This summary highlights information contained elsewhere in this prospectus and
does not contain all of the information that you should consider in making your
investment decision. Before investing in our common stock, you should carefully
read this entire prospectus, including our financial statements and the related
notes included elsewhere in this prospectus. You should also consider, among
other things, the matters described under Risk Factors and Managements
Discussion and Analysis of Financial Condition and Results of Operations, in
each case appearing elsewhere in this prospectus.
Unless otherwise mentioned or unless the context requires otherwise, all
references to Plug Power, we, us, our, the company or similar
designations refer to Plug Power Inc. and its subsidiaries.
This prospectus includes trademarks, service marks and trade names owned by us
or other companies. All trademarks, service marks and trade names included or
incorporated by reference into this prospectus or any related free writing
prospectus are the property of their respective owners.
PLUG POWER
INC.
Background
We are 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 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, or 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.
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 we will continue to service and support GenSys
and/or GenCore products on a limited basis, our current 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, or OEMs, and
their dealer networks. We sell to businesses, government agencies and commercial
consumers.
Business Strategy
We are committed to developing effective, economical and reliable fuel cell
products and services for businesses, government agencies and commercial
consumers. Building on our substantial fuel cell application and product
integration experience, we are focused on generating strong relationships with
customers who value increased reliability, productivity, energy security and a
sustainable future.
Our business strategy leverages our unique fuel cell application and integration
knowledge to identify early adopter markets for which we can design and develop
innovative systems and customer solutions that provide superior value,
ease-of-use and environmental design.
We have made significant progress in our analysis of the material handling
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.
Our strategy is to focus our resources on the material handling market with our
GenDrive product line, which represents an alternative to lead-acid battery
configurations. Our strategy also includes the following objectives: decrease
product costs by leveraging the supply chain, lower manufacturing costs, improve
system reliability, expand our sales network to effectively reach more of our
targeted customers and provide customers with high-quality products, service and
post-sales support experience.
1
Our longer-term objectives are to deliver economic,
social, and environmental benefits in terms of reliable, clean, cost-effective
fuel cell solutions and, ultimately, sustainability.
We believe continued investment in research and
development is critical to the development and enhancement of innovative
products, technologies and services. In addition to evolving our direct
hydrogen fueled systems, we continue to capitalize on our investment and
expertise in power electronics, controls, and software design.
Products
We sell and continue to develop a range of fuel cell
products to replace lead-acid batteries in material handling vehicles and
industrial trucks for some of North Americas largest distribution and
manufacturing businesses. Our primary product line is GenDrive, a hydrogen
fueled PEM fuel cell system to provide power to industrial vehicles. We are
focusing our efforts on material handling applications (forklifts) at multi-shift
high volume manufacturing and high throughput distribution sites where our
products and services provide a unique combination of productivity, flexibility
and environmental benefits. In October, 2011 we introduced our next generation
GenDrive products. These next generation fuel cell units include a
simplified architecture featuring 30% fewer components and a scalable design
for low power applications, giving customers greater flexibility in managing
their deployments. By the third quarter of 2012, the majority of units
produced and shipped were based on the simplified architecture. During the fiscal
year ended December 31, 2012, we received new orders from Stihl, Mercedes Benz,
Lowes, Carters and Ace Hardware. We also experienced add-on orders from
Walmart, P&G, Coca-Cola, Sysco, Wegmans, Kroger and BMW.
We continue to develop and monitor future iterations of
our products aligned with our evolving product roadmap. According to Fuel
Cells Bulletin, an industry publication, we had 85% world-wide market share in
the fuel cell powered material handling industry as of September 2010.
Markets/Geography & Order Status
Our commercial sales for GenDrive products are in the
material handling market, which primarily consist of large fleet, multi-shift
operations in high-volume manufacturing and high-throughput distribution
centers. In 2012, all of our GenDrive product installations were in North
America.
