Table of
Contents
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012
OR
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
FOR THE TRANSITION PERIOD FROM
TO
Commission File Number: 1-34392
PLUG POWER INC.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
|
|
22-3672377
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer
Identification Number)
|
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)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
x
No
o
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
x
No
o
Table of
Contents
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, and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):
|
|
|
|
|
|
|
Large
accelerated filer
o
|
|
Accelerated
filer
o
|
|
Non-accelerated
filer
x
|
|
Smaller
reporting company
o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b
2 of the Exchange Act). Yes
o
No
x
The number of shares of common stock, par value of $.01
per share, outstanding as of May 9, 2012 was 37,855,742.
PLUG POWER INC.
Table of
Contents
INDEX to
FORM 10-Q
Table of
Contents
PART
1. FINANCIAL INFORMATION
Item
1 Interim Financial Statements (Unaudited)
Plug Power Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
|
Assets
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
20,829,033
|
|
$
|
13,856,893
|
|
Accounts receivable, less allowance of $0 at March 31, 2012 and December 31, 2011
|
12,969,623
|
|
13,388,909
|
|
Inventory
|
|
|
8,109,179
|
|
10,354,707
|
|
Prepaid expenses and other current assets
|
|
|
1,176,980
|
|
1,894,014
|
|
|
Total current assets
|
|
|
43,084,815
|
|
39,494,523
|
Property, plant and equipment, net
|
|
|
8,084,985
|
|
8,686,840
|
Intangible assets, net
|
|
|
7,001,738
|
|
7,474,636
|
|
|
Total assets
|
|
|
$
|
58,171,538
|
|
$
|
55,655,999
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
2,903,785
|
|
$
|
4,668,721
|
|
Accrued expenses
|
|
|
2,378,956
|
|
3,172,998
|
|
Product warranty reserve
|
|
|
1,091,147
|
|
1,210,909
|
|
Borrowings under line of credit
|
|
|
-
|
|
5,405,110
|
|
Deferred revenue
|
|
|
6,983,501
|
|
5,542,004
|
|
Other current liabilities
|
|
|
650,300
|
|
80,000
|
|
|
Total current liabilities
|
|
|
14,007,689
|
|
20,079,742
|
|
Common stock warrant liability
|
|
|
4,082,240
|
|
5,320,990
|
|
Other liabilities
|
|
|
1,247,335
|
|
1,219,602
|
|
|
Total liabilities
|
|
|
19,337,264
|
|
26,620,334
|
Stockholders' equity:
|
|
|
|
|
|
|
Common stock, $0.01 par value per share; 245,000,000 shares authorized;
|
|
|
|
|
Issued (including shares in treasury):
|
|
|
|
|
|
|
|
37,933,447 at March 31, 2012 and 22,924,411 at December 31, 2011
|
379,335
|
|
229,244
|
|
Additional paid-in capital
|
|
|
800,368,988
|
|
784,213,871
|
|
Accumulated other comprehensive income
|
|
|
1,005,247
|
|
928,744
|
|
Accumulated deficit
|
|
|
(761,366,914)
|
|
(754,783,812)
|
|
Less common stock in treasury:
|
|
|
|
|
|
|
165,906 shares at March 31, 2012 and December 31, 2011
|
|
(1,552,382)
|
|
(1,552,382)
|
|
|
Total stockholders' equity
|
|
|
38,834,274
|
|
29,035,665
|
|
|
Total liabilities and stockholders' equity
|
|
|
$
|
58,171,538
|
|
$
|
55,655,999
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
Table of
Contents
Plug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2012
|
|
2011
|
|
Product and service revenue
|
$
|
7,236,766
|
|
$
|
4,993,405
|
|
Research and development contract revenue
|
515,376
|
|
785,224
|
|
Licensed technology revenue
|
-
|
|
163,125
|
|
Total revenue
|
7,752,142
|
|
5,941,754
|
|
Cost of product and service revenue
|
9,060,689
|
|
6,690,453
|
|
Cost of research and development contract revenue
|
765,958
|
|
1,337,080
|
|
Research and development expense
|
1,227,457
|
|
1,062,726
|
|
Selling, general and administrative expenses
|
3,935,793
|
|
3,561,598
|
|
Amortization of intangible assets
|
575,773
|
|
581,489
|
|
|
Operating loss
|
(7,813,528)
|
|
(7,291,592)
|
|
Interest and other income and net realized losses
|
|
|
|
|
from available-for-sale securities
|
47,524
|
|
33,898
|
|
Change in fair value of common stock warrant liability
|
1,238,750
|
|
-
|
|
Interest and other expense and foreign currency gain (loss)
|
(55,848)
|
|
14,494
|
|
|
Net loss
|
$
|
(6,583,102)
|
|
$
|
(7,243,200)
|
|
Loss per share:
|
|
|
|
|
|
Basic and diluted
|
$
|
(0.28)
|
|
$
|
(0.55)
|
|
Weighted average number of common shares
|
|
|
|
|
outstanding
|
23,437,600
|
|
13,225,095
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
Plug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive
Income (Loss)
(Unaudited)
|
Three months ended
|
|
March 31,
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
|
Net loss
|
$
|
(6,583,102)
|
|
$
|
(7,243,200)
|
Other comprehensive income:
|
|
|
|
Foreign currency translation gain
|
76,503
|
|
104,192
|
Unrealized gain on available-for-sale securities
|
-
|
|
18,502
|
Comprehensive loss
|
$
|
(6,506,599)
|
|
$
|
(7,120,506)
|
|
|
|
|
|
|
|
|
The accompanying notes are
an integral part of these unaudited condensed consolidated financial statements.
Table of
Contents
Plug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
Three months ended
|
|
|
|
|
March 31,
|
|
|
|
|
2012
|
|
2011
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
Net loss
|
|
$
|
(6,583,102)
|
|
$
|
(7,243,200)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
Depreciation of property, plant and equipment
|
486,275
|
|
504,740
|
|
|
Amortization of intangible assets
|
575,773
|
|
581,489
|
|
|
Stock-based compensation
|
524,055
|
|
392,174
|
|
|
Loss on disposal of property, plant and equipment
|
57,680
|
|
-
|
|
|
Realized loss on available for sale securities
|
-
|
|
22,421
|
|
|
Change in fair value of common stock warrant liability
|
(1,238,750)
|
|
-
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
419,638
|
|
(129,923)
|
|
|
Inventory
|
2,245,528
|
|
1,075,822
|
|
|
Prepaid expenses and other current assets
|
717,034
|
|
351,209
|
|
|
Accounts payable, accrued expenses, product warranty reserve and other liabilities
|
(2,121,367)
|
|
(2,385,856)
|
|
|
Deferred revenue
|
1,441,497
|
|
(384,189)
|
|
|
|
Net cash used in operating activities
|
(3,475,739)
|
|
(7,215,313)
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
Purchase of property, plant and equipment
|
-
|
|
(966,875)
|
|
|
Proceeds from disposal of property, plant and equipment
|
57,900
|
|
-
|
|
|
Proceeds from maturities and sales of available-for-sale securities
|
-
|
|
10,399,396
|
|
|
|
Net cash provided by investing activities
|
57,900
|
|
9,432,521
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
Purchase of treasury stock
|
-
|
|
(158,179)
|
|
|
Proceeds from issuance of common stock
|
17,685,403
|
|
-
|
|
|
Stock issuance costs
|
(1,891,378)
|
|
-
|
|
|
Repayment of borrowings under line of credit
|
(5,405,110)
|
|
-
|
|
|
Principal payments on long-term debt
|
-
|
|
(9,956)
|
|
|
|
Net cash provided by (used in) financing activities
|
10,388,915
|
|
(168,135)
|
|
|
Effect of exchange rate changes on cash
|
1,064
|
|
(2,479)
|
|
|
Increase in cash and cash equivalents
|
6,972,140
|
|
2,046,594
|
|
|
Cash and cash equivalents, beginning of period
|
13,856,893
|
|
10,955,403
|
|
|
Cash and cash equivalents, end of period
|
$
|
20,829,033
|
|
$
|
13,001,997
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
Table of
Contents
Plug Power Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Nature
of Operations
Description of Business
Plug
Power Inc., or the Company, is a leading provider of alternative energy
technology and is involved in the design, development, commercialization and
manufacture of fuel cell systems for the industrial off-road (forklift or
material handling) market.
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
concentrate our efforts on developing, manufacturing and selling our
hydrogen-fueled PEM GenDrive
®
products on commercial terms for
industrial off-road (forklift or material handling) applications, with a focus
on multi-shift high volume manufacturing and high throughput distribution
sites.
On
February 29, 2012 the Company completed the formation of its joint venture with
Axane, S.A., a subsidiary of Air Liquide, under the name HyPulsion (the
JV). The principal purpose of the JV will be to develop and sell hydrogen
fuel cell systems for the European material handling market. Axane contributed
cash at the closing and will make additional fixed cash contributions in 2013
and 2014 in exchange for 55% ownership of the JV, subject to certain
conditions. The Company contributed the right to use its technology, including
design and technology know-how on GenDrive systems, to the JV in exchange for
45% ownership of the JV. The Company has not contributed any cash to the
JV and is not obligated to contribute any cash. The Company has an option
in the future to contribute cash and become a majority owner of the JV.
