially no set deliverables. We measure progress on
our percentage-of-completion contracts based on costs incurred. All allowable
work performed through the end of each calendar quarter is billed, subject to
limitations in the respective contracts. We expect to continue certain research
and development contract work that is directly related to our current product
development efforts. At December 31, 2009 and 2008, the Company had unbilled
amounts from research and development contract revenue in the amount of
approximately $1.3 million and $1.5 million, respectively. At December 31,
2009 and 2008, the Company had customer deposits from research and development
contract revenue, representing deposits in advance of performance of the
allowable work, in the amount of approximately $159,000 and $13,000,
respectively.
Property, Plant and
Equipment
Property,
plant and equipment are originally recorded at cost. Maintenance and repairs
are expensed as costs are incurred. Depreciation on plant and equipment is
calculated on the straight-line method over the estimated useful lives of the
assets. The Company records depreciation and amortization over the following
estimated useful lives:
Buildings
|
|
20 years
|
Building improvements
|
|
520 years
|
Software, machinery and equipment
|
|
115 years
|
F-13
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Impairment of
Long-Lived Assets
The
Company evaluates the recoverability of long-lived assets in accordance with
the provisions of FASB ASC No. 360-10-35-15, Impairment or Disposal of
Long-Lived Assets. Long-lived assets, such as property, plant, and equipment,
and purchased intangibles subject to amortization, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of
the asset exceeds the fair value of the asset. Assets to be disposed of would
be separately presented in the balance sheet and reported at the lower of the
carrying amount or fair value less costs to sell, and are no longer
depreciated. The assets and liabilities of a disposal group classified as held
for sale would be presented separately in the appropriate asset and liability
sections of the balance sheet. As a result of the uncertain economic
environment in general and the further decline in our stock price, the Company
performed an impairment assessment in accordance with FASB ASC No. 360-10-35-15
as of December 31, 2009 and has determined that no impairment exists.
Income Taxes
Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the period that includes the enactment date. A valuation
allowance is recorded to reduce the carrying amounts of deferred tax assets if
it is more likely than not that such assets will not be realized. We did not
report a benefit for federal and state income taxes in the consolidated
financial statements as the deferred tax asset generated from our 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 carryforward will not
be realized.
The
Company accounts for uncertain tax positions in accordance with FASB ASC No.
740-10-25, Income Taxes Overall Recognition. The Company must recognize in
its financial statements the impact of a tax position, if that position is more
likely than not to be sustained on audit, based on the technical merits of the
position.
Foreign
Currency Translation
Foreign
currency translation adjustments arise from conversion of the Companys foreign
subsidiarys financial statements to US dollars for reporting purposes, and are
included in accumulated other comprehensive income (loss) in stockholders
equity on the accompanying consolidated balance sheets. Realized foreign
currency transaction gains and losses are included in interest and other
expense in the accompanying consolidated statements of operations.
F-14
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Research and
Development
Costs
incurred in research and development by the Company are expensed as incurred.
Stock-Based
Compensation
The
Company maintains employee stock-based compensation plans, which are described
more fully in Note 14, Employee Benefit Plans.
Stock-based
compensation represents the cost related to stock-based awards granted to
employees and directors. The Company measures stock-based compensation cost at
grant date, based on the fair value of the award, and recognizes the cost as
expense on a straight-line basis (net of estimated forfeitures) over the
options requisite service period.
The Company estimates the fair value of stock-based
awards using a Black-Scholes valuation model. Stock-based compensation expense
is recorded in Research and development expense and Selling, general and
administrative expense in the consolidated statements of operations based on
the employees respective function.
The
Company records deferred tax assets for awards that result in deductions on the
Companys income tax returns, unless the Company cannot recognize the deduction
(i.e. the Company is in a net operating loss (NOL) position), based on the
amount of compensation cost recognized and the Companys statutory tax rate.
Differences between the deferred tax assets recognized for financial reporting
purposes and the actual tax deduction reported on the Companys income tax
return are recorded in additional paid-in capital if the tax deduction exceeds
the deferred tax asset or in the consolidated statements of operations if the
deferred tax asset exceeds the tax deduction and no additional paid-in capital
exists from previous awards. No tax benefit or expense for stock-based
compensation has been recorded during the years ended December 31, 2009,
2008 and 2007 since the Company remains in a NOL position.
Per Share Amounts
The
Company reports net loss per basic and diluted common share in accordance with the
provisions of FASB ASC No. 260, Earnings Per Share (ASC 260), which establishes
standards for computing and presenting loss per share. Basic earnings per
common share are computed by dividing net loss available to common stockholders
by the weighted average number of common shares outstanding during the
reporting period, adjusted for unvested restricted stock. Diluted earnings per
share reflects the potential dilution that could occur if securities or other
contracts to issue common stock (such as convertible preferred stock, stock
options, unvested restricted stock, and warrants) were exercised or converted
into common stock or resulted in the issuance of common stock (net of any
assumed repurchases) that then shared in the earnings of the Company, if any.
This is computed by dividing net earnings by the combination of dilutive common
share equivalents, which is comprised of shares issuable under outstanding
warrants, the Companys share-based compensation plans, and the weighted
average number of common shares outstanding during the reporting period. Since
the Company is in a net loss position, all common stock equivalents would be
considered to be anti-dilutive and are, therefore, not included in the
determination of diluted earnings per share. Accordingly, basic and diluted
loss per share are the same.
F-15
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The
following table provides the components of the calculations of basic and
diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(40,708,552
|
)
|
|
$
|
(121,700,024
|
)
|
|
$
|
(60,570,816
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
129,110,661
|
|
|
|
89,383,480
|
|
|
|
87,341,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These dilutive potential common shares are summarized
as follows:
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
Stock options outstanding
|
|
5,981,286
|
|
6,119,804
|
|
6,578,313
|
Unvested restricted stock (2)
|
|
8,682,666
|
|
|
|
784,697
|
Preferred stock (1)
|
|
|
|
|
|
39,500,000
|
Warrants
|
|
571,429
|
|
571,429
|
|
571,429
|
Number of dilutive potential common shares
|
|
15,235,381
|
|
6,691,233
|
|
47,434,439
|
|
|
|
|
|
|
|
(1)
|
The preferred stock
amount represents the dilutive potential common shares of the 395,000 shares
of Class B capital stock issued on
June 29, 2006, which were converted into 39,500,000 shares of common
stock in December 2008.
|
|
|
(2)
|
December 31, 2009, does not
include 2,028,572 shares subsequently issued in 2010 (which will immediately
vest) for the achievement of performance
objectives in 2009.
|
F-16
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Use of
Estimates
The
consolidated financial statements of the Company have been prepared in
conformity with U.S. generally accepted accounting principles, which require
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
Subsequent
Events
The
Company has evaluated subsequent events and transactions for potential
recognition or disclosure in the financial statements through March 16, 2010,
which was the date we filed this Form 10-K with the SEC. No recognized or
non-recognized subsequent events were noted.
Recently
Adopted Accounting Pronouncements
The
Company adopted the Financial Accounting Standards Board (FASB) Accounting
Standard Codification (ASC) No. 105, Generally Accepted Accounting Principles
(GAAP) (ASC No. 105 or FASB Codification) during the quarter ended September
30, 2009 and it did not have a material effect on the Companys consolidated
financial position, consolidated results of operations, or liquidity. The
Company has appropriately updated its disclosures with the appropriate
FASB Codification references. As such, all the notes to the consolidated
financial statements below as well as the critical accounting policies in the
Managements Discussion and Analysis section have been updated with the
appropriate FASB Codification references. The FASB Codification is the
authoritative source of generally accepted accounting principles in the United States. Rules and interpretive releases of the SEC under federal securities laws are
also sources of authoritative GAAP for SEC registrants. The FASB will no longer
issue new standards in the form of Statements, FASB Staff Positions, or
Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting
Standards Updates (ASU). ASU will not be authoritative in their own right as
they will only serve to update the FASB Codification. The issuance of the FASB
Codification was not intended to change or alter existing GAAP.
The
Company adopted ASC No. 810-10, Consolidation-Overall on January 1, 2009. This
standard establishes accounting and reporting standards for ownership interests
in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parents ownership interest and the valuation of
retained noncontrolling equity investments when a subsidiary is
deconsolidated. The standard also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between
the interests of the parent and the interests of the noncontrolling owners. The
Company does not have any outstanding noncontrolling interests. The Company
also adopted ASU No. 2010-02, Accounting and Reporting for Decreases in
Ownership of a Subsidiary A Scope Clarification. This Update was issued to
clarify the recent guidance on accounting for decreases in ownership of a
subsidiary. This Update is effective as of December 31, 2009. The adoption of
these standards did not have a material effect on the Companys consolidated
financial position, consolidated results of operations, or liquidity.
F-17
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The
Company adopted ASC No. 805, Business Combinations on January 1, 2009. This
standard applies to all transactions or other events in which an entity obtains
control of one or more businesses, including those sometimes referred to as
true mergers or mergers of equals and combinations achieved without the
transfer of consideration. This standard applies to all business entities,
including mutual entities that previously used the pooling-of-interests method
of accounting for some business combinations. The adoption did not have a
material effect on the Companys consolidated financial position, consolidated
results of operations, or liquidity. However, prospective business
combinations, if any, will be significantly impacted by the adoption of this
standard.
The
Company adopted ASC No. 260, Earnings Per Share on January 1, 2009. This
standard requires that unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) should be classified as participating securities and should be included
in the computation of earnings per share pursuant to the two-class method. The
adoption did not have a material effect on the Companys consolidated financial
position, consolidated results of operations, or liquidity.
The
Company adopted ASC No. 825-10-65, Financial Instruments Transition and Open
Effective Date Information during the quarter ended June 30, 2009. This
standard requires disclosures about fair value of financial instruments in
interim financial statements as well as in annual financial statements. The
Company provided the additional disclosure requirements. See Note 3 Fair
Value Measurements.
The
Company adopted ASC No. 820-10-35, Fair Value Measurements and Disclosures
Subsequent Measurement
during the quarter ended June 30, 2009. This
standard discusses the provisions related to the determination of fair value
when the volume and level of activity for the asset or liability have
significantly decreased. ASC No. 820-10-35 provides additional guidance for
estimating fair value when the volume and level of transaction activity for an
asset or liability have significantly decreased in relation to normal market
activity for the asset or liability. ASC No. 820-10-35 also includes guidance
on identifying circumstances that may indicate a transaction is not orderly.
ASC No. 820-10-35 emphasizes that even if there has been a significant decrease
in the volume and level of activity for the asset or liability and regardless
of the valuation technique(s) used, the objective of a fair value measurement
remains the same. Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction (that is, not a
forced liquidation or distressed sale) between market participants at the
measurement date under current market conditions. The adoption did not have a
material effect on the Companys consolidated financial position, consolidated
results of operations, or liquidity. See Note 3 Fair Value Measurements.
The
Company adopted ASC No. 320-10-65, Transition Related to Recognition and
Presentation of Other-Than-Temporary Impairments during the quarter ended June
30, 2009. This standard amends the other-than-temporary impairment guidance for
debt securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments in the financial
statements. The most significant change is a revision to the amount of
other-than-temporary loss of a debt security recorded in earnings. The adoption
did not have a material effect on the Companys consolidated financial
position, consolidated results of operations, or liquidity.
F-18
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The
Company adopted ASC No. 855, Subsequent Events during the quarter ended June
30, 2009. This standard should be applied to the accounting for and disclosure
of subsequent events. This standard does not apply to subsequent events or
transactions that are within the scope of other applicable GAAP that provide
different guidance on the accounting treatment for subsequent events or
transactions. ASC No. 855 applies to both interim financial
statements and annual financial statements. The objective of ASC No. 855 is to
establish general standards of accounting for and disclosures of events that
occur after the balance sheet date but before financial statements are issued
or are available to be issued. In particular, this standard sets forth: 1) The
period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements; 2) The circumstances under which an
entity should recognize events or transactions occurring after the balance
sheet date in its financial statements; and, 3) The disclosures that an entity
should make about events or transactions that occurred after the balance sheet
date. ASC No. 855 also requires entities to disclose the date through which
they have evaluated subsequent events and whether the date corresponds with the
release of their financial statements. The adoption did not have a material
effect on the Companys consolidated financial position, consolidated results
of operations, or liquidity. See Note 2 - Summary of Significant Accounting
Policies for this new disclosure.