We shipped 873 units and received 353 orders for our GenDrive product during the nine months ended September 30, 2012, representing
$9.7
million in orders from material handling customers. We
shipped 1,024 units and received 2,503 orders for our GenDrive product during
the year ended December 31, 2011, representing $46.1 million in orders from
material handling customers; $18.1 million of which were received during the
fourth quarter. Backlog on December 31, 2012 is estimated to have been
1,319 units, representing approximately
$26.2 million in value. Backlog on December 31, 2011 was 1,969
units representing approximately $36.0 million in value. Backlog on December
31, 2010 was 527 units representing approximately $12.8 million in value
including approximately $700,000 related to 20 units that were awarded under a
government project.
The following table sets forth certain shipment, order and
backlog information (in units):
|
|
Nine Months
ended
September 30
|
|
|
|
|
Product Shipments
|
552
|
1,024
|
873
|
Lease Shipments
|
98
|
-
|
-
|
Cancellations/Adjustments
|
(20)
|
(37)
|
-
|
Orders
|
543
|
2,503
|
353
|
Backlog
|
527
|
1,969
|
1,449
|
We have accepted orders that require certain conditions or
contingencies to be satisfied prior to shipment, some of which are outside of
our control. Historically, shipments made against these orders generally occur
between ninety days and twenty-four months from the date of acceptance of the
order.
The assembly of GenDrive products that we sell is
performed at our manufacturing facility in Latham, New York. Currently, the
supply and manufacture of several critical components used in our products are
performed by sole-sourced third-party vendors in the U.S., Canada and China.
2
We intend to focus our efforts on developing,
manufacturing and selling our GenDrive products and do not expect to develop or
manufacture GenSys or GenCore products in the near term. We took no GenCore or GenSys orders in 2012 and did not ship any of these products in
2012.
Selected Risk Factors
Our business is subject to many risks and uncertainties of
which you should be aware before you decide to invest in our common stock
and/or warrants to purchase common stock. These risks are discussed more fully
under Risk Factors in this prospectus. Some of these risks are:
|
|
We have
incurred losses, anticipate continuing to incur losses and might never achieve
or maintain profitability.
|
|
|
We do not have
enough cash to fund our operations to profitability and if we are unable to
secure additional capital, we may need to reduce and/or cease our operations.
|
|
|
Despite this
offering, we will still require significant additional capital funding and
such capital may not be available to us.
|
|
|
The recent
restructuring plan we adopted may adversely impact managements ability to
meet financial reporting requirements.
|
|
|
We do not have
extensive experience in manufacturing and marketing our products and, as a
result, may be unable to sustain a profitable commercial market for our new
and existing products.
|
|
|
Certain
GenDrive component quality issues have resulted in adjustments to our
warranty reserves, which negatively impacted our results and delayed our new
order momentum, and unanticipated future product reliability and quality
issues could impair our ability to service long term warranty and maintenance
contracts profitably.
|
|
|
Our purchase
orders may not ship, be commissioned or installed, or convert to revenue, and
our pending orders may not convert to purchase orders, which may have a
material adverse effect on our revenue and cash flow.
|
|
|
If our stock
price continues to remain below $1.00, our common stock may be subject to
delisting from The NASDAQ Stock Market.
|
|
|
Our stock
price has been and could remain volatile, which could further adversely
affect the market price of our stock, our ability to raise additional capital
and/or cause us to be subject to securities class action litigation.
|
|
|
Two of our
stockholders, JSC INTER RAO Capital, or INTER RAO Capital, and affiliates
and associates of AWM Investment 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., or, collectively,
SSF, have substantial control over us and could limit our other stockholders
ability to influence the outcome of key transactions, including a change of
control.
|
|
|
The sale by INTER
RAO Capital or SSF of a substantial number of shares of our common stock
could cause the market price of our common stock to decline and adversely
affect our ability to remain listed on an exchange and/or raise capital through
equity offerings.
|
|
|
Investors in
this offering will experience immediate and substantial dilution.
|
|
|
There is no
public market for the warrants to purchase common stock being offered in this
offering.
|
|
|
Holders of our
warrants will have no rights as a common stockholder until such holders
exercise their warrants and acquire our common stock.
|
|
|
The warrants
in this offering may not have any value.