The Company will share in 45% of the profits from the JV and is accounting for
the JV under the equity method of accounting in accordance with Subtopic
323-10,
Investments Equity Method and Joint Ventures Overall
. The
formation of the JV did not result in a gain or loss recorded by the Company
and, as of March 31, 2012, the Company had a zero basis for its investment in
the JV. In accordance with the equity method of accounting, the Company will
increase its investment in the JV by its share of any earnings.
We
have previously invested in development and sales activities for
low-temperature remote-prime power GenSys
®
products and our GenCore
®
product, which is a hydrogen fueled PEM fuel cell system to provide back-up
power for critical infrastructure. While Plug Power will continue to service
and support GenSys and/or GenCore products on a limited basis, our main focus is
our GenDrive product line.
We sell our products
worldwide, with a primary focus on North America, 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 a public company 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 acquired all the issued and outstanding equity of Cellex Power
Products, Inc. (Cellex) and General Hydrogen Corporation (General Hydrogen).
Through these acquisitions, and our continued GenDrive product development
efforts, Plug Power became the first fuel cell company to offer a complete
suite of products: Class 1 - sit-down counterbalance trucks, Class 2 stand-up
reach trucks and Class 3 rider pallet trucks.
Unless the context indicates
otherwise, the terms Company, Plug Power, we, our or us as used
herein refers to Plug Power Inc. and its subsidiaries.
Table of
Contents
Plug Power Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Liquidity
As of March 31, 2012, we had approximately $29.1
million of working capital, which includes $20.8 million of cash and cash
equivalents to fund our future operations. Additionally, as of March 30, 2012,
we executed a Second Loan Modification Agreement with Silicon Valley Bank which
increased our credit facility, providing us access of up to $15 million in
financing, subject to borrowing base limitations, to support working capital
needs (See Note 14, Loan and Security Agreement, of the condensed consolidated
financial statements). We believe that our current cash, cash equivalents and
cash generated from future sales, in conjunction with the availability of the
credit facility, will provide sufficient liquidity to fund operations into
2013. This projection is based on our current expectations regarding product
sales, cost structure, and cash burn rate and operating assumptions. In the
event that our operating expenses are higher than anticipated or the gross
margins and shipments of our GenDrive products do not increase as we expect, we
may be required to implement contingency plans within our control to conserve
and/or enhance our liquidity to meet operating needs. Such plans include: our
ability to further reduce discretionary expenses, monetize our real estate
assets through a sale-leaseback arrangement and obtain additional funding from
licensing the use of our technologies. Our cash requirements relate primarily
to working capital needed to operate and grow our business, including funding
operating expenses, growth in inventory to support both shipments of new units
and servicing the installed base, and continued development and expansion of
our products. Our ability to achieve profitability and meet future liquidity
needs and capital requirements will depend upon numerous factors, including the
timing and quantity of product orders and shipments, the timing and amount of
our operating expenses; the timing and costs of working capital needs; the
timing and costs of building a sales base; the timing and costs of developing
marketing and distribution channels; the timing and costs of product service
requirements; the timing and costs of hiring and training product staff; the
extent to which our products gain market acceptance; the timing and costs
of product development and introductions; the extent of our ongoing and any new
research and development programs; and changes in our strategy or our planned
activities. As a result, we can provide no assurance that we will be able to
fund our operations beyond 2013 without additional external financing. If
additional funding is required beyond 2013, alternatives the Company would
consider include equity or debt financings, strategic alliances or joint
ventures. Under such conditions, if we are unable to obtain additional capital in
2013, we may not be able to sustain our future and may be required to delay,
reduce and/or cease our operations and/or seek bankruptcy protection. We cannot
assure you that any necessary additional financing will be available on terms
favorable to us, or at all. Given the difficult current economic environment,
we believe that it could be difficult to raise additional funds and there can
be no assurance as to the availability of additional financing or the terms
upon which additional financing may be available. Additionally, even if we
raise sufficient capital through equity or debt financing, strategic alliances
or otherwise, there can be no assurances that the revenue or capital infusion
will be sufficient to enable us to develop our business to a level where it
will be profitable or generate positive cash flow. If we raise additional funds
through the issuance of equity or convertible debt securities, the percentage
ownership of our stockholders could be significantly diluted, and these newly
issued securities may have rights, preferences or privileges senior to those of
existing stockholders. If we incur additional debt, a substantial portion of our
operating cash flow may be dedicated to the payment of principal and interest
on such indebtedness, thus limiting funds available for our business
activities. The terms of any debt securities issued could also impose
significant restrictions on our operations. Broad market and industry factors
may seriously harm the market price of our common stock, regardless of our
operating performance, and may adversely impact our ability to raise additional
funds. If we raise additional funds through collaborations and/or licensing
arrangements, we might be required to relinquish significant rights to our
technologies, or grant licenses on terms that are not favorable to us.
2. Basis of Presentation
Principles of Consolidation:
The accompanying unaudited condensed interim
consolidated financial statements include the financial statements of the
Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation. It is the
Companys policy to reclassify prior period consolidated financial statements
to conform to current period presentation.
Interim Financial Statements
:
The
accompanying unaudited condensed interim consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). In the opinion of management, all adjustments, which
consist solely of normal recurring adjustments, necessary to present fairly, in
accordance with U.S. generally accepted accounting principles (GAAP), the
financial position, results of operations and cash flows for all periods
presented, have been made. The results of operations for the interim periods
presented are not necessarily indicative of the results that may be expected
for the full year.
Certain information and footnote disclosures normally
included in annual consolidated financial statements prepared in accordance
with U.S. generally accepted accounting principles have been condensed or
omitted. These unaudited condensed consolidated financial statements should be
read in conjunction with the Companys audited consolidated financial
statements and notes thereto included in the Companys Annual Report on Form
10-K filed for the fiscal year ended December 31, 2011.
The information presented in the accompanying condensed
consolidated balance sheet as of December 31, 2011 has been derived from
the Companys December 31, 2011 audited consolidated financial statements.
All other information has been derived from the Companys unaudited condensed
consolidated financial statements as of March 31, 2012 and for the three months
ending March 31, 2012 and 2011.
Table of
Contents
Plug Power Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Use of Estimates:
The unaudited
condensed interim consolidated financial statements have been prepared in
conformity with GAAP, 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.
Stock Split
:
The financial statements for all prior periods have been retroactively adjusted
to reflect the May 19, 2011 one-for-ten reverse stock split of the Companys
common stock. See Note 6, Stockholders Equity, of the condensed consolidated
financial statements for more detail.
Significant Accounting Policies:
Warrant
accounting
We account for common stock warrants in accordance with
applicable accounting guidance provided in ASC 815, Derivatives and Hedging
Contracts in Entitys Own Equity, as either derivative liabilities or as equity
instruments depending on the specific terms of the warrant agreement. In
compliance with applicable securities law, registered common stock warrants
that require the issuance of registered shares upon exercise and do not
sufficiently preclude an implied right to cash settlement are accounted for as
derivative liabilities. We classify these derivative warrant liabilities on the
condensed consolidated balance sheets as a long term liability, which is
revalued at each balance sheet date subsequent to the initial issuance. We use
the Black-Scholes pricing model to value the derivative warrant liability. The
Black-Scholes pricing model, which is based, in part, upon unobservable inputs
for which there is little or no market data, requires the Company to develop
its own assumptions. The Company used the following assumptions for its common stock
warrants. The risk-free interest rate for May 31, 2011 (issuance date),
December 31, 2011, and March 31, 2012 were .75%, .33% and .43%, respectively.
The volatility of the market price of the Companys common stock for May 31,
2011, December 31, 2011 and March 31, 2012 were 94.4%, 78.6%, and 79.6%,
respectively. The expected average term of the warrant used for all periods was
2.5 years. There was no expected dividend yield for the warrants granted. As a
result, if factors change and different assumptions are used, the warrant
liability and the change in estimated fair value could be materially
different. A significant increase in the volatility of the market price of
the Company's common stock, in isolation , would result in a significantly
higher fair value measurement; and a significant decrease in volatility would
result in a significantly lower fair value measurement. Changes in the fair value of the warrants are reflected in the
condensed consolidated statement of operations as change in fair value of
common stock warrant liability.
Recent Accounting Pronouncements:
On
January 1, 2012, we adopted Financial Accounting Standards Board (FASB)
Accounting Standards Update (ASU) 2011-05, an amendment to Accounting Standards
Codification (ASC) 220,
Comprehensive
Income
. ASU 2011-05 introduces a new
statement, the Consolidated Statement of Comprehensive Income, which begins
with net earnings and adds or deducts other recognized changes in assets and
liabilities that are not included in net earnings, but are reported directly to
equity, under GAAP. For example, unrealized changes in currency
translation adjustments are included in the measure of comprehensive income but
are excluded from net earnings. The amendments became effective for the first
quarter 2012 financial statements. The amendments affect only the
display of those components of equity categorized as other comprehensive income
and do not change existing recognition and measurement requirements that
determine net earnings.