Recent
Accounting Pronouncements
In June 2009, the FASB issued ASC No. 860, Transfers and Servicing. ASC
No. 860 will require entities to provide more information about sales of
securitized financial assets and similar transactions, particularly if the
seller retains some risk with respect to the assets. ASC No. 860 is effective
for fiscal years beginning after November 15, 2009. The Company plans to adopt
the provisions of ASC No. 860 on January 1, 2010 and does not believe adoption
of this new standard will have a material effect on its consolidated financial
position, consolidated results of operations, or liquidity.
In
June 2009, the FASB issued ASC No. 810, Consolidation and
ASU No. 2009-17, Improvements
to Financial Reporting by Enterprises Involved with Variable Interest Entities
. ASC No. 810 and ASU No. 2009-17 amends certain
requirements to improve financial reporting by companies involved with variable
interest entities and to provide more relevant and reliable information to
users of financial statements. ASC No. 810 is effective for fiscal years
beginning after November 15, 2009. The Company plans to adopt the provisions of
ASC No. 810 on January 1, 2010 and does not believe adoption of this new
standard will have a material effect on its consolidated financial position, consolidated
results of operations, or liquidity.
F-19
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
In
October 2009, the FASB issued ASU No. 2009-13 on Topic 605, Revenue
Recognition Multiple Deliverable Revenue Arrangements
.
The objective of
this Update is to address the accounting for multiple-deliverable arrangements
to enable vendors to account for products or services (deliverables) separately
rather than as a combined unit. Vendors often provide multiple products or
services to their customers. Those deliverables often are provided at different
points in time or over different time periods. This Update provides amendments
to the criteria in Subtopic 605-25 for separating consideration in
multiple-deliverable arrangements. The amendments in this Update establish a
selling price hierarchy for determining the selling price of a deliverable. The
selling price used for each deliverable will be based on vendor-specific
objective evidence (VSOE) if
available, third-party evidence (TPE) if VSOE is not available, or estimated
selling price if neither VSOE nor TPE is available. The amendments in this
Update also will replace the term fair value in the revenue allocation guidance
with selling price to clarify that the allocation of revenue is based on
entity-specific assumptions rather than assumptions of a marketplace
participant. This Update is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June
15, 2010. The Company plans to adopt the provisions of this Update on January
1, 2011. The Company is currently evaluating the impact, if any, of this new
accounting update on its consolidated financial position, consolidated
results of operations, or liquidity.
I
n January 2010, the FASB issued ASU No. 2010-06, Improving
Disclosures About Fair Value Measurements. This Update adds disclosure
requirements about transfers into and out of Levels 1, 2, and 3, clarifies
existing fair value disclosure requirements about the appropriate level of
disaggregation, and clarifies that a description of the valuation technique
(e.g., market approach, income approach, or cost approach) and inputs used
to measure fair value is required for recurring, nonrecurring, and Level 2
and 3 fair value measurements. These provisions are effective for the Company's
reporting period ending March 31, 2010. The Update also requires that
Level 3 activity about purchases, sales, issuances, and settlements be
presented on a gross basis rather than as a net number as currently required.
This provision is effective for the Company's reporting period ending
March 31, 2011. As this Update amends only the disclosure requirements for
fair value measurements, the adoption will have no impact on its
consolidated financial position, consolidated results
of operations, or liquidity.
3. Fair Value Measurements
The
Company complies with the provisions of FASB ASC No. 820, Fair Value
Measurements and Disclosures
(ASC 820), in measuring fair value and in
disclosing fair value measurements. ASC 820 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements required under other accounting pronouncements. FASB ASC No.
820-10-35, Fair Value Measurements and Disclosures- Subsequent Measurement (ASC
820-10-35), clarifies that fair value is an exit price, representing the amount
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. ASC 820-10-35-3 also requires
that a fair value measurement reflect the assumptions market participants would
use in pricing an asset or liability based on the best information available.
Assumptions include the risks inherent in a particular valuation technique (such
as a pricing model) and/or the risks inherent in the inputs to the model.
F-20
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
ASC
820-10-35 discusses valuation techniques, such as the market approach
(comparable market prices), the income approach (present value of future income
or cash flow), and the cost approach (cost to replace the service capacity of
an asset or replacement cost). The statement utilizes a fair value hierarchy
that prioritizes the inputs to valuation techniques used to measure fair value
into three broad levels. The following is a brief description of those three
levels:
Level
1 Inputs Level 1 inputs are unadjusted quoted prices in active markets for
assets or liabilities identical to those to be reported at fair value. An
active market is a market in which transactions occur for the item to be fair
valued with sufficient frequency and volume to provide pricing information on
an ongoing basis.
Level
2 Inputs Level 2 inputs are inputs other than quoted prices included within
Level 1. Level 2 inputs are observable either directly or indirectly. These
inputs include: (a) Quoted prices for similar assets or liabilities in
active markets; (b) Quoted prices for identical or similar assets or liabilities
in markets that are not active, such as when there are few transactions for the
asset or liability, the prices are not current, price quotations vary
substantially over time or in which little information is released publicly;
(c) Inputs other than quoted prices that are observable for the asset or
liability; and (d) Inputs that are derived principally from or
corroborated by observable market data by correlation or other means.
Level
3 Inputs Level 3 inputs are unobservable inputs for an asset or liability.
These inputs should be used to determine fair value only when observable inputs
are not available. Unobservable inputs should be developed based on the best
information available in the circumstances, which might include internally
generated data and assumptions being used to price the asset or liability.
When
determining the fair value measurements for assets or liabilities required or
permitted to be recorded at and/or marked to fair value, the Company considers
the principal or most advantageous market in which it would transact and
considers assumptions that market participants would use when pricing the asset
or liability. When possible, the Company looks to active and observable markets
to price identical assets. When identical assets are not traded in active
markets, the Company looks to market observable data for similar assets.
Nevertheless, certain assets are not actively traded in observable markets and
the Company must use alternative valuation techniques to derive a fair value
measurement.
F-21
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The
following table summarizes the basis used to measure certain financial assets
at fair value on a recurring basis in the consolidated balance sheet:
Basis
of Fair Value Measurements
|
|
|
|
Quoted Prices in Active
Markets for Identical Items
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
Balance
at December 31, 2009
|
|
Total
|
|
|
|
Trading securities auction rate debt securities
|
|
$
|
53,397,179
|
|
$
|
|
|
$
|
|
|
$
|
53,397,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
$
|
47,959,920
|
|
$
|
47,959,920
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate debt securities repurchase agreement
|
|
$
|
5,977,822
|
|
$
|
|
|
$
|
|
|
$
|
5,977,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following tables show reconciliations of the beginning and ending balances for
assets measured at fair value on a recurring basis using significant
unobservable inputs (i.e. Level 3):
|
|
|
|
|
Trading
Securities Auction Rate Debt Securities
|
|
Fair Value
Measurements Using
Significant
Unobservable Inputs
|
|
Beginning of period
|
|
$
|
52,650,654
|
|
Sale of trading securities
for the year ended December 31, 2009
|
|
|
(3,499,999
|
)
|
Net
unrealized gains on trading securities
for the year ended December 31, 2009
|
|
|
4,246,524
|
|
|
|
|
|
|
Fair value of trading securities - auction rate debt securities at
December 31, 2009
|
|
$
|
53,397,179
|
|
|
|
|
|
|
F-22
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
Auction
Rate Debt Securities Repurchase Agreement
|
|
Fair Value
Measurements Using
Significant
Unobservable Inputs
|
Beginning of period
|
|
$
|
10,224,346
|
Change in fair value of auction rate debt securities repurchase
agreement for the year ended December 31, 2009
|
|
|
(4,246,524)
|
|
|
|
|
Fair value of auction rate debt securities repurchase agreement at
December 31, 2009
|
|
$
|
5,977,822
|
|
|
|
|
The
following summarizes the valuation technique for assets measured and recorded
at fair value:
Available-for-sale
securities: For our level 1 securities, which represent Federal treasury
securities, fair value is based on quoted market prices.
Trading
securities auction rate debt securities and auction rate debt securities
repurchase agreement: The securities valued using unobservable inputs were the
auction rate debt securities and auction rate debt securities repurchase
agreement as the financial and capital markets have experienced significant
dislocation and illiquidity in regard to these types of instruments and there
is currently no secondary market for these types of securities. There have been
no successful auctions since early 2008. The valuation of these auction rate
debt securities and auction rate debt securities repurchase agreement is an
estimate based upon factors specific to these securities, including duration,
tax status (taxable or tax-exempt), credit quality, the existence of insurance
wraps, and the composition of the underlying student loans (Federal Family
Education Loan Program or private loans). Assumptions were made about future
cash flows based upon interest rate formulas as described above. Also, the
valuation included estimates of market data including yields or spreads of
similar trading instruments, when available, or assumptions believed to be
reasonable for non-observable inputs such as likelihood of redemption.
Actual transactions involving these securities and/or future valuations could
differ from the estimated fair value of these securities at December 31,
2009.
F-23
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
4.
Available-for-Sale Securities
The
amortized cost and fair value of the Companys available-for-sale securities as
of December 31, 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Gross Unrealized
Gains
|
|
Gross Unrealized
Losses
|
|
|
Fair Value
|
U.S.
Treasury Securities
|
|
$
|
47,864,122
|
|
$
|
95,798
|
|
$
|
|
|
|
$
|
47,959,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
amortized cost and fair value of the Companys available-for-sale securities as
of December 31, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
Gross Unrealized
Gains
|
|
Gross Unrealized
Losses
|
|
|
Fair Value
|
U.S.
Treasury Securities
|
|
$
|
23,616,845
|
|
$
|
227,105
|
|
$
|
|
|
|
$
|
23,843,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There
were no unrealized losses in the available-for-sale securities portfolio at
December 31, 2009 and 2008, respectively. The contractual maturities of
available-for-sale securities are all in the year ended December 31, 2010 for
balances as of December 31, 2009, and December 31, 2009 for balances as of
December 31, 2008.
The Company recognized gross gains, gross losses and
proceeds on available-for-sale securities for each of the years ended
December 31 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
Proceeds on sales
|
|
$
|
3,699,149
|
|
$
|
159,849,925
|
|
$
|
24,859,823
|
Proceeds on maturities
|
|
|
133,856,781
|
|
|
106,924,255
|
|
|
531,780,745
|
Gross realized gains
|
|
|
-
|
|
|
404,074
|
|
|
162,890
|
Gross realized losses
|
|
|
-
|
|
|
14,890
|
|
|
45,227
|
F-24
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
5. Property, Plant
and Equipment
Property,
plant and equipment at December 31, 2009 and 2008 consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
2009
|
|
|
December 31,
2008
|
|
Land
|
|
$
|
90,000
|
|
|
$
|
90,000
|
|
Buildings
|
|
|
14,557,080
|
|
|
|
14,557,080
|
|
Building improvements
|
|
|
8,784,867
|
|
|
|
8,615,636
|
|
Software, machinery and equipment
|
|
|
16,131,696
|
|
|
|
29,779,651
|
|
|
|
|
39,563,643
|
|
|
|
53,042,367
|
|
Less accumulated depreciation and amortization
|
|
|
(25,220,903
|
)
|
|
|
(35,272,393
|
)
|
Property, plant, and equipment, net
|
|
$
|
14,342,740
|
|
|
$
|
17,769,974
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense was $3.4 million, $4.4 million and $3.7 million for the years ended
December 31, 2009, 2008 and 2007, respectively, and was included in
research and development and selling, general and administrative expenses on
the accompanying consolidated statements of operations.
6.
Goodwill and Other Intangible Assets
Goodwill
is tested for impairment annually or more frequently when events or
circumstances indicate that the carrying value more likely than not exceeds its
fair value. There was no carrying amount of goodwill or changes in the carrying
amount of goodwill for the year ended December 31, 2009 as a result of the
full impairment charge recorded in 2008.