|
3
Recent Developments
NASDAQ Notice
On October 12, 2012, we received a deficiency notice from
The NASDAQ Stock Market, or the NASDAQ, stating that we no longer comply with NASDAQ
Marketplace Rule 5550(a)(2) because the bid price of our common stock closed
below the required minimum $1.00 per share for the previous 30 consecutive
business days. The notice also indicated that, in accordance with Marketplace
Rule 5810(c)(3)(A), we have a period of 180 calendar days, until April 10,
2013, to regain compliance with Rule 5550(a)(2). If at any time before April
10, 2013 the bid price of our common stock closes at $1.00 per share or more
for a minimum of 10 consecutive business days, NASDAQ will notify us that we
have regained compliance with Rule 5550(a)(2). In the event we do not regain
compliance with Rule 5550(a)(2) prior to the expiration of the 180-day period, NASDAQ
will notify us that our common stock is subject to delisting. We may appeal the
delisting determination to a NASDAQ hearing panel and the delisting will be
stayed pending until the panels determination. At such hearing, we would
present a plan to regain compliance and NASDAQ would then subsequently render a
decision. We are currently evaluating our alternatives to resolve the listing
deficiency.
Restructuring
On December 11, 2012, we adopted a restructuring plan to
improve organizational efficiency and conserve working capital needed to
support the growth of our GenDrive business. In doing so, 22 full-time
positions were eliminated at our U.S. facilities. This workforce reduction was
substantially completed on December 13, 2012. As a result of the restructuring,
we expect to reduce annual expenses by $3.0 to $4.0 million.
We currently estimate that we will incur pre-tax
restructuring charges in the fourth quarter resulting from the restructuring of
approximately $600,000 related to severance pay and other related costs. We
expect to pay the majority of these restructuring charges within the next few
months. The estimates of total charges and cash expenditures that we expect to
incur in connection with the restructuring, and the timing thereof, is subject
to a number of assumptions, and actual results may materially differ from those
stated above.
Company and Other Information
We were organized in the State of Delaware on June 17,
1997. 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., or Cellex, and General
Hydrogen Corporation, or General Hydrogen. Through these acquisitions, and our
continued GenDrive product development efforts, we became the first fuel cell
company to offer a complete suite of Class 1 - sit-down counterbalance trucks,
Class 2 stand-up reach trucks and Class 3 rider pallet trucks products.
Effective April 1, 2010, we were no longer considered a
development stage enterprise since our principal operations began to provide
more than insignificant revenues as we received orders from repeat customers,
increased our customer base and had a significant backlog. Prior to April 1,
2010, we were considered a development stage enterprise because substantially
all of our resources and efforts were aimed at the discovery of new knowledge
that could lead to significant improvement in fuel cell reliability and
durability, and the establishment, expansion and stability of markets for our
products.
Our principal executive offices are located at 968
Albany-Shaker Road, Latham, New York, 12110, and our telephone number is (518)
782-7700. Our corporate website address is www.plugpower.com. The information
contained on, or accessible through, our website is not part of this
prospectus.
4
Common stock
offered by us
|
|
shares
|
Common stock
to be outstanding after this offering
|
|
shares
|
Warrants we
are offering
|
|
We are offering warrants to purchase
up to shares of common stock, which will be exercisable
during the period commencing on the date of original issuance and ending five
years from such date at an exercise price of $ per share of common
stock. This prospectus also relates to the offering of the shares of common
stock issuable upon exercise of the warrants. There is no established
public trading market for the warrants, and we do not expect a market to
develop. In addition, we do not intend to apply for listing of the warrants
on any national securities exchange or other nationally recognized trading
system.
|
Over-allotment
option to purchase additional shares
|
|
The underwriter has an option to
purchase a maximum of additional shares
of common stock and/or warrants to purchase a maximum of shares of
common stock from us. The underwriter can exercise this option at any time
within 45 days from the date of this prospectus.
|
Use of
Proceeds
|
|
We estimate that we will receive net
proceeds from the sale of shares of our common stock and warrants to purchase
common stock in this offering of approximately
$ million, after deducting
underwriting discounts and commissions and estimated offering expenses
payable by us. We intend to use the proceeds to be used for working capital
and other general corporate purposes including, among other things, capital
expenditures. See Use of Proceeds in this prospectus.