On January 1, 2012, we adopted FASB ASU 2011-04, an
amendment to ASC 820,
Fair
Value Measurements
. ASU 2011-04
clarifies or changes the application of existing fair value measurements,
including: that the highest and best use valuation premise in a fair value
measurement is relevant only when measuring the fair value of nonfinancial
assets; that a reporting entity should measure the fair value of its own equity
instrument from the perspective of a market participant that holds that
instrument as an asset; to permit an entity to measure the fair value of
certain financial instruments on a net basis rather than based on its gross
exposure when the reporting entity manages its financial instruments on the
basis of such net exposure; that in the absence of a Level 1 input, a reporting
entity should apply premiums and discounts when market participants would do so
when pricing the asset or liability consistent with the unit of account; and
that premiums and discounts related to size as a characteristic of the
reporting entitys holding are not permitted in a fair value measurement. Adopting
this amendment
resulted in additional disclosure related to our Level 3 fair value
measurements.
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.
Table of
Contents
Plug Power Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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.
The following tables summarize the basis used to
measure certain financial assets and liabilities at fair value on a recurring
basis in the condensed consolidated balance sheets:
Basis of Fair Value Measurements
|
|
|
|
|
Quoted Prices in Active
|
|
Significant
|
|
Significant
|
|
|
|
|
|
Markets for Identical
|
|
Other Observable
|
|
Unobservable
|
|
|
|
|
|
Items
|
|
Inputs
|
|
Inputs
|
Balance at March 31, 2012
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
Common stock warrant liability
|
|
$
|
4,082,240
|
|
$
|
-
|
|
$
|
-
|
|
$
|
4,082,240
|
|
|
|
|
|
|
|
|
|
|
The following tables show reconciliations of the
beginning and ending balances for liabilities measured at fair value on a
recurring basis using significant unobservable inputs (i.e. Level 3) for the three
months ended March 31, 2012:
|
|
|
|
|
|
Fair Value
|
|
|
Measurement Using
|
|
|
Significant
|
Common stock warrant liability
|
|
Unobservable Inputs
|
Beginning of period - January 1, 2012
|
$
|
5,320,990
|
Change in fair value of common stock warrants
|
(1,238,750)
|
Fair value of common stock warrant liability at March 31, 2012
|
$
|
4,082,240
|
|
|
|
|
|
|
Table of
Contents
Plug Power Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The
following summarizes the valuation technique for assets and liabilities
measured and recorded at fair value:
Common stock warrant
liability:
For our level 3 securities, which represent common
stock warrants, fair value is based on the Black-Scholes pricing model which is
based, in part, upon unobservable inputs for which there is little or no market
data, requiring the Company to develop its own assumptions.
4.
Earnings 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. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock (such as stock options,
unvested restricted stock, 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
and 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. The financial statements for all prior periods
have been retroactively adjusted to reflect the May 19, 2011 one-for-ten
reverse stock split of the Companys common stock.
The following table provides the components of the
calculations of basic and diluted earnings per share:
|
|
Three Months Ended
|
|
|
March 31, 2012
|
|
March 31, 2011
|
Numerator:
|
|
|
|
|
Net loss
|
$
|
(6,583,102)
|
|
$
|
(7,243,200)
|
Denominator:
|
|
|
|
|
Weighted average number of common shares outstanding
|
23,437,600
|
|
13,225,095
|
|
|
|
|
|
The potential
dilutive common shares are summarized as follows:
|
At March 31,
|
|
2012
|
|
2011
|
Stock options outstanding
|
|
1,948,124
|
|
442,585
|
Unvested restricted stock
|
|
280,771
|
|
409,326
|
Common stock warrants
(1)
|
|
9,421,008
|
|
57,143
|
Number of dilutive potential common shares
|
|
11,649,903
|
|
909,054
|
(1)
|
On May 31, 2011, the Company granted
7,128,563 warrants as part of an underwritten public offering. As a
result of the March 28 and 29, 2012 public offerings described in Note 6
below, the number of warrants increased to 9,421,008. On May 4, 2007, the
Company granted 57,143 warrants (as adjusted for the reverse stock split) to
the shareholders of General Hydrogen as part of the acquisition of that
company. Those warrants expired on May 4, 2011.
|
Table of
Contents
Plug Power Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
5.
Intangible Assets
The
gross carrying amount and accumulated amortization of the Companys acquired
identifiable intangible assets related to Plug Power Canada Inc. as of March 31,
2012 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Effect of
|
|
|
|
|
Weighted Average
|
|
Gross Carrying
|
|
Accumulated
|
|
Foreign Currency
|
|
|
|
|
Amortization Period
|
|
Amount
|
|
Amortization
|
|
Translation
|
|
Total
|
|
Acquired Technology
|
8 years
|
|
|
$
|
15,900,000
|
|
$
|
(10,519,120)
|
|
$
|
1,235,404
|
|
$
|
6,616,284
|
|
Customer Relationships
|
8 years
|
|
|
1,000,000
|
|
(614,546)
|
|
-
|
|
385,454
|
|
|
|
|
|
|
|
$
|
16,900,000
|
|
$
|
(11,133,666)
|
|
$
|
1,235,404
|
|
$
|
7,001,738
|
The
gross carrying amount and accumulated amortization of the Companys acquired
identifiable intangible assets related to Plug Power Canada Inc. as of December
31, 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Effect of
|
|
|
|
|
Weighted Average
|
|
Gross Carrying
|
|
Accumulated
|
|
Foreign Currency
|
|
|
|
|
Amortization Period
|
|
Amount
|
|
Amortization
|
|
Translation
|
|
Total
|
|
Acquired Technology
|
8 years
|
|
|
$
|
15,900,000
|
|
$
|
(9,974,597)
|
|
$
|
1,132,529
|
|
$
|
7,057,932
|
|
Customer Relationships
|
8 years
|
|
|
1,000,000
|
|
(583,296)
|
|
-
|
|
416,704
|
|
|
|
|
|
|
|
$
|
16,900,000
|
|
$
|
(10,557,893)
|
|
$
|
1,132,529
|
|
$
|
7,474,636
|
6. Stockholders Equity
On
May 19, 2011, the Company implemented a one-for-ten reverse stock split of its
common stock. As a result of the reverse stock split, each ten (10) outstanding
shares of pre-split common stock were automatically combined into one (1) share
of post-split common stock. Fractional shares received cash and proportional
adjustments were made to the Companys outstanding stock options and other
equity awards and to the Companys equity compensation plans to reflect the
reverse stock split. The financial statements for all prior periods have been
retroactively adjusted to reflect this stock split for both common stock issued
and options outstanding.
On May 31, 2011, the Company completed an underwritten
public offering of 8,265,000 shares of its common stock and warrants to
purchase an aggregate of 7,128,563 shares of common stock (including warrants to purchase an aggregate of 929,813
shares of common stock purchased by the underwriter pursuant to the exercise of
its over-allotment option). Net proceeds, after underwriting discounts and
commissions and other fees and expenses payable by Plug
Power, were $18,289,883 (of this amount $8,768,143 in
fair value was recorded as common stock warranty liability at issuance date).
The shares and the warrants were sold together as a fixed combination, with
each combination consisting of one share of common stock and 0.75 of a warrant
to purchase one share of common stock, at a price to the public of $2.42 per
fixed combination. The warrants are exercisable upon
issuance and will expire on May 31, 2016. The exercise price of the warrants
upon issuance was $3.00 per share of common stock and is subject to weighted
average anti-dilution provisions in the event of issuance of additional shares
of common stock and certain other conditions, as further described in the
warrant agreement. Additionally, in the event of a sale of the Company, and
under certain conditions, each warrant holder has the right to require the
Company to purchase such holders warrants at a price determined using a
Black-Scholes option pricing model. As a result of the March 28 and 29, 2012
public offerings and pursuant to the effect of the anti-dilution provisions,
the exercise price of the warrants was reduced to $2.27 per share of common
stock. Simultaneously with the adjustment to the exercise price, the number of
common stock shares that may be purchased upon exercise of the warrants was
increased to 9,421,008 shares.
Table of
Contents
Plug Power Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
On June 8, 2011, the Company sold 836,750 additional
shares of common stock, pursuant to the underwriters partial exercise of its
over-allotment option, resulting in additional net
proceeds to Plug Power of $1,874,990.
On July 1, 2011, the Company sold 231,000 additional shares of common stock, pursuant to
the underwriters partial exercise of its over-allotment option, resulting in
additional net proceeds to Plug Power of $
527,626.
On March 28, 2012, the Company completed an
underwritten public offering of 13,000,000 shares of its common stock. The
shares were sold at $1.15 per share. Net proceeds, after underwriting
discounts and commissions and other fees and expenses payable by Plug Power were
$13,708,500.
On March 29, 2012, the Company sold 1,950,000
additional shares of common stock at $1.15 per share, pursuant to the
underwriters exercise of its over-allotment option in connection with the
March 28, 2012 underwritten public offering, resulting in additional net
proceeds to Plug Power of $2,085,525.