As
a result of the uncertain economic environment in general and the decline in
our stock price during the fourth quarter of 2008, indicative of a potential
devaluation of the Companys assets, the Company performed a goodwill
impairment assessment under FASB ASC No. 350, Intangibles Goodwill and Other.
As a result of this assessment, the Company determined that a goodwill
impairment occurred and recorded an impairment charge of $45.8 million during
the year ended December 31, 2008.
The
test for goodwill impairment, as defined by FASB ASC No. 350 is a two-step
approach. The first step of the goodwill impairment test requires a
determination of whether or not the fair value of goodwill is less than its
carrying value. If so, the second step is required, which involves an analysis
reflecting the allocation of the fair value determined in the first step (as if
it was the purchase price in a business combination). This process may result
in the determination of a new amount of goodwill. If the calculated fair
value of the goodwill resulting from this allocation is lower than the carrying
value of the goodwill in the reporting unit, the difference is reflected as a
non-cash impairment loss. The purpose of the second step is only to determine
the amount of goodwill that should be recorded on the consolidated balance
sheet. The recorded amounts of other items on the consolidated balance sheet
are not adjusted.
F-25
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
We estimate the fair value of our single reporting
unit using market and income valuation approaches. The market valuation
approach estimates our enterprise value, which is comprised of our market
capitalization. The income valuation approach estimates our enterprise value
using a net present value model, which discounts projected free cash flows
(DCF) of our business at a computed weighted average cost of capital as the
discount rate.
In the fourth quarter of 2008, as a result of
completing the first step of the goodwill impairment test, we determined that
the carrying value of our goodwill exceeded its fair value, which required us
to perform the second step of the goodwill impairment test. The
second step of the goodwill impairment test, which included consideration of
the Companys market capitalization as well as discounted cash flow projections
and estimations of the fair values of identified assets and liabilities and
intangible assets with estimated useful lives, indicated that goodwill was
impaired and we recorded a non-cash goodwill impairment charge of
$45.8 million, all of which was classified as goodwill impairment in the
accompanying 2008 consolidated statement of operations.
Identifiable intangible assets which have indefinite
lives are tested at least annually for impairment. As a result of the uncertain
economic environment in general and the further decline in our stock price, the
Company performed an impairment assessment in accordance with FASB ASC No.
360-10-35-15 as of December 31, 2009 and 2008 and determined that no impairment
exists.
Intangible
assets consisting of acquired technology and customer relationships related to the
Cellex and General Hydrogen acquisitions during the year ended December 31,
2007 are amortized using a straight-line method over their useful lives of 8
years. On January 1, 2008, General Hydrogen (Canada) Corporation, Plug
Power Canada Inc. and Cellex Power Products, Inc. amalgamated as Plug Power
Canada Inc.
The
gross carrying amount and accumulated amortization of the Companys acquired
identifiable intangible assets as of December 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Amortization Period
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
|
Effect of
Foreign Currency
Translation
|
|
Total
|
Acquired Technology
|
|
8 years
|
|
$
|
15,900,000
|
|
$
|
(5,638,057
|
)
|
|
$
|
893,220
|
|
$
|
11,155,163
|
Customer Relationships
|
|
8 years
|
|
|
1,000,000
|
|
|
(333,333
|
)
|
|
|
|
|
|
666,667
|
|
|
|
|
$
|
16,900,000
|
|
$
|
(5,971,390
|
)
|
|
$
|
893,220
|
|
$
|
11,821,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-26
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amortization
expense for acquired identifiable intangible assets for the years ended
December 31, 2009, 2008, and 2007 was $2.1 million, $2.2 million, and $1.6
million, respectively. Estimated amortization expense for subsequent years is
as follows:
|
|
|
|
2010
|
|
$
|
2,238,087
|
2011
|
|
|
2,238,087
|
2012
|
|
|
2,238,087
|
2013
|
|
|
2,238,087
|
2014
|
|
|
2,238,087
|
Thereafter
|
|
|
631,395
|
Total
|
|
$
|
11,821,830
|
|
|
|
|
7. Credit Line
Agreement and Auction Rate Debt Securities Repurchase Agreement
In
December 2008, the Company entered into a Credit Line Agreement with a
third-party lender with a maximum availability of $62.9 million. The
Companys auction rate debt securities included in trading securities on the
consolidated balance sheets are pledged as collateral for the Credit Line
Agreement. As of December 31, 2008, the Company had drawn down $62.9 million on
this line of credit. During the year ended December 31, 2009, $3.5 million of
auction rate debt securities were sold by the third-party lender holding the
collateral which resulted in a corresponding reduction in amounts outstanding
under the Credit Line Agreement. The fair value of the auction rate debt
securities is $53.4 million and $52.7 million at December 31, 2009 and 2008,
respectively. The Credit Line Agreement bears interest at a variable rate equal
to the average rate of interest earned by the Company on the auction rate debt
securities pledged as collateral for the Credit Line Agreement. The interest
rate on the line of credit advances was 1.2% and 2.4% at December 31, 2009 and
2008, respectively. Interest expense on the advances on the Credit Line
Agreement was approximately $915,000 for the year ended December 31, 2009 and between
its origination in December 2008 through December 31, 2008 was not significant.
The
advances on the Credit Line Agreement are repayable on demand by the
third-party lender. If the third-party lender exercises its right to demand
repayment of the advances under the Credit Line Agreement prior to June 30,
2010 (the date upon which the Company can first exercise its rights under the
Repurchase Agreement discussed below), the third-party lender is required to
arrange alternative financing on terms substantially the same as the Credit
Line Agreement or the third party lender must repurchase the auction rate debt
securities pledged as collateral for the Credit Line Agreement at their par
value, which is $59.4 million and $62.9 million at December 31, 2009 and 2008,
respectively.
F-27
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
In
December 2008, the Company also entered into a Repurchase Agreement with the
third-party lender such that the Company may require the third-party lender to
repurchase the auction rate debt securities pledged as collateral for the
Credit Line Agreement, at their par value, from June 30, 2010 through July 2,
2012 as full settlement for the advances on the Credit Line Agreement. The
Company has elected to record this item at its fair value in accordance with ASC
No. 825-10-25 to allow consistent treatment of this repurchase agreement and
the underlying collateral. At December 31, 2009 and 2008 the fair value
of this item is approximately $6.0 million and $10.2 million, respectively and
is recorded as an asset on the consolidated balance sheets. The change in the
fair value of the Repurchase Agreement for the year ended December 31, 2009 was
$4.2 million and is recorded as a realized loss on the consolidated statements
of operations. The change in fair value of the Repurchase Agreement
between its origination in December 2008 through
December 31, 2008 was not significant.
8. Debt and Lease
Arrangement
In
March, 2009, the Company signed a $1.7 million promissory note issued by
Key Equipment Finance Inc. for the purpose of financing its investment in
equipment that was leased to its customer, Central Grocers, beginning on
April 1, 2009. Monthly installments of $32,900 are due through March 2014 and
the note bears interest at a fixed rate of 7.23% per annum on a 360-day year.
The Company was initially required to pledge $1.8 million in cash to
collateralize the debt, which will decrease over time in accordance with
decreases in the outstanding balance of the debt. This note is also secured by
the equipment that is leased to Central Grocers as described in the Master
Security Agreement and Collateral Schedule No. 01 dated as of March 20, 2009,
together known as the Master Security Agreement.
The
outstanding balance of the debt as of December 31, 2009 is $1.4 million and is
recorded as current portion of long term debt and long term debt in the
consolidated balance sheets. Restricted cash and the amount of the
corresponding pledge requirement as of December 31, 2009 was $1.7 million and
is recorded within restricted cash in the consolidated balance sheets.
Principal payments due on long-term debt over the next five fiscal years are as
follows: 2010, $300,000; 2011, $323,000; 2012, $347,000; 2013, $373,000; and
2014 $98,000.
On
April 1, 2009, the Company began leasing this same equipment to its customer,
Central Grocers. The terms of the arrangement are 60 monthly installments of
$32,900. Upon expiration of the 60 months (initial term of the lease), Central
Grocers has the option to renew the lease for an additional five years at
mutually agreed upon pricing, to purchase all equipment for a purchase price
equal to the then fair market value thereof, or to return the equipment to the
Company. The Company shall provide maintenance in accordance with the lease
agreement.
In
July 2009, the Company signed a letter of credit with Key Bank in the amount of
$525,000. The standby letter of credit is required by the agreement negotiated
between Air Products and Chemicals, Inc. (Air Products) and the Company to
supply hydrogen infrastructure and hydrogen to Central Grocers at their
distribution center.
The standby letter
of credit is collateralized by cash held in a restricted account.
In
October 2009, the Company entered into a 15 month financing arrangement for an
electrolyzer. The outstanding balance of the debt as of December 31, 2009 was
approximately $123,000 and is recorded as current portion of long term debt and
long term debt in the consolidated balance sheets.
F-28
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
9. Accrued
Expenses
Accrued
expenses at December 31, 2009 and 2008 consist of:
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
Accrued payroll and compensation related costs
|
|
$
|
2,310,273
|
|
$
|
2,694,177
|
Accrued restructuring costs
|
|
|
1,694,456
|
|
|
4,393,085
|
Other accrued liabilities
|
|
|
1,842,812
|
|
|
2,858,054
|
|
|
|
|
|
|
|
|
|
$
|
5,847,541
|
|
$
|
9,945,316
|
|
|
|
|
|
|
|
10. Repayable
Government Assistance
During
the year ended December 31, 2000, the Companys wholly-owned subsidiary,
Plug Power Canada Inc., formerly known as Cellex Power Products Inc., entered
into an Industrial Research Assistance Program (IRAP) Repayable Contribution
Agreement with the National Research Council of Canada (NRC) under which it
received contributions totaling Cdn$500,000 for certain development activities.
The agreement with the NRC provides for payment of royalties of up to 170% of
the contributions received subject to certain conditions, payable quarterly,
calculated at 3.5% of gross revenues. Plug Power Canadas repayment obligation
to the NRC existed from July 1, 2002 to March 31, 2009. At
April 1, 2009, if the total amount repaid to the NRC was less than the
Cdn$500,000 contribution, then Plug Power Canada would continue to make
payments to the NRC until either the full Cdn$500,000 is repaid or until
July 1, 2012, whichever comes first. The maximum liability under this
repayment obligation is Cdn$850,000. If at any point Plug Power Canadas repayments reach this amount, the obligation shall cease.
At
April 1, 2009, the total amount repaid to the NRC was less than the Cdn$500,000
contribution, therefore Plug Power Canada will continue to make payments to the
NRC until either the full Cdn$500,000 is repaid or until July 1, 2012,
whichever comes first. The Company has recorded the estimate of amounts owed
under this arrangement as a debt, with royalty payments recorded as a reduction
of the debt.
Accordingly,
liabilities relating to this agreement in the amount of $0 and $119,408 have
been recorded as repayable government assistance and current portion of
repayable government assistance (other current liabilities), respectively, in
the consolidated balance sheets as of December 31, 2009 and $173,138 and
$369,331 have been recorded as repayable government assistance and
current portion of repayable government assistance (other current
liabilities), respectively, in the consolidated balance sheets as of December
31, 2008. The imputed interest is recorded as interest expense in the
consolidated statement of operations.
F-2
9
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
General Hydrogen Corporation and its wholly owned
subsidiary General Hydrogen (Canada) Corporation, and Cellex Power Products,
Inc. each entered into agreements with Technology Partnerships Canada (TPC)
during the year ended December 31, 2005 for the development of early
market fuel cell applications. On December 31, 2007, General Hydrogen
Corporation merged with Plug Power Inc. and, subsequently, Plug Power Inc.
contributed the wholly owned subsidiary General Hydrogen (Canada) Corporation to Plug Power Canada Inc. On January 1, 2008, General Hydrogen (Canada) Corporation, Plug Power Canada Inc. and Cellex Power Products, Inc. amalgamated as
Plug Power Canada Inc.