|
NASDAQ Stock
Market symbol
|
|
PLUG
|
Risk Factors
|
|
You should read carefully Risk
Factors in this prospectus for a discussion of factors that you should
consider before deciding to invest in shares of our common stock and warrants
to purchase common stock.
|
The number of shares of
common stock to be outstanding after this offering is based on 38,197,255
shares outstanding as of September 30, 2012 and excludes:
|
|
|
1,999,521 shares of common stock issuable upon exercise of outstanding
options as of September 30, 2012 at a weighted average exercise price of
$9.01 per share (of which options to acquire 665,305 shares of common stock
are vested as of September 30, 2012);
|
|
|
|
275,262 shares of common stock issuable upon the exercise of unvested
restricted stock awards outstanding as of September 30, 2012;
|
|
|
|
5,485,229 shares of our common stock reserved for future issuance under our
equity incentive plans as of September 30, 2012;
|
|
|
|
9,421,008 shares of common stock issuable upon the exercise of warrants
outstanding as of September 30, 2012, which number of shares will increase
as a result of the offering due to anti-dilution provisions contained in
such warrants; and
|
|
|
|
shares of common stock issuable upon the exercise of the warrants to be
sold in this offering.
|
Except as otherwise
indicated, all information in this prospectus assumes no exercise by the
underwriter of its over-allotment option.
5
The following table presents our summary consolidated
financial data for the periods indicated. The consolidated statement of
operations
and comprehensive income (loss)
data for the years ended December 31, 2009, 2010 and 2011 and the
balance sheet data as of December 31, 2010 and 2011 have been derived from our
audited consolidated financial statements included elsewhere in this
prospectus. The balance sheet data as of December 31, 2009 and September
30, 2011 have been derived
from our audited consolidated financial statements and unaudited interim
consolidated financial statements, respectively, that are not included in this
prospectus. The consolidated statement of operations
and comprehensive income (loss)
data for the nine months
ended September 30, 2011 and 2012 and the consolidated balance sheet data as of
September 30, 2012 have been derived from our unaudited interim consolidated
financial statements that are included elsewhere in this prospectus. The
unaudited consolidated financial statements have been prepared on the same
basis as the audited consolidated financial statements, and in the opinion of
management, reflect all adjustments of a normal recurring nature considered
necessary to present fairly our financial position for such periods. Our historical results are not necessarily indicative of
future operating results, and the interim results set forth below are not
necessarily indicative of expected results for the year ended December 31, 2012
or for any future period.
Effective January 1, 2012, the company adopted the Financial
Accounting Standards Boards Accounting Standards Update (ASU) No. 2011-5,
Comprehensive Income (Topic 220): Presentation of Comprehensive Income, as
amended by ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective
Date for Amendments to the Presentation of Reclassifications of Items Out of
Accumulated Other Comprehensive Income in Accounting Standards Update No.
2011-05. These updates revise the manner in which entities present
comprehensive income in their financial statements. The statement of
comprehensive income (loss) data presented below revises historical information
to illustrate the new presentation required by this pronouncement for those
periods prior to adoption.
You should read this summary consolidated financial
data in conjunction with the sections entitled Capitalization, Selected
Consolidated Financial Data and Managements Discussion and Analysis of
Financial Condition and Results of Operations and our consolidated financial
statements and related notes, all included elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share data)
|
Consolidated
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
Product
and service revenue......................................
|
|
$4,833
|
|
$15,739
|
|
$23,223
|
|
$11,927
|
|
$18,712
|
Research
and development contract revenue........
|
|
7,460
|
|
3,598
|
|
3,886
|
|
3,342
|
|
1,475
|
Licensed
technology revenue....................................
|
|
|
|
|
|
|
|
489
|
|
-
|
Total revenue........................................................
|
|
12,293
|
|
19,473
|
|
27,626
|
|
15,758
|
|
20,187
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of product and service revenue........................