Changes in stockholders equity for the three months
ended March 31, 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
Treasury Stock
|
|
|
|
Total
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
Additional Paid-
in-Capital
|
|
|
|
|
|
|
Accumulated
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Shares
|
|
Amount
|
|
|
|
December 31, 2011
|
|
22,924,411
|
|
$
|
229,244
|
|
$
|
784,213,871
|
|
$
|
928,744
|
|
165,906
|
|
$
|
(1,552,382)
|
|
$
|
(754,783,812)
|
|
$
|
29,035,665
|
|
Net loss
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(6,583,102)
|
|
(6,583,102)
|
|
Foreign currency translation gain
|
|
|
-
|
|
-
|
|
-
|
|
76,503
|
|
-
|
|
-
|
|
-
|
|
76,503
|
|
Stock based compensation
|
|
59,036
|
|
591
|
|
510,592
|
|
-
|
|
-
|
|
-
|
|
-
|
|
511,183
|
|
Public offering common stock, net
|
|
14,950,000
|
|
149,500
|
|
15,644,525
|
|
-
|
|
-
|
|
-
|
|
-
|
|
15,794,025
|
|
March 31, 2012
|
|
37,933,447
|
|
$
|
379,335
|
|
$
|
800,368,988
|
|
$
|
1,005,247
|
|
165,906
|
|
$
|
(1,552,382)
|
|
$
|
(761,366,914)
|
|
$
|
38,834,274
|
7.
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 three months ended March 31, 2012 and 2011:
|
March 31, 2012
|
|
March 31, 2011
|
Stock-based compensation accrual impact, net
|
$
|
(12,872)
|
|
$
|
198,269
|
Change in unrealized loss/gain on available-for-sale securities
|
-
|
|
18,502
|
Transfer of investment in leased property to inventory
|
-
|
|
263,239
|
8. Debt and Lease Arrangement
In
July 2009, the Company signed a standby 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. This standby letter of credit with Key Bank was
cancelled in September 2011, and replaced with a standby letter of credit with
Silicon Valley Bank, as noted below. The standby letter of credit with
Key Bank was collateralized by cash held in a restricted account and was
recorded as restricted cash in the condensed consolidated balance sheets as of
December 31, 2010.
Table of
Contents
Plug Power Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In
September 2011, the Company signed a letter of credit with Silicon Valley Bank
in the amount of $525,000. The standby letter of credit is required by the
agreement negotiated between Air Products and the Company to supply hydrogen
infrastructure and hydrogen to Central Grocers at their distribution
center. There are no collateral requirements associated with this letter
of credit.
9.
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
825-10-65, Financial Instruments, which 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, accounts payable and borrowings under line of
credit:
The carrying amounts reported
in the condensed consolidated balance sheets approximate fair value because of
the short maturities of these instruments.
10. Multiple-Deliverable Revenue Arrangements
The Company enters into multiple-deliverable revenue
arrangements that may contain a combination of fuel cell systems or equipment,
installation, service, maintenance, fueling and other support services. The
delivered item, equipment, does have value to the customer on a standalone
basis and could be separately sold by another vendor. In addition, the
Company does not include a right of return on its products.
Under the guidance of the FASB ASU No. 2009-13,
in an arrangement with multiple-deliverables, the delivered items will be
considered a separate unit of accounting if the following criteria are met:
-
The delivered item or items have
value to the customer on a standalone basis.
-
If the arrangement includes a
general right of return relative to the delivered item(s), delivery or
performance of the undelivered item or items is considered probable and
substantially in the control of the vendor.
Deliverables not meeting the criteria for being a
separate unit of accounting are combined with a deliverable that does meet that
criterion. The appropriate allocation of arrangement consideration and
recognition of revenue is then determined for the combined unit of accounting.
The Company allocates arrangement consideration to each
deliverable in an arrangement based on its relative selling price. The Company
determines selling price using vendor-specific objective evidence (VSOE), if it
exists, otherwise third-party evidence (TPE). If neither VSOE nor TPE of
selling price exists for a unit of accounting, the Company uses estimated
selling price (ESP).
VSOE is generally limited to the price that a vendor
charges when it sells the same or similar products or services on a standalone
basis. TPE is determined based on the prices charged by competitors of the
Company for a similar deliverable when sold separately. The Company
generally expects that it will not be able to establish VSOE or TPE for certain
deliverables due to the lack of standalone sales and the nature of the markets
in which the Company competes, and, as such, the Company typically will
determine selling price using ESP.
Table of
Contents
Plug Power Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The objective of ESP is to determine the price at which
the Company would transact if the product or service were sold by the Company
on a standalone basis. The Companys determination of ESP may involve a
weighting of several factors based on the specific facts and circumstances of
the arrangement. Specifically, the Company may consider the cost to produce the
deliverable, the anticipated margin on that deliverable, the selling price and
profit margin for similar parts, the Companys ongoing pricing strategy and
policies, the value of any enhancements that have been built into the
deliverable and the characteristics of the varying markets in which the
deliverable is sold, as applicable. The Company will determine ESP for
deliverables in future agreements based on the specific facts and circumstances
of the arrangement.
As noted above, in determining selling price, TPE is
generally not readily available due to a lack of a competitive environment in
selling fuel cell technology. However, when determining selling price for
certain deliverables such as service and maintenance, if available, the Company
utilizes prices charged by its competitors as TPE when estimating its costs for
labor hours.
Each deliverable within the Companys
multiple-deliverable revenue arrangements is accounted for as a separate unit
of accounting under the guidance of ASU No. 2009-13. Once a standalone selling
price for all the deliverables that meet the separation criteria has been met,
whether by VSOE, TPE or ESP, the relative selling price method is used to
proportionately allocate each element of the arrangement to the sale
consideration. The Company plans to analyze the selling prices used in its
allocation of arrangement consideration at a minimum on an annual basis.
Selling prices will be analyzed on a more frequent basis if a significant
change in the Companys business necessitates a more timely analysis or if the
Company experiences significant variances in its selling prices.
For all product and service revenue transactions
entered into prior to the implementation of ASU No. 2009-13, the Company will
continue to defer the 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 extend over multiple years. While contract terms for
those transactions generally required payment shortly after shipment or
delivery and installation of the fuel cell system and were not contingent on
the achievement of specific milestones or other substantive performance, the
multiple-element revenue obligations within our contractual arrangements were
generally not accounted for separately based on our limited experience and lack
of evidence of fair value of the undelivered components. During the three
months ended March 31, 2012, we recognized $51,000 of revenue related to these
transactions. At March 31, 2012, and December 31, 2011, there was
approximately $859,000 and $910,000, respectively, included in deferred revenue
in the condensed consolidated balance sheets related to these transactions.
11.
Income Taxes
Under
Internal Revenue Code (IRC) Section 382, the use of net operating loss carry-forwards,
capital loss carry-forwards and other tax credit carry-forwards 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 five percent
stockholders a change of ownership has occurred under the provisions of IRC
Section 382, the Company's net operating loss, capital loss and tax credit carry-forwards
could be subject to significant IRC Section 382 limitations.
Prior to March 2011, the Company had
approximately $703 million in Federal and state net operating loss carry-forwards
and $15.6 million in Federal research and experimentation tax credit carry-forwards.
A Section 382 ownership change occurred during March 2011 that resulted in
approximately $675 million of Federal and state net operating loss carry-forwards
being subject to IRC Section 382 limitations and as a result of IRC Section 382
limitations, approximately $618 million of the net operating loss carry-forwards
and $15.6 million of the Federal research and experimentation tax credit carry-forwards
will expire prior to utilization. As a result of the IRC Section 382
limitations, these net operating loss and tax credit carry-forwards that will
expire unutilized were not reflected in the Companys gross deferred tax asset
as of December 31, 2011. The ownership change also resulted in Net Unrealized
Built in Losses per IRS Notice 2003-65 which should result in Recognized Built
in Losses during the five year recognition period of approximately $7 million.
This will translate into unfavorable book to tax add backs in the Company's
2011 to 2016 U.S. corporate income tax returns that resulted in a gross
deferred tax liability of $2.6 million at the time of the ownership change and
$1.8 million at December 31, 2011 with a corresponding reduction to the
valuation allowance. This gross deferred tax liability will offset certain
existing gross deferred tax assets (i.e. capitalized research expense). This
had no impact on the Company's current financial position, results of
operations, or cash flows because of the full valuation allowance.
Table of
Contents
Plug Power Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
As
a result of certain equity transactions by five percent stockholders, the
Company is continuing to evaluate and determine if an ownership change occurred
for IRC Section 382 purposes during the quarter ending March 31, 2012. If an
ownership change occurred in the quarter ending March 31, 2012, an IRC Section
382 limitation could result in all but approximately $14.9 million of the
Company's Federal and state net operating loss carry-forwards expiring prior to
utilization, which would result in the Companys gross deferred tax asset and
related valuation allowance decreasing by approximately $24.6 million. The
ownership change would also result in Net Unrealized Built in Losses per IRS
Notice 2003-65 which should result in Recognized Built in Losses during the
five year recognition period of approximately $33.6 million. This will
translate into unfavorable book to tax add backs in the Company's 2012 to 2017
U.S. corporate income tax returns that would result in a gross deferred tax
liability of $12.8 million at the time of the ownership change with a
corresponding reduction to the valuation allowance. This gross deferred tax
liability will offset certain existing gross deferred tax assets (i.e.
capitalized research expense).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 during the quarter ending
March 31, 2012 and expects to complete that study during the quarter ended June
30, 2012.
12. Stock Option Plan
On May 12, 2011, the Companys stockholders approved
the 2011 Stock Option and Incentive Plan (the 2011 Plan). The 2011 Plan
provides for the
issuance of up to a
maximum number of
shares of common stock equal to the sum of (i) 1,000,000, plus (ii) the number
of shares of common stock underlying any grants pursuant to the 2011 Plan or
the Plug Power Inc. 1999 Stock Option and Incentive Plan that are forfeited,
canceled, repurchased or are terminated (other t
han by
exercise). The shares may be issued pursuant to stock options, stock
appreciation rights, restricted stock awards and certain other equity-based
awards granted to employees, directors and consultants of the Company.