On
September 30, 2008 Plug Power Inc., Plug Power Canada Inc., and TPC
entered into Assumption and Termination Agreements related to both the Cellex
TPC Agreement and the General Hydrogen TPC Agreement. In consideration of the
Assumption and Termination Agreements, Plug Power Inc. and Plug Power Canada
Inc agreed to pay $2,235,244 to TPC. As a result of this agreement, the
Company recorded a gain on the termination of these agreements in the amount of
$1,232,522 in interest and other income and net realized gains from
available-for-sale securities in the consolidated statement of operations for
2008.
11. Restructuring
Charges
On
June 10, 2008, the Company undertook a restructuring as part of its plan
to become a market and sales driven organization. The Company has refocused on
the GenDrive motive power product where there has been significant customer
interest in fuel cell power units. As part of the restructuring, the Company
has reduced its workforce, cut back discretionary spending, and deferred non
strategic projects. The Company recorded restructuring charges in the amount of
$3,744,801 within selling, general and administrative expenses in the
consolidated statement of operations for 2008.
The Company recorded additional restructuring charges in the amount of
$537,819 within selling, general and administrative expenses in the
consolidated statement of operations for the year ended December 31, 2009
related to costs incurred to consolidate facilities based upon the Companys
discontinued use of the leased premises. At December 31, 2009, $765,190 remains
in accrued expenses on the consolidated balance sheets.
The
accrued restructuring charges relating to the June 2008 restructuring are
comprised of the following at December 31, 2009:
|
|
Accrued
restructuring
charges at
January 1, 2009
|
|
Adjustments to
or additional
accrued
restructuring
charges
|
|
Cash Payments
|
|
Accrued
restructuring
charges at
December 31, 2009
|
Personnel Related
|
|
$
|
38,621
|
|
$
|
(22,737)
|
|
$
|
(15,884)
|
|
$
|
|
Contract Cancellation
|
|
|
364,100
|
|
|
|
|
|
(1,556)
|
|
|
362,544
|
Net Lease Obligations
|
|
|
|
|
|
537,819
|
|
|
(135,173)
|
|
|
402,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
402,721
|
|
$
|
515,082
|
|
$
|
(152,613)
|
|
$
|
765,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-30
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
On
December 18, 2008, the Company adopted a restructuring plan intended to focus
the Company on revenue growth, improve organizational efficiency and position
the Company for long-term profitability. As part of this plan, the
Company implemented a reduction in workforce by eliminating 90 positions in
addition to terminating purchase commitments and charging off inventory related
to lapsed product lines. The Company recorded restructuring charges in
the amount of $3,990,364 within selling, general and administrative expenses
and $2,295,370 in cost of product and service revenue in the consolidated
statement of operations for 2008.
The
Company recorded an adjustment to accrued restructuring charges in the amount
of $305,044 within selling, general and administrative expenses in the
consolidated statement of operations for year ended December 31, 2009 to revise
previous estimates. At December 31, 2009, $929,266 remains in accrued expenses
on the consolidated balance sheets. The accrued restructuring charges related
to the December 2008 restructuring are comprised of the following at December
31, 2009:
|
|
Accrued
restructuring
charges at
January 1, 2009
|
|
Adjustments to
accrued
restructuring
charges
|
|
Cash Payments
|
|
Accrued
restructuring
charges at
December 31, 2009
|
Personnel Related
|
|
$
|
2,653,597
|
|
$
|
(116,805)
|
|
$
|
(2,520,792)
|
|
$
|
16,000
|
Contract Cancellation
|
|
|
1,336,767
|
|
|
(188,239)
|
|
|
(235,262)
|
|
|
913,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,990,364
|
|
$
|
(305,044)
|
|
$
|
(2,756,054)
|
|
$
|
929,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12. Income Taxes
The
components of income/(loss) before income taxes and the provision for income taxes
for the years ended December 31, 2009, 2008 and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Income/(loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
(39,363,000
|
)
|
|
$
|
(95,363,000
|
)
|
|
$
|
(55,506,000
|
)
|
Foreign
|
|
|
(1,346,000
|
)
|
|
|
(26,337,000
|
)
|
|
|
(5,065,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(40,709,000
|
)
|
|
$
|
(121,700,000
|
)
|
|
$
|
(60,571,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
There
was no current income tax expense for the years ended December 31, 2009,
2008 and 2007. The Company was a Limited Liability Company (LLC) until its
merger into Plug Power Inc. effective November 3, 1999. From inception
through November 3, 1999, the Company was treated as a partnership for
federal and state income tax purposes and accordingly the Companys income
taxes or credits resulting from earnings or losses were payable by, or accrued
to its members. Therefore, no provision for income taxes has been made prior to
November 3, 1999.
Effective
November 3, 1999, the Company is taxed as a corporation for Federal and
State income tax purposes and the effect of deferred taxes recognized as a
result of the change in tax status of the Company have been included in
operations. Deferred tax assets and liabilities are determined based on the
temporary differences between the financial statement and tax bases of assets
and liabilities as measured by the enacted tax rates.
The
Companys effective income tax rate differed from the Federal statutory rate as
follows:
|
Years ended December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
U.S. Federal statutory tax rate
|
(35.0
|
)%
|
(35.0
|
)%
|
(35.0
|
)%
|
Deferred state taxes, net of
federal benefit
|
(2.9
|
)
|
(1.8
|
)
|
(2.8
|
)
|
Other, net
|
(0.8
|
)
|
0.1
|
|
|
|
Goodwill impairment charge
|
|
|
12.3
|
|
|
|
Foreign tax rate differential
|
0.2
|
|
0.8
|
|
2.6
|
|
Expiring attribute
carryforward
|
|
|
0.7
|
|
2.4
|
|
Adjustment to opening
deferred tax balance
|
(4.3
|
)
|
0.8
|
|
(0.4
|
)
|
Tax credits
(net of monetization)
|
0.7
|
|
(0.3
|
)
|
(1.6
|
)
|
Change in valuation
allowance
|
42.1
|
|
22.4
|
|
34.8
|
|
|
|
|
|
|
|
|
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of certain assets and
liabilities for financial reporting and the amounts used for income tax expense
purposes. Significant components of the Companys deferred tax assets and
liabilities as of December 31, 2009 and 2008 are as follows:
F-32
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Years ended December 31,
|
|
|
Foreign
Years ended December 31,
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
Deferred tax assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
$
|
340,574
|
|
|
$
|
(2,023,365
|
)
|
|
$
|
(372,240
|
)
|
|
$
|
(1,823,521)
|
Non-employee stock-based
compensation
|
|
(1,043,476
|
)
|
|
|
(500,642
|
)
|
|
|
|
|
|
|
|
Gain on auction rate debt securities
repurchase agreement
|
|
(1,613,679
|
)
|
|
|
(3,885,251
|
)
|
|
|
|
|
|
|
|
Impairment loss on available-for-
sale securities
|
|
1,613,679
|
|
|
|
3,885,251
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
1,746,752
|
|
|
|
2,058,774
|
|
|
|
|
|
|
|
|
Other reserves and accruals
|
|
572,913
|
|
|
|
1,792,292
|
|
|
|
123,196
|
|
|
|
44,049
|
Capital loss carryforwards
|
|
5,883,889
|
|
|
|
5,883,889
|
|
|
|
|
|
|
|
|
Research and development tax
credit carryforwards
|
|
9,559,233
|
|
|
|
9,858,749
|
|
|
|
1,490,302
|
|
|
|
1,209,903
|
Property, plant and equipment
|
|
368,953
|
|
|
|
124,061
|
|
|
|
170,778
|
|
|
|
541,233
|
Amortization of stock-based
compensation
|
|
7,211,439
|
|
|
|
6,603,377
|
|
|
|
|
|
|
|
|
Research and development
expenditures
|
|
16,796,000
|
|
|
|
15,960,000
|
|
|
|
3,613,615
|
|
|
|
3,309,462
|
Repayable government assistance
|
|
|
|
|
|
|
|
|
|
29,852
|
|
|
|
141,042
|
Net operating loss carryforwards
|
|
203,699,706
|
|
|
|
188,726,938
|
|
|
|
2,877,873
|
|
|
|
3,024,891
|
Total deferred tax asset
|
|
245,135,983
|
|
|
|
228,484,073
|
|
|
|
7,933,376
|
|
|
|
6,447,059
|
Less valuation allowance
|
|
(245,135,983
|
)
|
|
|
(228,484,073
|
)
|
|
|
(7,933,376
|
)
|
|
|
(6,447,059)
|
Net deferred tax assets
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company has recorded a valuation allowance, as a result of uncertainties
related to the realization of its net deferred tax asset, at December 31,
2009 and 2008 of approximately $253.1 million and $234.9 million, respectively.
A reconciliation of the current year change in valuation allowance is as
follows:
F-33
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
Total
|
|
|
U.S.
|
|
|
Foreign
|
|
Increase in valuation allowance for
current year increase in net
operating losses
|
$
|
15,482,935
|
|
$
|
14,972,768
|
|
$
|
510,167
|
|
Increase in valuation allowance for
current year net increase in
deferred tax assets other than net
operating losses
|
|
1,978,073
|
|
|
1,679,142
|
|
|
298,931
|
|
Increase in valuation allowance as a
result of foreign currency
fluctuation
|
|
1,021,945
|
|
|
|
|
|
1,021,945
|
|
Decrease in valuation allowance as a
result of change in foreign tax
rate
|
|
(288,842
|
)
|
|
|
|
|
(288,842
|
)
|
Decrease in valuation allowance due
to current year change of
deferred
tax assets as the result of uncertain
tax positions
|
|
(55,884
|
)
|
|
|
|
|
(55,884
|
)
|
|
|
|
|
|
|
|
|
|
|
Net increase in valuation allowance
|
$
|
18,138,227
|
|
$
|
16,651,910
|
|
$
|
1,486,317
|
|
|
|
|
|
|
|
|
|
|
|
The
deferred tax assets have been offset by a full valuation allowance because it
is more likely than not that the tax benefits of the net operating loss
carryforwards and other deferred tax assets may not be realized. Included in
the valuation allowance as of December 31, 2009 and December 31, 2008 are
$14.3 million of deferred tax assets resulting from the exercise of employee
stock options, which upon subsequent realization of the tax benefits, will be
allocated directly to paid-in capital.
At
December 31, 2009, the Company has unused Federal and State net operating
loss carryforwards of approximately $640 million, of which $76.7 million was
generated from the operations of H Power during the period May 31, 1989,
through the date of the H Power acquisition, $2.7 million was generated by
Cellex through the date of the Cellex acquisition, $44.1 million was generated
by General Hydrogen through the date of the General Hydrogen acquisition, and $516.5
million was generated by the Company during the period October 1, 1999 through
December 31, 2009. The net operating loss carryforwards if unused will
expire from 2010 through 2029. In 2009, net operating loss carryforwards of $1.9 million acquired as part of the H Power transaction
expired.
F-34
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Under Internal Revenue Code (IRC) Section 382, the use
of loss carryforwards may be limited if a change in ownership of a company
occurs. If it is determined that due to transactions involving the Companys
shares owned by its 5 percent shareholders a change of ownership has occurred
under the provisions of IRC Section 382, the Company's Federal and state net
operating loss carryforwards could be subject to significant IRC Section 382
limitations.
Based upon an existing IRC Section 382 study, a
previous Section 382 ownership change occurred in 2005 that resulted in
approximately $479 million of the $640 million of Federal and state net
operating loss carryforwards being subject to IRC Section 382 limitations and
as the result of IRC Section 382 limitations, approximately $53.7 million of
the net operating loss carryforwards acquired from H Power will expire prior to
utilization, and approximately $27 million of the net operating loss
carryforwards acquired from General Hydrogen will expire prior to utilization.
Additionally, approximately $25 million of H Powers remaining net operating
loss carryforwards represent an unrecognized tax benefit. As a result of the
IRC Section 382 limitations and the unrecognized tax benefits, these net
operating loss carryforwards are not reflected in the Companys deferred tax
asset as of December 31, 2009.