|
|
7,246
|
|
23,111
|
|
30,670
|
|
19,188
|
|
28,552
|
Cost of research and development contract
revenue............................................................................
|
|
12,433
|
|
6,371
|
|
6,232
|
|
5,506
|
|
2,390
|
Research
and development expense........................
|
|
16,324
|
|
12,901
|
|
5,656
|
|
3,648
|
|
4,090
|
Selling,
general and administrative expenses..........
|
|
15,427
|
|
25,572
|
|
14,546
|
|
11,051
|
|
10,556
|
Gain
on sale of assets..................................................
|
|
-
|
|
(3,217)
|
|
(673)
|
|
(673)
|
|
-
|
Amortization
of intangible assets.............................
|
|
2,132
|
|
2,264
|
|
2,322
|
|
1,755
|
|
1,727
|
Other
income (expense), net......................................
|
|
|
|
|
|
|
|
|
|
|
Net loss..................................................................
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share, basic and diluted..............................
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding...................................................................
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of
Comprehensive Income (Loss) Data:
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
(40,709)
|
|
$
(46,959)
|
|
$(27,454)
|
|
$(20,286)
|
|
$(23,388)
|
Other
comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain
(loss)................
|
|
1,294
|
|
277
|
|
(56)
|
|
(74)
|
|
107
|
Unrealized
gain (loss) on
available-for-sale securities....................................
|
|
(131)
|
|
(114)
|
|
19
|
|
19
|
|
-
|
Comprehensive
Loss......................................................
|
|
$ (39,546)
|
|
$ (46,796)
|
|
$(27,491)
|
|
$(20,341)
|
|
$(23,281)
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data:
(
at
end of the period
)
|
|
|
|
|
|
|
|
|
|
|
Unrestricted cash, cash equivalents and available-
for-sale securities..........................................................
|
|
$62,541
|
|
$21,359
|
|
$13,857
|
|
$22,802
|
|
$9,461
|
Trading securities auction rate debt securities.....
|
|
53,397
|
|
-
|
|
-
|
|
-
|
|
-
|
Total assets...................................................................
|
|
164,185
|
|
59,177
|
|
55,656
|
|
53,312
|
|
45,567
|
Borrowings under line of credit..................................
|
|
59,375
|
|
-
|
|
5,405
|
|
-
|
|
1,000
|
Current portion of long-term obligations.................
|
|
533
|
|
-
|
|
-
|
|
-
|
|
-
|
Long-term obligations.................................................
|
|
2,426
|
|
3,141
|
|
9,577
|
|
5,768
|
|
6,426
|
Stockholders' equity....................................................
|
|
88,269
|
|
42,913
|
|
29,036
|
|
35,728
|
|
23,045
|
Working capital............................................................
|
|
60,009
|
|
25,556
|
|
22,452
|
|
24,543
|
|
15,584
|
Investing in our common stock and warrants involves a high
degree of risk. You should carefully consider the following risks and
uncertainties, together with all other information in this prospectus,
including our consolidated financial statements and related notes, before
investing in our common stock. Any of the risk factors we describe below could
adversely affect our business, financial condition or results of operations.
The market price of our common stock could decline if one or more of these
risks or uncertainties actually occurs, causing you to lose all or part of the
money you paid to buy our common stock and warrants. Certain statements below
are forward-looking statements. See Forward-Looking Statements in this
prospectus.
Risks Related to our Business and our Industry
We have incurred losses, anticipate continuing to incur losses and might
never achieve or maintain profitability.
We have not achieved profitability in any quarter since
our formation and we will continue to incur net losses until we can produce
sufficient revenue to cover our costs. Our net losses were approximately $60.6
million in 2007, $121.7 million in 2008, $40.7 million in 2009, $47.0 million
in 2010, $27.5 million in 2011 and $23.4 million for the nine months ended
September 30, 2012. As of September 30, 2012, we had an accumulated deficit of $778.2
million. We anticipate that we will continue to incur losses until we can
produce and sell our products on a large-scale and cost-effective basis.