No
grants may be made under the 2011 Plan after May 12, 2021.
13. Commitments and Contingencies
The Equipment Sale Agreement Addendum No. 1 between
Ballard and the Company was executed on June 30, 2011. This addendum relates to
a committed purchase by the Company of a total of 3,250 Ballard fuel cell stacks
between the dates of July 1, 2011 and December 31, 2012. The amount of this
commitment was approximately $9.4 million. As of March 31, 2012, the
Company had purchased 1,347 stacks, and has a remaining commitment of
approximately $5.1 million. In conjunction with this agreement, the
Company paid a one-time non-recurring engineering fee of $450,000 to Ballard to
be used at Ballards sole discretion for the purposes of product development,
cost reduction and production implementation. This fee is being amortized
to research and development expense over a period of eighteen months.
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 with government
agencies. To mitigate credit risk, the Company performs appropriate evaluation
of a prospective customers financial condition.
At March 31, 2012, four customers comprise
approximately 84.2% of the total accounts receivable balance, with each
customer individually representing 42.8%, 22.5%, 10.7%, and 8.2% of total
accounts receivable, respectively. At December 31, 2011, five customers
comprise approximately 83.0% of the total accounts receivable balance, with
each customer individually representing 27.0%, 17.3%, 16.4%, 12.1% and 10.2% of
total accounts receivable, respectively.
Table of
Contents
Plug Power Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
For the three months ended March 31, 2012, contracts
with two customers comprise approximately 58.7% of total consolidated revenues,
with each customer representing 48.1% and 10.6%, respectively. For the three months ended March 31, 2011, contracts with two
customers comprise approximately 61.9% of total consolidated revenues, with each
customer representing 44.4% and 17.5%, respectively .
14. Loan and Security Agreement
The Company is party to a loan and security agreement,
as amended, (the Loan Agreement) with Silicon Valley Bank (SVB) providing the
Company with access to up to $15,000,000 of financing in the form of (i) revolving loans, (ii) letters of
credit, (iii) foreign exchange contracts and (iv) cash management services such
as merchant services, direct deposit of payroll, business credit card and check
cashing services.
Advances
under the Loan Agreement cannot exceed a borrowing base limit calculated using
(A) an advanced rate of 80% on the Company's eligible accounts receivable and
(B) an advanced rate of 25% on the Company's eligible inventory (subject to a
limit of the lesser of (a) $3 million and (b) 30% of all outstanding advances),
subject to certain reserves established by SVB and other adjustments.
Interest
on advances of credit under the Loan Agreement for: (i) financed accounts
receivables are equal to (a) SVBs prime rate, which is currently 3.25% per
annum, plus 3.0% per annum or (b) if the Company maintains at all times during
any month an adjusted quick ratio of 2.0 to 1.0, then SVBs prime rate plus
1.50% per annum; and (ii) financed inventory is equal to (a) SVBs prime rate
plus 5.25% per annum or (b) if the Company maintains at all times during any
month an adjusted quick ratio of 2.0 to 1.0, then SVBs prime rate plus 3.25%
per annum. The minimum monthly interest charge is $6,000 per month. The Loan Agreement
will be used by the Company to support its current working capital needs.
The
Loan Agreement is secured by substantially all of the Company's properties,
rights and assets, including substantially all of its equipment, inventory,
receivables, intellectual property and general intangibles.
The
Loan Agreement includes customary representations and warranties for credit
facilities of this type. In addition, the Loan Agreement contains a number of
covenants that will impose significant operating and financial restrictions on
the Company's operations, including restrictions pertaining to, among other
things: (i) the condition of inventory; (ii) maintenance of an adjusted quick
ratio of at least 1.50 to 1.0; (iii) intellectual property right protection and
registration; (iv) dispositions of assets; (v) changes in business, management,
ownership or business locations; (vi) mergers, consolidations or acquisitions;
(vii) incurrence or assumption of indebtedness; (viii) incurrence of liens on
any of the Company's property; (ix) paying dividends or making distributions
on, or redemptions, retirements or repurchases of, capital stock; (x)
transactions with affiliates; and (xi) payments on or amendments to
subordinated debt. As of March 31, 2012 the Company is in compliance with these
covenants.
The
Loan Agreement also contains events of default customary for credit facilities
of this type with, in some cases, corresponding grace periods, including, (i)
failure to pay any principal or interest when due, (ii) failure to comply with
covenants, (iii) any material adverse change occurring, (iv) an attachment,
levy or restraint on our business, (v) certain bankruptcy or insolvency events
, (vi) payment defaults relating to, or acceleration of, other indebtedness or
that could result in a material adverse change to the Company's business, (vii)
the Company or its subsidiaries becoming subject to judgments, claims or
liabilities in an amount individually or in aggregate in excess of $150,000
(viii) any misrepresentations, or (ix) any revocation, invalidation, breach or
invalidation of any subordinated debt.
The
Loan Agreement will expire on March 29, 2013. The Loan Agreement may be
terminated prior to March 29, 2013; however, the Company would be required to
pay a $150,000 early termination fee in connection with a termination (i) by
the Company for any reason or (ii) by SVB upon notice and after the occurrence
and during the continuance of an event of default. At March 31, 2012 there
were no borrowings outstanding.
Table of
Contents
Plug Power Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
15. Subsequent Events
The Company has evaluated subsequent events and
transactions through the date of this filing for potential recognition or
disclosure in the financial statements and has noted no subsequent events requiring
recognition or disclosure.
Table of
Contents
Item 2 Managements
Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion should be read in conjunction with our accompanying
unaudited condensed consolidated financial statements and notes thereto
included within this report, and our audited consolidated financial statements
and notes thereto included in our Annual Report on Form 10-K filed for the
fiscal year ended December 31, 2011. In addition to historical information, this
Form 10-Q and the following discussion contain statements that are not
historical facts and are considered forward-looking within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. These
forward-looking statements contain projections of our future results of
operations or of our financial position or state other forward-looking
information. In some cases you can identify these statements by forward-looking
words such as anticipate, believe, could, continue, estimate,
expect, intend, may, should, will, would, plan, projected or
the negative of such words or other similar words or phrases. We believe that
it is important to communicate our future expectations to our investors.
However, there may be events in the future that we are not able to accurately
predict or control and that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. Investors
are cautioned not to
unduly
rely on forward-looking
statements because they involve risks and uncertainties, and actual results may
differ materially from those discussed as a result of various factors,
including, but not limited to: the risk that we continue to incur losses and
might never achieve or maintain profitability, the risk that we expect we will
need to raise additional capital to fund our operations and such capital may
not be available to us; the risk that the previously disclosed expected uses of
the Companys recently raised capital may change; our lack of extensive
experience in manufacturing and marketing products may impact our ability to
manufacture and market products on a profitable and large-scale commercial
basis; the risk that unit orders will not ship, be installed and/or converted
to revenue; the risk that pending orders may not convert to purchase orders;
the cost and timing of developing, marketing and selling our products and our
ability to raise the necessary capital to fund such costs; the ability to
achieve the forecasted gross margin on the sale of our products; the actual net
cash used for operating expenses may exceed the projected net cash for
operating expenses; the cost and availability of fuel and fueling
infrastructures for our products; market acceptance of our GenDrive 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
successfully expand our product lines; our ability to improve system
reliability for our GenDrive systems; competitive factors, such as price
competition and competition from other traditional and alternative energy
companies; our ability to protect our intellectual property; the cost of
complying with current and future federal, state and international governmental
regulations; and other risks and uncertainties discussed, but are not limited
to, those set forth in Item 1A-Risk Factors in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2011, as filed on March 30, 2012 as
updated by Part II, Item 1A of this Form 10-Q. 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 Form 10-Q.
Overview
Plug Power Inc., or the Company, is a leading provider
of alternative energy technology focused on the design, development,
commercialization and manufacture of fuel cell systems for the industrial
off-road (forklift or material handling) market. 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 our analysis of the material
handling market. We believe we have developed reliable products which allow
the end customers to eliminate incumbent power sources from their operations,
and realize their sustainability objectives through clean energy alternatives.
In October, 2011 we introduced our next generation
GenDrive products. These next generation fuel cell units include a simplified
architecture featuring 30% fewer components, giving customers greater
flexibility in managing their deployments.
Table of
Contents
We have experienced and continue to experience negative
cash flows from operations and we expect to continue to incur net losses in the
foreseeable future. Accordingly, in 2010, we restructured and consolidated our
operations to focus on the GenDrive business. This restructuring significantly
reduced our operating expenses in 2011. As of March 31, 2012, we had
approximately $29.1 million of working capital, which includes $20.8 million of
cash and cash equivalents to fund our future operations. Our future liquidity
and capital requirements will depend upon numerous factors, including those identified
in Part II, Item 1A (Risk Factors) of this form 10-Q.
Recent Developments
On
January 24, 2012, the Company entered into a Master and Shareholders' Agreement
with Axane, S.A., a subsidiary of Air Liquide, pursuant to which the Company
and Axane formed a joint venture company based in France under the name
HyPulsion (the "JV"). The principal purpose of the JV will be to
develop and sell hydrogen fuel cell systems for the European material handling
market. On February 29, 2012, the Company completed the formation of the JV and
the Company and the JV entered into a Contribution and License Agreement and a
Supply and Engineered Services Agreement.