During the fourth quarter of 2009, as a result of
certain equity transactions, the Company may have had an ownership change for
IRC Section 382 purposes. If a change occurred in the fourth quarter, an IRC
Section 382 limitation could result in as much as approximately $458.6 million
of the Company's Federal and state net operating loss carryforwards expiring
prior to utilization, which would result in the Companys deferred tax asset
and valuation allowance decreasing by approximately $174.3 million. Additionally,
if a change in control occurred during the fourth quarter an IRC Section 382
limitation could result in as much as approximately $15 million of Federal research
and experimentation tax credit carryforwards expiring prior to utilization (of
which $5.7 million represents an uncertain tax position), which would result in
the Company's deferred tax asset and valuation allowance decreasing by
approximately $9.3 million. These decreases would have no impact on the
Companys financial position, results of operations, or cash flows. However,
these potential future tax benefits would no longer be available to the
Company. The Company is in the process of completing a formal IRC Section 382
study to determine if an ownership change has occurred.
At
December 31, 2009, the Company has Federal capital loss carryforwards of
approximately $15.5 million available to offset future capital gains that will
expire at various dates in 2011. At December 31, 2009, the Company has US
Federal Research and Experimentation credit carryforwards of approximately $15.3
million available to offset future income tax that will expire at various dates
from 2020 through 2029. Approximately $5.7 million of the Companys Research
and Experimentation carryforwards represent an unrecognized tax benefit and are
therefore, not reflected in the Companys deferred tax asset as of
December 31, 2009.
At
December 31, 2009, the Company has unused foreign net operating loss
carryforwards of approximately $15.0 million. The net operating loss
carryforwards if unused will expire at various dates from 2010 through 2027. At
December 31, 2009, the Company has Scientific Research and Experimental
Development expenditures of $21.2 million available to offset future taxable
income. These expenditures have no expiry date. At December 31, 2009, the
Company has Canadian investment tax credit (ITC) carryforwards of $2.3 million
available to offset future income tax. These credit carryforwards if unused
will expire at various dates from 2010 through 2026. Approximately $3.5 million
of the net operating loss carryforwards, $6.7 million of the Scientific
Research and Experimental Development expenditures and $822,000 of the Canadian
ITC credit carryforwards represent unrecognized tax benefits and are therefore,
not reflected in the Companys deferred tax asset as of December 31, 2009.
The
Company intends to reinvest indefinitely its unrepatriated foreign earnings. As
of December 31, 2009, the Company has no unrepatriated foreign earnings. The
Company has not provided for US income taxes on these undistributed earnings of
its foreign subsidiaries because management considers such earnings to be
reinvested indefinitely outside of the U.S. If the earnings were distributed,
the Company may be subject to both foreign withholding taxes and U.S. income taxes that may not be fully offset by foreign tax credits. Determination of the
amount of this unrecognized deferred income tax liability is not practical.
F-35
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
A
reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
Unrecognized tax benefits balance at
beginning of
year
|
$
|
18,149,125
|
|
$
|
16,119,790
|
|
$
|
15,200,161
|
Additions for tax positions of prior years
|
|
|
|
|
2,518,182
|
|
|
866,762
|
Reductions based on tax positions related
to the
current year
|
|
|
|
|
|
|
|
(23,485)
|
Reductions for tax positions of prior years
|
|
(55,884)
|
|
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
|
|
Currency translation
|
|
476,936
|
|
|
(488,847)
|
|
|
76,352
|
Unrecognized tax benefits balance at end
of year
|
$
|
18,570,177
|
|
$
|
18,149,125
|
|
$
|
16,119,790
|
|
|
|
|
|
|
|
|
|
The
Company recognizes accrued interest and penalties related to unrecognized tax
benefits as a component of income tax expense. During the year ended
December 31, 2009, the Company recognized $0 in interest and penalties.
The Company had $1.2
million
in interest and penalties accrued at December 31, 2009.
The
Company files income tax returns in the U.S. federal jurisdiction and various
state and foreign jurisdictions. In the normal course of business the Company
is subject to examination by taxing authorities. Open tax years in the U.S.
range from 2006 to 2009. Open tax years in the foreign jurisdictions range from
2003 to 2009. However, upon examination in subsequent years, if net operating
losses carryforwards and tax credit carryforwards are utilized, the U.S. and foreign jurisdictions can reduce net operating loss carryforwards and tax credit
carryforwards utilized in the year being examined if they do not agree with the
carryforward amount. As of December 31, 2009, the Company was not under
audit in the U.S. or non-U.S. taxing jurisdictions. No significant changes to
the amount of unrecognized tax benefits are anticipated within the next twelve
months.
F-36
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
13. Stockholders
Equity
The
Company has financed our operations from inception through December 31,
2009 primarily from the sale of equity (including those related to stock-based
compensation less stock issuance costs), which has provided cash in the amount
of $636.4 million. This includes a net $214.4 million as a result of our
June 29, 2006 transaction with Smart Hydrogen Inc. (the Buyer). The
Company sold 395,000 shares of Class B Capital Stock, a class of preferred
stock of the Company, which were convertible into 39,500,000 shares of common
stock of the Company, and 11,240 shares of common stock of the Company to the
Buyer.
In
December 2008, Smart Hydrogen Inc. sold to OJSC (Third Generation Company of
the Wholesale Electricity Market) (OGK-3) all 395,000 shares of the Company's
Class B Capital Stock as well as 5,126,939 shares of the Company's common
stock. This sale triggered the automatic conversion of the Company's Class B
Capital Stock into 39,500,000 shares of common stock, and the termination of
all the rights and obligations attached to the Class B Capital Stock. The
rights and obligations attached to the Class B Capital Stock that terminated
included, but were not limited to, the right to appoint directors, veto rights
and voting support obligations under the Investor Rights Agreement dated as of
June 29, 2006, as amended (the Investor Rights Agreement). OGK-3 has executed a
joinder agreement to the Investor Rights Agreement and is prohibited from
transferring its shares of the Company's Common Stock to a competitor of the
Company. OGK-3 is also bound by the same standstill provisions that applied to
Smart Hydrogen, as set forth in the Investor Rights Agreement. This transfer
and conversion triggered a change of control pursuant to Section 17 of our 1999
Stock Option and Incentive Plan; and, therefore, each outstanding Stock Option
Right automatically became fully exercisable and conditions and restrictions on
each outstanding Restricted Stock Award, Deferred Stock Award and Performance
Share Award that relates solely to the passage of time and continued employment
were removed.
Preferred
Stock
The
Company has authorized 5.0 million shares of preferred stock, par value
$.01 per share. The Companys certificate of incorporation provides that shares
of preferred stock may be issued from time to time in one or more series. The
Companys Board of Directors is authorized to fix the voting rights, if any,
designations, powers, preferences, qualifications, limitations and restrictions
thereof, applicable to the shares of each series. As of December 31, 2009,
there were no shares of preferred stock issued and outstanding.
The
Company has registered Series A Junior Participating Cumulative Preferred
Stock, par value $.01 per share. As of December 31, 2009 there were no
shares of Series A Junior Participating Cumulative Preferred Stock issued and
outstanding.
Common Stock
The
Company has one class of common stock, par value $.01 per share. Each share of
the Companys common stock is entitled to one vote on all matters submitted to
stockholders. As of December 31, 2009 there were 130,591,236 shares of
common stock issued and outstanding.
F-
37
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following represents changes in stockholders
equity since inception.
|
No. of
Preferred
Shares
|
No. of
Common
Shares
|
No. of
Treasury
Shares
|
Cash
Contribution
|
Noncash
Contribution
|
Total
Capital
Contribution
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Deficit
Accumulated
During the
Development
Stage
|
Treasury
Stock
|
Total
Stockholders'
Equity
|
1997
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$(5,903,340)
|
$
|
-
|
$(5,903,340)
|
DTE Energy Company (Issuance at 1.00 per share)
|
-
|
4,750,000
|
-
|
4,750,000
|
-
|
4,750,000
|
-
|
-
|
-
|
4,750,000
|
Mechanical Technology Incorporated
|
-
|
4,750,000
|
-
|
-
|
4,750,000 (a)
|
4,750,000
|
-
|
-
|
-
|
4,750,000
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
9,500,000
|
-
|
4,750,000
|
4,750,000
|
9,500,000
|
-
|
(5,903,340)
|
-
|
3,596,660
|
|
|
|
|
|
|
|
|
|
|
|
1998
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(9,615,963)
|
-
|
(9,615,963)
|
DTE Energy Company
|
-
|
4,950,000
|
-
|
7,750,000
|
-
|
7,750,000
|
-
|
-
|
-
|
7,750,000
|
Mechanical Technology Incorporated
|
-
|
2,700,000
|
-
|
3,000,000
|
550,000 (a)
|
3,550,000
|
-
|
-
|
-
|
3,550,000
|
Stock based compensation and other noncash
transactions
|
-
|
-
|
-
|
-
|
212,000 (c)
|
212,000
|
-
|
-
|
-
|
212,000
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
7,650,000
|
-
|
10,750,000
|
762,000
|
11,512,000
|
-
|
(9,615,963)
|
-
|
1,896,037
|
|
|
|
|
|
|
|
|
|
|
|
1999
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(33,469,312)
|
-
|
(33,469,312)
|
Edison Development Corporation
|
-
|
4,004,315
|
-
|
28,697,782
|
-
|
28,697,782
|
-
|
-
|
-
|
28,697,782
|
Mechanical Technology Incorporated
|
-
|
6,254,315
|
-
|
24,000,000
|
8,897,782 (a)
|
32,897,782
|
-
|
-
|
-
|
32,897,782
|
General Electric Company
|
-
|
5,250,000
|
-
|
37,500,000
|
11,250,000 (b)
|
48,750,000
|
-
|
-
|
-
|
48,750,000
|
Other private investors
|
-
|
3,549,850
|
-
|
25,045,000
|
-
|
25,045,000
|
-
|
-
|
-
|
25,045,000
|
Initial public offering-net
|
-
|
6,782,900
|
-
|
92,971,878
|
-
|
92,971,878
|
-
|
-
|
-
|
92,971,878
|
Stock option exercises
|
-
|
24,128
|
-
|
41,907
|
-
|
41,907
|
-
|
-
|
-
|
41,907
|
Stock based compensation and other noncash
transactions
|
-
|
-
|
-
|
-
|
978,800 (c)
|
978,800
|
-
|
-
|
-
|
978,800
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
25,865,508
|
-
|
208,256,567
|
21,126,582
|
229,383,149
|
-
|
(33,469,312)
|
-
|
195,913,837
|
F-
38
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
No. of
Preferred
Shares
|
No. of
Common
Shares
|
No. of
Treasury
Shares
|
Cash
Contribution
|
Noncash
Contribution
|
Total
Capital
Contribution
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Deficit
Accumulated
During the
Development
Stage
|
Treasury
Stock
|
Total
Stockholders'
Equity
|
2000
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(86,241,899)
|
-
|
(86,241,899)
|
Stock option exercises
|
-
|
632,378
|
-
|
3,793,028
|
-
|
3,793,028
|
-
|
-
|
-
|
3,793,028
|
Stock issued under employee stock purchase plan
|
-
|
32,717
|
-
|
408,452
|
-
|
408,452
|
-
|
-
|
-
|
408,452
|
Stock issued for development agreement
|
-
|
104,869
|
-
|
-
|
5,000,000 (d)
|
5,000,000
|
-
|
-
|
-
|
5,000,000
|
Stock issued for equity in affiliate
|
-
|
7,000
|
-
|
-
|
827,750 (e)
|
827,750
|
-
|
-
|
-
|
827,750
|
Stock based compensation and other noncash
transactions
|
-
|
3,041
|
-
|
-
|
8,936,779 (c)
|
8,936,779
|
-
|
-
|
-
|
8,936,779
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
780,005
|
-
|
4,201,480
|
14,764,529
|
18,966,009
|
-
|
(86,241,899)
|
-
|
(67,275,890)
|
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(73,112,027)
|
-
|
(73,112,027)
|
Edison Development Corporation
|
-
|
416,666
|
-
|
4,800,000
|
-
|
4,800,000
|
-
|
-
|
-
|
4,800,000
|
General Electric Company
|
-
|
416,666
|
-
|
4,800,000
|
-
|
4,800,000
|
-
|
-
|
-
|
4,800,000
|
Public offering-net
|
-
|
4,575,000
|
-
|
51,588,551
|
-
|
51,588,551
|
-
|
-
|
-
|
51,588,551
|
Stock option exercises
|
-
|
760,531
|
-
|
2,051,954
|
-
|
2,051,954
|
-
|
-
|
-
|
2,051,954
|
Stock issued under employee stock purchase plan
|
-
|
73,132
|
-
|
730,592
|
-
|
730,592
|
-
|
-
|
-
|
730,592
|
Stock issued for development agreement
|
-
|
96,336
|
-
|
-
|
3,000,000 (d)
|
3,000,000
|
-
|
-
|
-
|
3,000,000
|
Stock option issued to affiliate
|
-
|
-
|
-
|
-
|
5,000,000 (f)
|
5,000,000
|
-
|
-
|
-
|
5,000,000
|
Stock based compensation and other noncash
transactions
|
-
|
189,084
|
-
|
-
|
2,013,177 (c)
|
2,013,177
|
-
|
-
|
-
|
2,013,177
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
6,527,415
|
-
|
63,971,097
|
10,013,177
|
73,984,274
|
-
|
(73,112,027)
|
-
|
872,247
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(47,218,326)
|
-
|
(47,218,326)
|
Stock option exercises
|
-
|
138,567
|
-
|
708,931
|
-
|
708,931
|
-
|
-
|
-
|
708,931
|
Stock issued under employee stock purchase plan
|
-
|
78,208
|
-
|
395,679
|
-
|
395,679
|
-
|
-
|
-
|
395,679
|
Stock issued for development agreement
|
-
|
243,383
|
-
|
-
|
2,000,000 (d)
|
2,000,000
|
-
|
-
|
-
|
2,000,000
|
Stock based compensation and other noncash
transactions
|
-
|
213,987
|
-
|
-
|
1,807,593 (c)
|
1,807,593
|
-
|
-
|
-
|
1,807,593
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
674,145
|
-
|
1,104,610
|
3,807,593
|
4,912,203
|
-
|
(47,218,326)
|
-
|
(42,306,123)
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(53,038,802)
|
-
|
(53,038,802)
|
Public offering, net
|
-
|
11,700,000
|
-
|
54,967,204
|
-
|
54,967,204
|
-
|
-
|
-
|
54,967,204
|
Stock option exercises
|
-
|
35,033
|
-
|
84,973
|
-
|
84,973
|
-
|
-
|
-
|
84,973
|
Stock issued under employee stock purchase plan
|
-
|
90,380
|
-
|
348,605
|
-
|
348,605
|
-
|
-
|
-
|
348,605
|
Stock issued in acquisition of H Power
|
-
|
9,063,080
|
-
|
-
|
46,260,576 (g)
|
46,260,576
|
-
|
-
|
-
|
46,260,576
|
Stock based compensation
|
-
|
965,143
|
-
|
-
|
2,966,797 (c)
|
2,966,797
|
-
|
-
|
-
|
2,966,797
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
21,853,636
|
-
|
55,400,782
|
49,227,373
|
104,628,155
|
-
|
(53,038,802)
|
-
|
51,589,353
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(46,738,827)
|
-
|
(46,738,827)
|
Stock option exercises
|
-
|
95,960
|
-
|
501,308
|
-
|
501,308
|
-
|
-
|
-
|
501,308
|
Stock issued under employee stock purchase plan
|
-
|
71,709
|
-
|
409,413
|
-
|
409,413
|
-
|
-
|
-
|
409,413
|
Stock based compensation
|
-
|
332,500
|
-
|
-
|
4,137,202 (c)
|
4,137,202
|
-
|
-
|
-
|
4,137,202
|
Change in unrealized loss on marketable securities
|
-
|
-
|
-
|
-
|
-
|
-
|
(482,391)
|
-
|
-
|
(482,391)
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
500,169
|
-
|
910,721
|
4,137,202
|
5,047,923
|
(482,391)
|
(46,738,827)
|
-
|
(42,173,295)
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(51,743,462)
|
-
|
(51,743,462)
|
Public offering, net
|
-
|
12,000,000
|
-
|
70,580,736
|
-
|
70,580,736
|
-
|
-
|
-
|
70,580,736
|
Stock option exercises
|
-
|
82,082
|
-
|
516,686
|
-
|
516,686
|
-
|
-
|
-
|
516,686
|
Stock issued under employee stock purchase plan
|
-
|
78,702
|
-
|
374,149
|
-
|
374,149
|
-
|
-
|
-
|
374,149
|
Stock based compensation
|
-
|
323,586
|
-
|
-
|
2,888,685 (c)
|
2,888,685
|
-
|
-
|
-
|
2,888,685
|
Unrealized gain on available-for-sale securities
|
-
|
-
|
-
|
-
|
-
|
-
|
225,271
|
-
|
-
|
225,271
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
12,484,370
|
-
|
71,471,571
|
2,888,685
|
74,360,256
|
225,271
|
(51,743,462)
|
-
|
22,842,065
|
F-
39
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
No.
of
Preferred
Shares
|
No.
of
Common
Shares
|
No.
of
Treasury
Shares
|
Cash
Contribution
|
Noncash
Contribution
|
Total
Capital
Contribution
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Deficit
Accumulated
During the
Development
Stage
|
Treasury
Stock
|
Total
Stockholders'
Equity
|
2006
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(50,309,587)
|
-
|
(50,309,587)
|
Stock offering (Issued at 5.50 per share net
of purchase cost)
|
395,000
|
11,240
|
-
|
214,442,129
(h)
|
-
|
214,442,129
|
-
|
-
|
-
|
214,442,129
|
Stock option exercises
|
-
|
7,958
|
-
|
31,351
|
-
|
31,351
|
-
|
-
|
-
|
31,351
|
Stock issued under employee stock purchase
plan
|
-
|
100,669
|
-
|
364,668
|
-
|
364,668
|
-
|
-
|
-
|
364,668
|
Stock based compensation
|
-
|
839,800
|
-
|
-
|
4,858,100
(c)
|
4,858,100
|
-
|
-
|
-
|
4,858,100
|
Unrealized gain on available-for-sale
securities
|
-
|
-
|
-
|
-
|
-
|
-
|
186,640
|
-
|
-
|
186,640
|
|
|
|
|
|
|
|
|
|
|
|
|
395,000
|
959,667
|
-
|
214,838,148
|
4,858,100
|
219,696,248
|
186,640
|
(50,309,587)
|
-
|
169,573,301
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(60,570,816)
|
-
|
(60,570,816)
|
Stock option exercises (Issued at average
cost of 1.00 per share)
|
-
|
151,237
|
-
|
151,237
|
-
|
151,237
|
-
|
-
|
-
|
151,237
|
Stock issued under employee stock purchase
plan
|
-
|
65,515
|
-
|
205,808
|
-
|
205,808
|
-
|
-
|
-
|
205,808
|
Stock based compensation
|
-
|
871,255
|
-
|
-
|
5,299,300
(c)
|
5,299,300
|
-
|
-
|
-
|
5,299,300
|
Unrealized gain on available-for-sale
securities
|
-
|
-
|
-
|
-
|
-
|
-
|
141,897
|
-
|
-
|
141,897
|
Foreign currency translation gain
|
-
|
-
|
-
|
-
|
-
|
-
|
7,739,141
|
-
|
-
|
7,739,141
|
Warrants issued
|
-
|
-
|
-
|
-
|
1,405,715
(i)
|
1,405,715
|
-
|
-
|
-
|
1,405,715
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
1,088,007
|
-
|
357,045
|
6,705,015
|
7,062,060
|
7,881,038
|
(60,570,816)
|
-
|
(45,627,718)
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(121,700,024)
|
-
|
(121,700,024)
|
Stock option exercises (Issued at average
cost of 1.00 per share)
|
-
|
3,935
|
-
|
3,935
|
-
|
3,935
|
-
|
-
|
-
|
3,935
|
Stock issued under employee stock purchase
plan
|
-
|
111,402
|
-
|
307,579
|
-
|
307,579
|
-
|
-
|
-
|
307,579
|
Stock based compensation
|
-
|
665,744
|
-
|
6,658
|
7,258,897
(c)
|
7,265,555
|
-
|
-
|
-
|
7,265,555
|
Conversion of preferred stock
|
(395,000)
|
39,500,000
(j)
|
-
|
-
|
-
|
-
|
|
|
-
|
-
|
Unrealized gain on available-for-sale
securities
|
-
|
-
|
-
|
-
|
-
|
-
|
155,688
|
-
|
-
|
155,688
|
Foreign currency translation loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(8,325,499)
|
-
|
-
|
(8,325,499)
|
Treasury stock
|
-
|
-
|
402,114
|
-
|
-
|
-
|
-
|
-
|
(743,586)
|
(743,586)
|
|
|
|
|
|
|
|
|
|
|
|
|
(395,000)
|
40,281,081
|
402,114
|
318,172
|
7,258,897
|
7,577,069
|
(8,169,811)
|
(121,700,024)
|
(743,586)
|
(123,036,352)
|
F-
40
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
No.
of
Preferred
Shares
|
No.
of
Common
Shares
|
No.
of
Treasury
Shares
|
Cash
Contribution
|
Noncash
Contribution
|
Total
Capital
Contribution
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Deficit
Accumulated
During the
Development
Stage
|
Treasury
Stock
|
Total
Stockholders'
Equity
|
2009
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(40,708,552)
|
-
|
(40,708,552)
|
Stock based compensation
|
-
|
2,218,993
|
-
|
-
|
2,287,048
(c)
|
2,287,048
|
-
|
-
|
-
|
2,287,048
|
Stock issued under employee stock purchase
plan
|
-
|
208,240
|
-
|
76,493
|
121,598
|
198,091
|
|
|
-
|
198,091
|
Unrealized loss on available-for-sale
securities,
net of reclassification adjustments for realized
net losses and
gains
|
-
|
-
|
-
|
-
|
-
|
-
|
(131,308)
|
-
|
-
|
(131,308)
|
Foreign currency translation gain
|
-
|
-
|
-
|
-
|
-
|
-
|
1,293,770
|
-
|
-
|
1,293,770
|
Treasury stock
|
-
|
-
|
584,085
|
-
|
-
|
-
|
-
|
-
|
(534,418)
|
(534,418)
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
2,427,233
|
584,085
|
$76,493
|
$2,408,646
|
$2,485,139
|
$1,162,462
|
$(40,708,552)
|
$ (534,418)
|
$(37,595,369)
|
|
|
|
|
|
|
|
|
|
|
|
Total as of December 31, 2009
|
-
|
130,591,236
|
986,199
|
$ 636,406,686
|
$ 132,707,799
|
$ 769,114,485
|
$
803,209
|
$
(680,370,937)
|
$(1,278,004)
|
$
88,268,753
|
a.
|
Since inception,
Mechanical Technology Incorporated has contributed in-process research and
development of $4,042,640; certain net assets at inception of $707,360;
$2,000,000 of deferred rent related to a below market lease for office and
manufacturing facilities; $500,000 of in-kind services; land and buildings
valued at approximately $4,697,782; and research contracts valued at
approximately $2,250,000.
|
b.
|
In February 1999,
the Company issued 2,250,000 shares of common stock to GE MicroGen, Inc. in
exchange for a 25% interest in GE Fuel Cell Systems, LLC. The fair value of
the shares issued of $11,250,000 was recorded under the balance sheet caption
Investment in affiliates.
|
c.
|
These issuances
primarily represent stock based compensation issued to employees, consultants
and others for services performed. These amounts are recorded at the fair
value of the issuance on the grant date.
|
d.
|
Represents the fair
value of shares issued to Engelhard Corporation for the development and
supply of advanced catalysts as part of a development agreement.
|
e.
|
Represents the fair
value of shares issued for ownership interest in Advanced Energy
Incorporated.
|
f.
|
Represents the fair
value of an option to purchase 725,000 shares of the Companys common stock
issued to GE Power Systems Equities, Inc. as part of the amendment to the GE
Fuel Cell Systems LLC distribution agreement.
|
g.
|
Represents the fair
value of shares issued related to the acquisition of H Power.
|
h.
|
On June 29,
2006, Smart Hydrogen, Inc. purchased 395,000 shares of Class B Capital Stock,
a class of preferred stock, along with the 11,240 shares of common stock.
|
i.
|
On May 4, 2007,
the shareholders of General Hydrogen received warrants to purchase up to
571,429 shares of Plug Power Common Stock.
|
j
|
On December 20, 2008 the
395,000 shares of Class B capital stock was converted into 39,500,000 shares
of common stock.
|
F-41
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
14. Employee Benefit Plans
1999 Employee Stock
Purchase Plan
In
1999, the Company adopted the 1999 Employee Stock Purchase Plan (the Plan)
under which employees are eligible to purchase shares of the Companys common
stock at a discount through periodic payroll deductions. The Plan is intended
to meet the requirements of Section 423 of the Internal Revenue Code.