On March 23, 2012, the Company and Broadridge Corporate
Issuer Solutions, Inc., as rights agent, entered into Amendment No. 3 (the
Rights Amendment) to the Shareholders Rights Agreement, dated as of June 23,
2009 (as amended, the Rights Agreement). The Rights Amendment provides that,
generally, any beneficial ownership of shares of our common stock by affiliates
and associates of AWM Investments Company, including but not limited to Special
Situations Technology Fund, L.P., Special Situations Technology Fund II, L.P.,
and Special Situations Private Equity Fund, L.P., (collectively, SSF) will not
cause the preferred stock purchase rights to become exercisable under the
Rights Agreement, so long as SSF and their affiliates and associates do not at
any time beneficially own shares of our common stock equaling or exceeding
three percent more than the percentage of the then outstanding shares of common
stock beneficially owned by SSF and their affiliates and associates immediately
following the closing of our public offering on March 28, 2012.
On March 28, 2012, the Company completed an
underwritten public offering of 13,000,000 shares of common stock. The shares
were sold at $1.15 per share for gross proceeds of approximately $15.0 million.
Net proceeds, after underwriting discounts and commissions and other estimated
fees and expenses payable by the Company, were approximately $13.6 million. The
Company intends to use the net proceeds of the offering for general corporate
purposes, which may include working capital, capital expenditures, research and
development expenditures, commercial expenditures, acquisitions of new
technologies or businesses that are complementary to its current technologies
or business focus, and investments. In connection with the offering, the
Company granted the underwriter a 45-day option to purchase up to an additional
1,950,000 shares of common stock to cover over-allotments.
On
March 29, 2012, the Company sold 1,950,000 additional shares of common stock,
pursuant to the underwriters exercise of its over-allotment option in
connection with the Companys public offering, resulting in additional net
proceeds to the Company of $2,085,525.
As a result of the March 28 and 29, 2012 public
offerings and pursuant to the effect of the anti-dilution provisions included
in our warrants issued in 2011, the exercise price of the warrants was reduced
from $3.00 per share of common stock to $2.27 per share of common stock.
Simultaneously with the adjustment to the exercise price, the number of common
stock shares that may be purchased upon exercise of the warrants was increased
from 7,128,563 shares to 9,421,008 shares.
On March 30, 2012, the Company executed a Second Loan
Modification Agreement with SVB, amending the Loan Agreement. This Second
Loan Modification Agreement increases the total revolving credit facility
availability from $7 million to $15 million to support working capital need,
and extends the agreement through March 29, 2013. All remaining terms of
the Loan Agreement remain in full force and effect.
Results of Operations
Product and service revenue.
Effective April 1, 2010, the Company adopted ASU No.
2009-13 on Topic 605, Revenue Recognition Multiple Deliverable Revenue
Arrangements retroactive to January 1, 2010
.
ASU No. 2009-13 amends the
FASB ASC to eliminate the residual method of allocation for multiple-deliverable
revenue arrangements, and requires that arrangement consideration be allocated
at the inception of an arrangement to all deliverables using the relative
selling price method. The Company anticipates that the effect of the
adoption of this guidance on subsequent periods will be primarily based on the
arrangements entered into and the timing of shipment of deliverables. See Note
10, Multiple-Deliverable Revenue Arrangements, of the condensed consolidated
financial statements, Part I, Item 1 of this Form 10-Q for further discussion
of our multiple-deliverable revenue arrangements.
Table of
Contents
For
all product and service revenue transactions entered into prior to the
implementation of ASU No. 2009-13, the Company will continue to defer the
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. While contract terms for those
transactions generally required payment shortly after shipment or delivery and
installation of the fuel cell system and were not contingent on the achievement
of specific milestones or other substantive performance, the multiple-element revenue
obligations within our contractual arrangements were generally not accounted
for separately based on our limited experience and lack of evidence of fair
value of the undelivered components.
Product and service revenue for the three months ended
March 31, 2012 increased $2.2 million, or 44.9%, to $7.2 million from $5.0
million for the three months ended March 31, 2011. During the three months
ended March 31, 2012 we shipped 299 fuel cell systems to end customers as
compared to 144 fuel cell systems shipped during the three months ended March
31, 2011. During the three months ended March 31, 2012, and March 31,
2011, we deferred $2.0 million and $253,000 in revenue, respectively, due to
contingent provisions in our agreements, as well as deliverables under ASU No.
2009-13 on Topic 605, Revenue Recognition Multiple Deliverable Revenue
Arrangements, where the deliverables have not yet been met. Additionally, in
the three months ended March 31, 2012, we recognized approximately $912,000 of
product and services revenue from fuel cell shipments made prior to the three
months ended March 31, 2012, whereas in the three months ended March 31, 2011,
we recognized approximately $474,000 of product and service revenue from fuel
cell shipments made prior to the three months ended March 31, 2011.
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
30% 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. 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 the three months ended March 31, 2012
decreased approximately $270,000, or 34.4%, to $515,000 from $785,000 for the
three months ended March 31, 2011. The decrease is primarily related to fewer
active projects in 2012.
Licensed technology revenue.
Licensed technology revenue relates to the sale of licensing rights and
engineering assistance. This revenue was being amortized over a twelve
month period.
Licensed
technology revenue for the three months ended March 31, 2012 and 2011 was
approximately $0 and $163,000, respectively.
Cost of product and service revenue.
Cost of product and service revenue includes the direct material and
labor cost as well as an allocation of overhead costs that relate to the
manufacturing of products we sell. In addition, cost of product and service
revenue also includes the labor and material costs incurred for product
maintenance, replacement parts and service under our contractual
obligations.
Cost
of product and service revenue for the three months ended March 31, 2012
increased approximately $2.4 million, or 35.4%, to $9.1 million from $6.7
million for the three months ended March 31, 2011. This increase is directly
related to increased fuel cell shipments to end customers. There were 299 fuel
cell systems shipped during the three months ended March 31, 2012 as compared
to 144 for the three months ended March 31, 2011.
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.
Table of
Contents
Cost
of research and development contract revenue for the three months ended March
31, 2012 decreased approximately $571,000, or 42.7%, to $766,000 from $1.3
million for the three months ended March 31, 2011. The
decrease is primarily a result of fewer active contracts in 2012, coupled with
a lower percentage of cost sharing on active contracts in 2012.
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 three months ended March 31, 2012 increased
approximately $165,000, or 15.5%, to $1.2 million from $1.1 million for the
three months ended March 31, 2011. This increase was a result of higher
personnel related costs, coupled with an increase in outside engineering expenses.
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
three months ended March 31, 2012 increased approximately $374,000, or 10.5%,
to $3.9 million from $3.6 million for the three months ended March 31, 2011.
The increase was primarily the result of higher personnel related costs,
including stock based compensation.
Amortization of intangible assets.
Amortization of intangible assets represents the
amortization associated with the Companys acquired identifiable intangible
assets from Plug Power Canada Inc., including acquired technology and customer
relationships, which are being amortized over eight years.
Amortization of intangible assets decreased to
approximately $576,000 for the three months ended March 31, 2012, compared to
approximately $581,000 for the three months ended March 31, 2011. The decrease
is related to foreign currency fluctuations.
Interest and other income and net realized losses from
available-for-sale securities.
Interest and other income and net realized losses from available-for-sale
securities consists primarily of interest earned on our cash, cash equivalents,
available-for-sale securities, and rental income.
Interest and other income and net realized losses from
available-for-sale securities for the three months ended March 31, 2012
increased approximately $14,000, or 40.2%, to $48,000 from $34,000 for the
three months ended March 31, 2011. The increase is primarily related to the
realized loss from available-for-sale securities recorded in the first quarter
of 2011. Rental income for the three months ended March 31, 2012 and 2011 was
approximately $48,000 and $51,000, respectively.
Change in fair value of common stock warrant liability.
We account for common stock warrants in accordance
with applicable accounting guidance provided in ASC 815, Derivatives and
Hedging Contracts in Entitys Own Equity, as either derivative liabilities or
as equity instruments depending on the specific terms of the warrant agreement.
Derivative warrant liabilities are valued using the Black-Scholes pricing model
at the date of initial issuance and each subsequent balance sheet date. Changes
in the fair value of the warrants are reflected in the condensed consolidated
statement of operations as change in the fair value of common stock warrant
liability.
The change in fair value of common stock warrant
liability for the three months ended March 31, 2012 resulted in income of $1.2
million due primarily to a decrease in the Companys common stock share price
and changes in volatility of our common stock during the period. The warrants
were not outstanding in the three months ended March 31, 2011.
Interest and other expense and foreign currency gain
(loss).
Interest and other expense and
foreign currency gain (loss) consists of interest related to the Credit Line
Agreement and foreign currency exchange gain (loss).
Table of
Contents
Interest and other expense and foreign currency gain
(loss) for the three months ended
March
31, 2012
and 2011 was approximately
$(56,000) and $14,000, respectively. Interest expense related to the Credit
Line Agreement was approximately $66,000 and $0, respectively, for the three
months ended
March 31, 2012 and 2011
.
Income taxes.