Purchases occur at the end of six month offering periods at a purchase price
equal to 85% of the market value of the Companys common stock at either the
beginning of the offering period or the end of the offering period, which ever
is lower. Participants may elect to have up to 10% of their pay withheld for
purchase of common stock at the end of the offering period, up to a maximum of
$12,500 within any offering period. The Company has reserved 1,000,000 shares
of common stock for issuance under the Plan. The Company issued 208,240,
111,402 and 65,515 shares of stock under the Plan during 2009, 2008, and 2007,
respectively.
Under FASB
ASC No. 718, Compensation Stock Compensation, the 15% discount and the
look-back feature are considered compensatory items for which expense must be
recognized. The Company values Plan shares as a combination position consisting
of 15% of a share of nonvested stock and 85% of a six-month stock option. The
value of the nonvested stock is estimated based on the trading value of the
Companys common stock at the beginning of the offering period, and an expected
life of six months. The resulting per-share value is multiplied by the shares
estimated to be purchased during the offering period based on historical
experience to arrive at a total estimated compensation cost for the offering
period. The estimated compensation cost is recognized on a straight-line basis
over the offering period.
Effective July 1, 2009, the Company suspended this
plan. Factors taken into consideration were the expense of administering the
plan, participation rate and the introduction of the Company-wide stock option
grant as an alternative means of promoting employee stock ownership.
Stock Option Plans
(the Option Plans)
1997 Stock Option
Plan
Effective
July 1, 1997, the Company established a stock option plan to provide
employees, consultants, and members of the Board of Directors the ability to acquire
an ownership interest in the Company (1997 Stock Option Plan). Options for
employees issued under this plan generally vested 20% per year and expire
ten years after issuance. Options granted to members of the Board generally
vested 50% upon grant and 25% per year thereafter. Options granted to
consultants generally vested one-third on the expiration of the consultants
initial contract term, with an additional one-third vesting on each of the next
two anniversaries thereafter. At December 31, 2009, there were 1,800
options outstanding and vested under this plan. Although no further options
will be granted under this plan, the options previously granted will be
exercisable for shares of common stock until their expiration dates are
reached.
1999 Stock
Option and Incentive Plan
Effective
August 16, 1999, the Company established a stock option plan to encourage
and enable the officers, employees, independent directors and other key persons
(including consultants) of the Company and its subsidiaries upon whose
judgment, initiative and efforts the Company largely depends for the successful
conduct of its business to acquire a proprietary interest in the Company (1999
Stock Option Plan).
F-
42
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
At
December 31, 2009 there were approximately 6.0 million options
granted and outstanding and 2.4 million options available to be issued under
the 1999 Stock Option Plan. The number of shares of common stock available for
issuance under the Plan will increase by the amount of any forfeitures under
the 1999 Stock Option Plan and under the 1997 Stock Option Plan. The number of
shares of common stock under the 1999 Stock Option Plan will further increase
January 1 and July 1 of each year by an amount equal to 16.4% of any
net increase in the total number of common shares of stock outstanding. The
1999 Stock Option Plan permits the Company to: grant incentive stock options;
grant non-qualified stock options; grant stock appreciation rights; issue or
sell common stock with vesting or other restrictions, or without restrictions;
grant rights to receive common stock in the future with or without vesting;
grant common stock upon the attainment of specified performance goals; and
grant dividend rights in respect of common stock. Options for employees issued
under this plan generally vest in equal annual installments over periods of
three or four years and expire ten years after issuance. Options granted to
members of the Board generally vest one year after issuance. Options granted to
consultants generally vested one-third on the expiration of the consultants
initial contract term, with an additional one-third vesting on each of the next
two anniversaries thereafter. To date, options granted under the 1999 Stock
Option Plan have vesting provisions ranging from immediate vesting to five
years in duration and expire ten years after issuance.
Compensation cost associated with employee stock
options represented approximately $291,000 of the total share-based payment
expense recorded for the year ended December 31, 2009. The Company
estimates the fair value of stock options and shares issued under the employee
stock purchase plan using a Black-Scholes valuation model, and the resulting
fair value is recorded as compensation cost on a straight-line basis over the
option vesting period. Key inputs and assumptions used to estimate the fair
value of stock options include the grant price of the award, the expected
option term, volatility of the Companys stock, an appropriate risk-free rate,
and the Companys dividend yield. Estimates of fair value are not intended to
predict actual future events or the value ultimately realized by employees who
receive equity awards, and subsequent events are not indicative of the
reasonableness of the original estimates of fair value made by the Company. The
assumptions made for purposes of estimating fair value under the Black-Scholes
model for the 1,375,500, 1,114,750 and 1,317,450 options granted during the
years ended December 31, 2009, 2008 and 2007, respectively were as
follows:
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
Dividend yield:
|
|
0%
|
|
0%
|
|
0%
|
Expected term of options (years):
|
|
6
|
|
6
|
|
6
|
Risk free interest rate:
|
|
1.79%-2.80%
|
|
2.56%-3.45%
|
|
3.77%-5.04%
|
Volatility:
|
|
85%-89%
|
|
61%-84%
|
|
55%-62%
|
The
Companys estimate of an expected option term was calculated in accordance with
the simplified method for calculating the expected term assumption. The
estimated stock price volatility was derived based upon a blend of implied
volatility and the Companys actual historic stock prices over the past six
years, which represents the Companys best estimate of expected volatility.
F-43
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
A
summary of stock option activity for the year December 31, 2009 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Weighted
|
|
Remaining
|
|
|
|
|
|
|
Average
|
|
Contractual
|
|
Aggregate
|
|
|
Shares
|
|
Exercise Price
|
|
Terms
|
|
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2008
|
|
6,170,304
|
|
$
|
8.78
|
|
5.6
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
1,375,500
|
|
0.92
|
|
|
|
|
Exercised
|
|
-
|
|
-
|
|
|
|
|
Forfeited
|
|
(1,281,590)
|
|
7.82
|
|
|
|
|
Expired
|
|
(282,928)
|
|
13.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2009
|
|
5,981,286
|
|
$
|
6.97
|
|
5.9
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2009
|
|
4,787,897
|
|
$
|
8.48
|
|
5.0
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Options fully vested at December 31, 2009
|
|
4,787,897
|
|
$
|
8.48
|
|
5.0
|
|
$
|
-
|
The
weighted average grant date fair value of options granted during the years
ended December 31, 2009, 2008 and 2007 was $0.66, $1.68 and $1.92,
respectively. There were no stock options exercised during the year ended
December 31, 2009. As of December 31, 2009, there was approximately
$615,000 of unrecognized compensation cost related to stock option awards to be
recognized over the next three years. The total fair value of stock options
that vested during the years ended December 31, 2009 and 2008 was approximately
$291,000 and $3.9 million, respectively.
F-44
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Restricted
stock awards vest in equal installments over a period of one to four years.
Restricted stock awards were valued based on the closing price of the Companys
common stock on the date of grant, and compensation cost is recorded on a
straight-line basis over the share vesting period. The Company recorded expense
of approximately $964,000 associated with its restricted stock awards in 2009.
As of December 31, 2009, there was $7.3 million of unrecognized
compensation cost related to restricted stock awards to be recognized over the
next three years.
A summary of restricted stock activity for the year
ended December 31, 2009 is as follows:
|
|
Shares
|
|
|
Aggregate
Intrinsic
Value
|
|
Unvested restricted stock at December 31, 2008
|
|
|
|
|
$
|
|
|
Granted (a)
|
|
10,194,459
|
|
|
|
8,664,018
|
|
Forfeited (a)
|
|
(82,840
|
)
|
|
|
(69,586
|
)
|
Vested
|
|
(1,428,953
|
)
|
|
|
(1,299,943
|
)
|
Unvested restricted stock at December 31, 2009
|
|
8,682,666
|
|
|
$
|
7,294,489
|
|
|
|
|
|
|
|
|
|
(a) Pursuant to the Long Term Incentive Plan discussed below, the
Company granted 8,667,666 restricted stock units, net of forfeitures, to a
select group of critical employees as of December 31, 2009. If certain metrics
are reached during each of the three years of the grant period commencing on
January 1, 2010, the
Company
could issue these shares.
For
the years ended December 31, 2009, 2008, and 2007, the Company recorded
expense of approximately $1.9 million, $8.6 million, and $5.4 million respectively,
in connection with its share based payment awards.
401(k)
Savings & Retirement Plan
The
Company offers a 401(k) Savings & Retirement Plan to eligible
employees meeting certain age and service requirements. This plan permits
participants to contribute 100% of their salary, up to the maximum allowable by
the Internal Revenue Service regulations. Participants are immediately vested
in their voluntary contributions plus actual earnings or less actual losses
thereon. Participants are vested in the Companys matching contribution based
on years of service completed. Participants are fully vested upon completion of
three years of service. During 2002, the Company began funding its matching
contribution in common stock. Accordingly, the Company has issued 607,553,
379,189 and 279,054 shares of common stock to the Plug Power Inc. 401(k)
Savings & Retirement Plan during 2009, 2008 and 2007, respectively.
The
Companys expense for this plan, including the issuance of shares, was approximately
$534,000, $835,000 and $962,000 for years ended December 31, 2009, 2008
and 2007, respectively.
F-45
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Long
Term Incentive Plan
On October 28, 2009, the Compensation Committee recommended
and the Board of Directors approved a Long Term Incentive (LTI) Plan pursuant
to the terms of the Companys 1999 Stock Option and Incentive Plan. Designed as
an incentive vehicle to support employee efforts, the LTI Plan seeks to
increase shareholder value by encouraging Plug Power employees to continue to
work diligently to further the Companys long term goals, particularly the
recently announced three year plan to achieve profitability in 2012.
Under the LTI Plan, a select group of critical employees
received a Restricted Stock Unit Award Agreement (Agreement) awarding a one
time grant of restricted stock units (RSUs) calculated using a multiple of the
selected employees base salary. According to the Agreement, the restrictions
on each participants RSU allocation will lapse over a three year period upon
successful completion of weighted performance-based metrics. Specifically,
restrictions on
25% of RSUs are tied to
the Companys achievement of revenue targets, while the restrictions on 75% of
RSUs are tied to the Companys achievement of earnings before interest expense,
taxes, depreciation, amortization and non-cash charges for equity compensation
(measurement referred to in the Agreement as EBITDAS) targets. Intended to supplement
the annual employee incentive plan payout, the total number of RSUs lapsing
each year will vary depending on the Companys progress achieving the
corresponding threshold, target or stretch goals.
Pursuant to the terms of the Agreement, in the event
stretch revenue and EBITDAS metrics are reached during each of the three years
of the grant period commencing on January 1, 2010, the Company could issue a
maximum of 8,667,666 shares to LTI Plan participants, currently representing
approximately 6.6% of total outstanding shares. Restrictions on these shares
only lapse in the event the Company performs at the articulated performance
metrics.
15.
Other Related Party Transactions
Pursuant
to the Second Amendment to the Amended and Restated Distribution Agreement
dated May 13, 2005, the Company currently has a non-exclusive distribution
agreement with DTE Energy Technologies, Inc. (DTE), an affiliate of Edison
Development Company and DTE Energy Corporation, for the states of Michigan, Ohio, Illinois, and Indiana. According to the most recent amendments to the
agreement, the Company may sell directly or negotiate non-exclusive
distribution rights with third parties for the GenCore, GenSite and GenSys2T
products in these four states. For every product sold directly by the Company
or by a third party within Michigan, Ohio, Illinois and Indiana the Company has
agreed to pay a 5% commission to DTE based on sales price of units shipped to
the above noted states. The distribution agreement expires on December 31,
2014.