We did not report
a benefit for federal and state income taxes in the condensed consolidated
financial statements for the three months ended March 31, 2012 and 2011 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.
Liquidity
and Capital Resources
We have experienced recurring operating losses and as
of March 31, 2012, we had an accumulated deficit of approximately $761.4
million. Substantially all of our losses resulted from costs incurred in
connection with our operating expenses, research and development expenses and
from general and administrative costs associated with our operations. To date,
we have funded our operations primarily through private and public offerings of
our common and preferred stock, our line of credit and maturities and sales of
our available-for-sale securities. We anticipate incurring substantial additional
losses and may never achieve profitability.
As
of March 31, 2012, we had approximately $29.1 million of working capital, which
includes $20.8 million of cash and cash equivalents to fund our future
operations. Additionally, as of March 30, 2012, we executed a Second Loan
Modification Agreement with Silicon Valley Bank which increased our credit
facility, providing us access of up to $15 million in financing, subject to
borrowing base limitations, to support working capital needs (See Note 14, Loan
and Security Agreement, of the condensed consolidated financial statements). We
believe that our current cash, cash equivalents and cash generated from future
sales, in conjunction with the availability of the credit facility, will
provide sufficient liquidity to fund operations into 2013. This projection is
based on our current expectations regarding product sales, cost structure, and
cash burn rate and operating assumptions. In the event that our operating
expenses are higher than anticipated or the gross margins and shipments of our
GenDrive products do not increase as we expect, we may be required to implement
contingency plans within our control to conserve and/or enhance our liquidity
to meet operating needs. Such plans include: our ability to further reduce
discretionary expenses, monetize our real estate assets through a
sale-leaseback arrangement and obtain additional funding from licensing the use
of our technologies. Our cash requirements relate primarily to working capital
needed to operate and grow our business, including funding operating expenses,
growth in inventory to support both shipments of new units and servicing the
installed base, and continued development and expansion of our products. Our
ability to achieve profitability and meet future liquidity needs and capital
requirements will depend upon numerous factors, including the timing and
quantity of product orders and shipments, the timing and amount of our
operating expenses; the timing and costs of working capital needs; the timing
and costs of building a sales base; the timing and costs of developing
marketing and distribution channels; the timing and costs of product service
requirements; the timing and costs of hiring and training product staff; the
extent to which our products gain market acceptance; the timing and costs
of product development and introductions; the extent of our ongoing and any new
research and development programs; and changes in our strategy or our planned
activities. As a result, we can provide no assurance that we will be able to
fund our operations beyond 2013 without additional external financing. If
additional funding is required beyond 2013, alternatives the Company would
consider include equity or debt financings, strategic alliances or joint
ventures. Under such conditions, if we are unable to obtain additional capital
in 2013, we may not be able to sustain our future and may be required to delay,
reduce and/or cease our operations and/or seek bankruptcy protection. We cannot
assure you that any necessary additional financing will be available on terms
favorable to us, or at all. Given the difficult current economic environment,
we believe that it could be difficult to raise additional funds and there can
be no assurance as to the availability of additional financing or the terms
upon which additional financing may be available. Additionally, even if we
raise sufficient capital through equity or debt financing, strategic alliances
or otherwise, there can be no assurances that the revenue or capital infusion
will be sufficient to enable us to develop our business to a level where it
will be profitable or generate positive cash flow. If we raise additional funds
through the issuance of equity or convertible debt securities, the percentage
ownership of our stockholders could be significantly diluted, and these newly
issued securities may have rights, preferences or privileges senior to those of
existing stockholders. If we incur additional debt, a substantial portion of
our operating cash flow may be dedicated to the payment of principal and
interest on such indebtedness, thus limiting funds available for our business
activities. The terms of any debt securities issued could also impose
significant restrictions on our operations. Broad market and industry factors
may seriously harm the market price of our common stock, regardless of our
operating performance, and may adversely impact our ability to raise additional
funds. If we raise additional funds through collaborations and/or licensing
arrangements, we might be required to relinquish significant rights to our
technologies, or grant licenses on terms that are not favorable to us.
Table of
Contents
Several
key indicators of liquidity are summarized in the following table:
|
|
|
|
Three months
|
Three months
|
|
Year
|
|
|
|
|
ended or at
|
ended or at
|
|
ended or at
|
|
|
|
|
March 31,
|
March 31,
|
|
December 31,
|
(in thousands)
|
|
|
2012
|
2011
|
|
2011
|
|
Cash and cash equivalents at end of period
|
|
|
|
20,829
|
13,002
|
|
13,857
|
|
Borrowings under line of credit at end of period
|
|
-
|
-
|
|
5,405
|
|
Working capital at end of period
|
|
|
|
29,077
|
17,210
|
|
19,415
|
|
Net loss
|
|
|
|
6,583
|
7,243
|
|
27,454
|
|
Net cash used in operating activities
|
|
|
|
3,476
|
7,215
|
|
33,310
|
|
Purchase of property, plant and equipment
|
|
-
|
967
|
|
1,326
|
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. As of March 31, 2012, we
had cash and cash equivalents of $20.8 million and working capital of
$29.1 million.
The Company is party to a loan and security agreement,
as amended, (the Loan Agreement) with Silicon Valley Bank (SVB) providing the
Company with access to up to $15,000,000 of financing in the form of (i) revolving loans, (ii) letters of
credit, (iii) foreign exchange contracts and (iv) cash management services such
as merchant services, direct deposit of payroll, business credit card and check
cashing services.
Advances
under the Loan Agreement cannot exceed a borrowing base limit calculated using
(A) an advanced rate of 80% on the Company's eligible accounts receivable and
(B) an advanced rate of 25% on the Company's eligible inventory (subject to a
limit of the lesser of (a) $3 million and (b) 30% of all outstanding advances),
subject to certain reserves established by SVB and other adjustments.
Interest
on advances of credit under the Loan Agreement for: (i) financed accounts
receivables are equal to (a) SVBs prime rate, which is currently 3.25% per
annum, plus 3.0% per annum or (b) if the Company maintains at all times during
any month an adjusted quick ratio of 2.0 to 1.0, then SVBs prime rate plus
1.50% per annum; and (ii) financed inventory is equal to (a) SVBs prime rate
plus 5.25% per annum or (b) if the Company maintains at all times during any
month an adjusted quick ratio of 2.0 to 1.0, then SVBs prime rate plus 3.25%
per annum. The minimum monthly interest charge is $6,000 per month. The Loan Agreement
will be used by the Company to support its current working capital needs.
The
Loan Agreement is secured by substantially all of the Company's properties,
rights and assets, including substantially all of its equipment, inventory,
receivables, intellectual property and general intangibles.
The
Loan Agreement includes customary representations and warranties for credit
facilities of this type. In addition, the Loan Agreement contains a number of
covenants that will impose significant operating and financial restrictions on
the Company's operations, including restrictions pertaining to, among other
things: (i) the condition of inventory; (ii) maintenance of an adjusted quick
ratio of at least 1.50 to 1.0; (iii) intellectual property right protection and
registration; (iv) dispositions of assets; (v) changes in business, management,
ownership or business locations; (vi) mergers, consolidations or acquisitions;
(vii) incurrence or assumption of indebtedness; (viii) incurrence of liens on
any of the Company's property; (ix) paying dividends or making distributions
on, or redemptions, retirements or repurchases of, capital stock; (x)
transactions with affiliates; and (xi) payments on or amendments to
subordinated debt. As of March 31, 2012 the Company is in compliance with
these covenants.
Table of
Contents
The
Loan Agreement also contains events of default customary for credit facilities
of this type with, in some cases, corresponding grace periods, including, (i)
failure to pay any principal or interest when due, (ii) failure to comply with
covenants, (iii) any material adverse change occurring, (iv) an attachment,
levy or restraint on our business, (v) certain bankruptcy or insolvency events
, (vi) payment defaults relating to, or acceleration of, other indebtedness or
that could result in a material adverse change to the Company's business, (vii)
the Company or its subsidiaries becoming subject to judgments, claims or
liabilities in an amount individually or in aggregate in excess of $150,000
(viii) any misrepresentations, or (ix) any revocation, invalidation, breach or
invalidation of any subordinated debt.
The
Loan Agreement will expire on March 29, 2013. The Loan Agreement may be
terminated prior to March 29, 2013; however, the Company would be required to
pay a $150,000 early termination fee in connection with a termination (i) by
the Company for any reason or (ii) by SVB upon notice and after the occurrence
and during the continuance of an event of default. At March 31, 2012 there
were no borrowings outstanding.
During the three months ended March 31, 2012, cash used
for operating activities was $3.5 million, consisting primarily of a net loss
of $6.6 million, offset by changes in operating assets and liabilities of $2.7
million, and net non-cash expenses in the amount of $0.4 million, including $1.1
million for amortization and depreciation, $0.5 million for stock based
compensation, and a $1.2 million reduction for the change in fair value of
common stock warrant liability. Cash provided by investing activities for the
three months ended March 31, 2012 was $57,000, consisting of proceeds from the
disposal of property, plant and equipment. Cash provided by financing
activities for the three months ended March 31, 2012 was approximately $10.4
million consisting primarily of $17.7 million in proceeds from the public
offering offset by $1.9 million in public offering costs and $5.4 million in
repayment of borrowings under line of credit.
Income Taxes
Under
Internal Revenue Code (IRC) Section 382, the use of net operating loss carry-forwards,
capital loss carry-forwards and other tax credit carry-forwards 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 five percent
stockholders a change of ownership has occurred under the provisions of IRC
Section 382, the Company's net operating loss, capital loss and tax credit carry-forwards
could be subject to significant IRC Section 382 limitations.
Prior to March 2011, the Company had
approximately $703 million in Federal and state net operating loss carry-forwards
and $15.6 million in Federal research and experimentation tax credit carry-forwards.
A Section 382 ownership change occurred during March 2011 that resulted in
approximately $675 million of Federal and state net operating loss carry-forwards
being subject to IRC Section 382 limitations and as a result of IRC Section 382
limitations, approximately $618 million of the net operating loss carry-forwards
and $15.6 million of the Federal research and experimentation tax credit carry-forwards
will expire prior to utilization. As a result of the IRC Section 382
limitations, these net operating loss and tax credit carry-forwards that will
expire unutilized were not reflected in the Companys gross deferred tax asset
as of December 31, 2011. The ownership change also resulted in Net Unrealized
Built in Losses per IRS Notice 2003-65 which should result in Recognized Built
in Losses during the five year recognition period of approximately $7 million.
This will translate into unfavorable book to tax add backs in the Company's
2011 to 2016 U.S. corporate income tax returns that resulted in a gross
deferred tax liability of $2.6 million at the time of the ownership change and
$1.8 million at December 31, 2011 with a corresponding reduction to the
valuation allowance. This gross deferred tax liability will offset certain
existing gross deferred tax assets (i.e. capitalized research expense). This
had no impact on the Company's current financial position, results of operations,
or cash flows because of the full valuation allowance.
As a result of
certain equity transactions by five percent stockholders, the Company is
continuing to evaluate and determine if an ownership change occurred for IRC
Section 382 purposes during the quarter ending March 31, 2012. If an ownership
change occurred in the quarter ending March 31, 2012, an IRC Section 382
limitation could result in all but approximately $14.9 million of the Company's
Federal and state net operating loss carry-forwards expiring prior to
utilization, which would result in the Companys gross deferred tax asset and
related valuation allowance decreasing by approximately $24.6 million. The
ownership change would also result in Net Unrealized Built in Losses per IRS
Notice 2003-65 which should result in Recognized Built in Losses during the
five year recognition period of approximately $33.6 million. This will
translate into unfavorable book to tax add backs in the Company's 2012 to 2017
U.S. corporate income tax returns that would result in a gross deferred tax
liability of $12.8 million at the time of the ownership change with a
corresponding reduction to the valuation allowance. This gross deferred tax
liability will offset certain existing gross deferred tax assets (i.e. capitalized
research expense).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 during the quarter ending March 31, 2012
and expects to complete that study during the quarter ended June 30, 2012.
Critical
Accounting Policies and Estimates
Managements
discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with U.S. generally accepted accounting principles. The
preparation of these consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities at the date of and during the reporting period. On an on-going
basis, we evaluate our estimates and judgments, including those related to bad
debts, inventories, intangible assets, equity investments, unbilled revenue,
income taxes and contingencies. We base our estimates and judgments on historical
experience and on various other factors and assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Table of
Contents
We
refer to the policies and estimates set forth in the section Managements
Discussion and Analysis of Financial Condition and Results of
OperationsCritical Accounting Estimates of our Annual Report on
Form 10-K for the fiscal year ended December 31, 2011. There have
been no material changes or modifications to the policies since December 31,
2011.
Recent Accounting Pronouncements
A
discussion of recent accounting pronouncements is included in Note 2, Basis of
Presentation, of the unaudited condensed consolidated financial statements in
Part I, Item 1 of this Form 10-Q.
Table of
Contents
Item 3 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, 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.
As of December 31, 2010, all of the Companys
operations had been relocated to the United States. A portion of the Companys
total financial performance for 2011 was attributable to activities related to
the winding up of operations in both Canada and India. Our exposure to changes
in foreign currency rates was primarily related to short-term inter-company
transactions with our previous Canadian and Indian subsidiaries and from client
receivables in different currencies. As exchange rates vary, the Companys
results can be affected.
In addition, the Company may source inventory from
worldwide locations. 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 4 Controls and Procedures
(a)
Evaluation of disclosure controls and procedures
As required by Rule 13a-15(b) under the Securities and
Exchange Act of 1934, our management, including the Chief Executive Officer and
Chief Financial Officer, conducted an evaluation as of the end of the period
covered by this report, of the effectiveness of the Companys disclosure
controls and procedures as defined in Exchange Act Rule 13a-15(e). Based on
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures were effective
at a reasonable assurance level as of the end of the period covered by this
report.
(b)
Changes in internal controls over financial reporting
As required by Rule 13a-15(d) under the Securities
Exchange Act of 1934, our management, including the Chief Executive Officer and
Chief Financial Officer, also conducted an evaluation of the Companys internal
control over financial reporting to determine whether any changes occurred
during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over
financial reporting. Based on that evaluation, there has been no such change
during the period covered by this report.
PART
II.
OTHER INFORMATION
Item 1
Legal Proceedings
None.
Item 1A
- Risk Factors
Part II, Item 1A, Risk Factors of our most recently
filed Annual Report on Form 10-K with the Securities and Exchange Commission
(SEC), filed on March 30, 2012, sets forth information relating to important
risks and uncertainties that could materially adversely affect our business, financial
condition and operating results. Except to the extent that information
disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk
factors (including, without limitation, the matters described in Part I, Item
2, Managements Discussion and Analysis of Financial Condition and Results of
Operations), there have been no material changes to our risk factors disclosed
in our most recently filed Annual Report on Form 10-K. However, those
risk factors continue to be relevant to an understanding of our business,
financial condition and operating results and, accordingly, you should review
and consider such risk factors in making any investment decision with respect
to our securities.
Table of
Contents
Item 2 - Unregistered Sales of Equity Securities
and Use of Proceeds
(a) During the three months ended March 31, 2012,
we issued 40,223 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.
(b)
Not applicable.
(c)
None.
Item 3 Defaults Upon Senior Securities
None.
Item 4 Mine Safety Disclosures
None.
Item 5 Other Information
(a)
None.
(b)
None.
Table of
Contents
Item 6 Exhibits
3.1
|
Amended
and Restated Certificate of Incorporation of Plug Power. (1)
|
|
|
3.2
|
Third
Amended and Restated By-laws of Plug Power Inc. (2)
|
|
|
3.3
|
Certificate of Amendment
to Amended and Restated Certificate of Incorporation of Plug Power Inc. (1)
|
|
|
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. (3)
|
|
|
10.1
|
Second Loan Modification Agreement dated March 30, 2012,
by and between Plug Power Inc. and Silicon Valley Bank. (4)
|
|
|
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. (5)
|
|
|
|
101.INS*
|
|
XBRL
Instance Document (5)
|
|
|
|
101.SCH*
|
|
XBRL
Taxonomy Extension Schema Document (5)
|
|
|
|
101.CAL*
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document (5)
|
|
|
|
101.DEF*
|
|
XBRL
Taxonomy Extension Definition Linkbase Document (5)
|
|
|
|
101.LAB*
|
|
XBRL
Taxonomy Extension Labels Linkbase Document (5)
|
|
|
|
101.PRE*
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document (5)
|
(1) Incorporated by reference to the Companys Form 10-K
for the period ended December 31, 2008.
(2) Incorporated by reference to the Companys current
Report on Form 8-K dated October 28, 2009.
(3) Incorporated by reference to the Companys Registration
Statement on Form 8-A dated June 24, 2009.
(4) Incorporated by reference to the Companys current
Report on Form 8-K dated April 3, 2012.
(5) Filed herewith
* Submitted electronically herewith. Attached as
Exhibit 101 are the following materials from the Companys Quarterly Report on
Form 10-Q for the quarter ended March 31, 2012, formatted in eXtensible
Business Reporting Language (XBRL) and tagged as blocks of text: (i) Condensed
Consolidated Balance Sheets at March 31, 2012 and December 31, 2011; (ii)
Condensed Consolidated Statements of Operations for the Three Months Ended
March 31, 2012 and 2011; (iii) Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2012 and 2011; and (iv) related notes,
tagged as blocks of text. Pursuant to Rule 406T of Regulation S-T this data is
deemed not filed or part of a registration statement or prospectus for purposes
of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not
filed for purposes of section 18 of the Securities and Exchange Act of 1934, as
amended, and otherwise is not subject to liability under these sections.
Table of
Contents
Signatures
Pursuant to requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PLUG
POWER INC.
|
|
|
|
|
Date:
May 15, 2012
|
|
|
|
By:
|
|
/s/
Andrew Marsh
|
|
|
|
|
|
|
|
|
|
Andrew
Marsh
|
|
|
|
|
|
|
|
|
|
President,
Chief Executive Officer and Director (Principal Executive Officer)
|
|
|
|
|
|
|
Date:
May 15, 2012
|
|
|
|
By:
|
|
/s/
Gerald A. Anderson
|
|
|
|
|
|
|
|
|
|
Gerald
A. Anderson
|
|
|
|
|
|
|
|
|
|
Chief
Financial Officer (Principal Financial Officer)
|
|
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