As of
December 31, 2009 and 2008, the Company had no payables due to DTE under
this commission provision and no outstanding receivables from DTE.
F-46
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
16. Fair Value of
Financial Instruments
The
following disclosure of the estimated fair value of financial instruments is
made in accordance with the provision of ASC No. 825-10-65, Financial
Instruments Transition and Open Effective Date Information (ASC 825-10-65).
ASC 825-10-65 requires disclosures about fair value of financial instruments in
interim financial statements as well as in annual financial statements.
Although the estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation methodologies, the
estimates presented are not necessarily indicative of the amounts that the
Company could realize in current market exchanges.
The
following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents, accounts receivable,
accrued interest receivable and payable, notes receivable and borrowings under
line of credit:
The carrying amounts
reported in the consolidated balance sheets approximate fair value because of
the short maturities of these instruments.
Long term debt:
The carrying amount reported in the consolidated balance sheets approximates
fair value as the debt was negotiated at market rates during the first quarter
2009 and there have not been any significant changes since that time.
17.
Supplemental Disclosures of Cash Flows Information
The
following represents required supplemental disclosures of cash flows
information and non-cash financing and investing activities which occurred
during the years ended December 31, 2009, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation accrual impact
|
|
$
|
480,145
|
|
|
$
|
(1,341,324
|
)
|
$
|
(247,054
|
)
|
Change in unrealized loss/gain on available-for-sale securities
|
|
|
(131,308
|
)
|
|
|
155,688
|
|
|
141,897
|
|
Estimated fair value of net assets acquired and liabilities assumed
|
|
|
|
|
|
|
|
|
|
58,512,893
|
|
Decrease to broker for security purchase
|
|
|
|
|
|
|
|
|
|
(5,000,000
|
)
|
Restricted shares forfeited
|
|
|
|
|
|
|
(124,945
|
)
|
|
|
|
Transfer to trading securities auction rate debt securities
|
|
|
|
|
|
|
52,650,654
|
|
|
|
|
Cash paid for interest
|
|
|
999,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-47
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
18.
Commitments and Contingencies
Alliances and
development agreements
BASF
: In 2006, BASF SE, a German Societas Europaea (SE)
corporation, acquired Engelhard, with whom we have a Development Agreement and
a Supply Agreement. With its acquisition, BASF inherited Engelhards
obligations to the Company under both of these agreements. The Development
Agreement, dated April 5, 2004, is for the development of advanced
catalysts to increase the overall performance and efficiency of the Companys
fuel processor and will expire on December 31, 2010. The Supply Agreement,
also dated April 5, 2004, is a requirements contract whereby the Company
agrees to buy from BASF and BASF agrees to sell to the Company, 100% of the
Companys requirements for catalyst materials, as developed under the
Development Agreement, the price to be determined January 1
st
of each year by BASF, until the agreements expiration date of
December 31, 2010.
General
Electric Company (GE) Entities:
On
February 27, 2006, the Company, GE MicroGen, Inc., and GE restructured
their service and equity relationships by terminating the joint venture and the
associated distributor and other agreements, and entering into a new
development collaboration agreement. Under this agreement, the Company and GE
(through its Global Research unit) agreed to collaborate on programs including,
but not limited to, development of tools, materials and components that can be
applied to various types of fuel cell products. The Company and GE mutually
agreed to extend the terms of the development collaboration agreement such that
the Company is obligated to purchase $1 million of services from GE in
connection with this collaboration prior to December 31, 2009. As of
December 31,
2009,
the approximately $363,000 obligation remaining under the extended development
collaboration agreement became due and payable; however, the Company and GE
d/b/a GE Global Research entered into a Lease Agreement dated October 6, 2009
for space in the Companys Latham, New York facility whereby the parties
mutually agreed that pursuant to section 4 of the Lease Agreement the amount
owed by the Company to GE under the development collaboration agreement would
be offset by the rent owed by GE to the Company each month. The development collaboration
agreement is scheduled to terminate on the earlier of
(i) December 31, 2014 or (ii) upon the completion of a certain
level of program activity.
NYSERDA
: The Company has an obligation to repay the New York
State Environmental Research and Development Authority (NYSERDA) according to
royalty payment provisions in each of the Companys past and present NYSERDA
agreements. For sales made by a New York State manufacturer, the Company must
pay a royalty to NYSERDA at a rate of 0.5% of net sales of products developed
under the NYSERDA programs; or, for a non-new York State manufacturer, the
Company must pay a royalty to NYSERDA at a rate of 3% of net sales. The royalty
payments are currently calculated at 0.5% of net sales of our GenCore and
GenSys products because we are a New York State manufacturer and both of these
products were developed using some percentage of NYSERDA monies. The Companys
maximum liability under the NYSERDA royalty provisions is one times the
aggregate total amount of monies received from NYSERDA. If the total amount
received from NYSERDA under an individual agreement is not paid back in
royalties to NYSERDA within fifteen (15) years from the date of that
individual agreement, then that amount is deducted from the aggregate total amount
due under the royalty provisions. As of December 31, 2009 and 2008,
approximately $2,000 and $15,000, respectively, have been recorded as accrued
expenses in the consolidated balance sheets related to the royalty provisions.
F-48
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Leases
As of
December 31, 2009 and 2008, the Company has no capital leases outstanding.
The Company has several noncancelable operating leases, primarily for warehouse
facilities and office space that expire over the next five years. Portions of
certain properties are subleased for periods expiring in various years through
2011.
Future
minimum lease payments under noncancelable operating leases (with initial or
remaining lease terms in excess of one year) as of December 31, 2009 are:
|
|
|
|
Year
ending December 31
|
|
Operating leases
|
2010
|
|
$
|
1,209,056
|
2011
|
|
|
987,198
|
2012
|
|
|
279,600
|
2013
|
|
|
279,600
|
2014 and thereafter
|
|
|
1,467,900
|
Total future minimum lease payments
|
|
$
|
4,223,354
|
|
|
|
|
Minimum
future rental income receivable under subleases from non-cancelable operating
leases were $437,028 and $0 as of December 31, 2009 and 2008, respectively.
Rental
expense for all operating leases for the years ended December 31, 2009, 2008
and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rentals
|
|
$
|
1,819,000
|
|
|
$
|
1,909,000
|
|
$
|
1,600,000
|
|
Sublease rental income
|
|
|
(5,000
|
)
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,814,000
|
|
|
$
|
1,909,000
|
|
$
|
1,600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-49
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Concentrations
of credit risk
Concentrations
of credit risk with respect to receivables exist due to the limited number of
select customers that the Company has initial commercial sales arrangements
with and government agencies. To mitigate credit risk, the Company performs
appropriate evaluation of a prospective customers financial condition.
At
December 31, 2009, five customers comprise approximately 67.7% of the
total accounts receivable balance, with each customer individually representing
43.8%, 7.0%, 6.7%, 6.2% and 4.0% of total accounts receivable, respectively. At
December 31, 2008, five customers comprise approximately 62.0% of the
total accounts receivable balance, with each customer individually representing
22.3%, 11.7%, 10.6%, 10.1% and 7.3% of total accounts receivable, respectively.
At
December 31, 2009, contracts with the federal government accounted for approximately
$5.6 million or 45.6% of total revenue. At December 31, 2008, contracts with
the federal government accounted for approximately $8.3 million or 46.6% of
total revenue, contracts with the state government accounted for $1.9 million or
10.7% and one other customer accounted for $1.9 million or 10.7% of total
revenue.
The
Company has cash deposits in excess of federally insured limits. The amount of
such deposits is essentially all cash at December 31, 2009.
Employment
Agreements
The
Company is party to employment agreements with certain executives which provide
for compensation and certain other benefits. The agreements also provide for
severance payments under certain circumstances.
Early Commercial Purchase Agreement
On
October 15, 2007, the Company and Wal-Mart Stores East, LP (Wal-Mart)
signed an Early Commercial Purchase Agreement for GenDrive units. Under this
agreement, the Company has certain commitments to provide for the
maintenance/service of the units sold as well as supply of hydrogen to Wal-Mart
for up to seven years from the date of commissioning. The Company also provides
certain indemnifications related to this agreement to Wal-Mart. As of
September 30, 2008, all units sold to Wal-Mart have been placed in
service.
Hydrogen
Payment Agreement
Pursuant
to the agreement negotiated between Air Products and the Company to supply
hydrogen infrastructure and hydrogen to Central Grocers at their distribution
center, the Company has an obligation to purchase hydrogen from and pay a
monthly service charge of $23,300 for hydrogen infrastructure to Air Products
for the full term of the contract.
F-50
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
19.
Geographic Information
During
2009, the Company formed our Indian organization, Plug Power Energy India Private
Limited (Plug Power India), an affiliate of Plug Power Inc. to provide support
and service to our GenSys product.
The
following is a summary of revenue for the years ended December 31, 2009, 2008
and 2007, based on physical location of the subsidiary making the sale:
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
2007
|
|
2007
|
|
|
Product and service
revenue
|
|
|
Research and
development
contract
revenue
|
|
|
Product and service
revenue
|
|
|
Research and
development
contract
revenue
|
|
Product and service
revenue
|
|
Research and
development
contract
revenue
|
United States
|
$
|
4,683,627
|
|
$
|
7,269,404
|
|
$
|
4,442,432
|
|
$
|
10,779,553
|
|
$
|
2,792,923
|
|
$
|
11,982,095
|
Canada
|
|
149,146
|
|
|
190,379
|
|
|
224,863
|
|
|
2,454,469
|
|
|
289,033
|
|
|
1,206,572
|
Total
|
$
|
4,832,773
|
|
$
|
7,459,783
|
|
$
|
4,667,295
|
|
$
|
13,234,022
|
|
$
|
3,081,956
|
|
$
|
13,188,667
|
Long-lived assets, representing the sum of net book
value of property, plant, and equipment plus intangible assets, goodwill and
other assets, based on physical location as of December 31, 2009 and 2008,
are as follows:
|
|
2009
|
|
|
2008
|
United States
|
$
|
18,572,109
|
|
$
|
20,871,248
|
India
|
|
14,222
|
|
|
-
|
Canada
|
|
9,834,011
|
|
|
9,911,038
|
Total
|
$
|
28,420,342
|
|
$
|
30,782,286
|
20. Unaudited
Quarterly Financial Data (in thousands, except per share data)
|
|
Quarters Ended
|
|
|
|
March 31,
2009
|
|
|
June 30,
2009
|
|
|
September 30,
2009
|
|
|
December 31,
2009
|
|
Product and service revenue
|
|
$
|
1,283
|
|
|
$
|
1,285
|
|
|
$
|
1,045
|
|
|
$
|
1,220
|
|
Contract revenue
|
|
|
1,339
|
|
|
|
1,937
|
|
|
|
1,497
|
|
|
|
2,687
|
|
Net loss
|
|
|
(8,157
|
)
|
|
|
(10,250
|
)
|
|
|
(10,171
|
)
|
|
|
(12,131
|
)
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
(0.06
|
)
|
|
|
(0.08
|
)
|
|
|
(0.08
|
)
|
|
|
(0.09
|
)
|
|
|
F-51
Table of Contents
PLUG POWER INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
Quarters Ended
|
|
|
|
March 31,
2008
|
|
|
June 30,
2008
|
|
|
September 30,
2008
|
|
|
December 31,
2008
|
|
Product and service revenue
|
|
$
|
850
|
|
|
$
|
1,130
|
|
|
$
|
1,271
|
|
|
$
|
1,416
|
|
Contract revenue
|
|
|
2,887
|
|
|
|
3,702
|
|
|
|
2,783
|
|
|
|
3,862
|
|
Net loss
|
|
|
(20,728
|
)
|
|
|
(22,867
|
)
|
|
|
(13,810
|
)
|
|
|
(64,295
|
)
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
(0.24
|
)
|
|
|
(0.26
|
)
|
|
|
(0.16
|
)
|
|
|
(0.69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-52
Grafico Azioni Plug Power (NASDAQ:PLUG)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Plug Power (NASDAQ:PLUG)
Storico
Da Lug 2023 a Lug 2024