Substantially all of our losses resulted from costs incurred in connection with
our manufacturing operations, research and development expenses and from
general and administrative costs associated with our operations. We cannot
guarantee when we will operate profitably, if ever. In order to achieve profitability,
among other factors, management must successfully execute our planned path to
profitability in the early adoption markets on which we are focused, the
hydrogen infrastructure that is needed to support our growth readiness and cost
efficiency must be available and cost efficient, we must: continue to shorten
the cycles in our product roadmap with respect to: product reliability and
performance
that
our customers expect and successful
introduction of our products into the market,
we must
accurately
evaluate our markets for, and react to, competitive threats in both other
technologies (such as advanced batteries) and our technology field, and we must
continue to lower our products build costs and lifetime service costs.
If we are unable to successfully take these steps, we may never operate
profitably, and, even if we do achieve profitability, we may be unable to
sustain or increase our profitability in the future.
We do not have enough cash to fund our operations to profitability and if
we are unable to secure additional capital, we may need to reduce and/or cease
our operations.
We have experienced recurring operating losses and as of
September 30, 2012, we had an accumulated deficit of approximately $778.2
million. Substantially all of our accumulated deficit has resulted from costs
incurred in connection with our operating expenses, research and development
expenses and from general and administrative costs associated with our
operations. On September 30, 2012, we had cash and cash equivalents of $9.5
million and net working capital of $15.6 million. This compares to $22.8
million and $24.5 million, respectively, at September 30, 2011. We currently
estimate that we had, as of December 31, 2012, cash and cash equivalents of
approximately $9.4 million and accounts payable of approximately $3.5 million.
We also estimate that as of December 31, 2012, of our total accounts
payable, approximately $1.6 million were more than 30 days past due and approximately
$0.3 million were more than 120 days past due.
In addition, based
on the borrowing base calculation and our outstanding loan balance, we
currently have no availability under our loan facility with Silicon Valley Bank.
To date, we have funded our operations primarily through public and private
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. 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.
Despite this
offering, we will still require significant additional capital funding and such
capital may not be available to us.
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. If we are unable to fund our
operations without additional external financing and therefore cannot sustain
future operations, we may be required to delay, reduce and/or cease our
operations and/or seek bankruptcy protection.
7
Alternatives we would consider for additional funding
include additional equity or debt financings, a sale-leaseback of our real
estate, or licensing of our technology. In addition to raising capital, we may
also consider strategic alternatives including business combinations, strategic
alliances or joint ventures. If we are unable to obtain additional capital in
2013, we may not be able to sustain our future operations and may be required
to delay, reduce and/or cease our operations and/or seek bankruptcy protection.
The additional capital from the proceeds we receive in this offering is
expected to fund our operations through the remainder of our 2013
fiscal year. 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 additional equity or
debt financings, strategic alternatives or otherwise, there can be no assurance
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. Similarly, if our common stock is delisted
from the NASDAQ Capital Market, it may limit 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.
The recent restructuring plan we adopted may adversely impact managements
ability to meet financial reporting requirements.
On December 11, 2012, we adopted a restructuring plan to
improve organizational efficiency and conserve working capital needed to
support the growth of our GenDrive business. In doing so, 22 full-time
positions were eliminated at our U.S. facilities, including positions in our
finance department. This workforce reduction was substantially completed
on December 13, 2012. As a result of the restructuring and associated
reduced headcount, going forward we may lack the resources to adequately meet
our financial reporting requirements.
We do not have extensive experience in manufacturing and marketing our
products and, as a result, may be unable to sustain a profitable commercial
market for our new and existing products.
From 1997 to 2008, we focused primarily on research and
development of fuel cell systems. In the latter half of 2008, we shifted our
focus to viable commercialization of our fuel cell products. While we
have been manufacturing our products in small quantities for several years, we
do not have extensive experience in mass-manufacturing and marketing our
products. We do not know whether or when we will be able to develop efficient,
low-cost manufacturing capabilities and processes that will enable us to
manufacture our products in commercial quantities while meeting the quality,
price, engineering, design, and production standards required to profitably
market our products. Even if we are successful in developing our manufacturing
capabilities and processes, we do not know whether we will do so in time to
meet our product commercialization schedule or to satisfy the requirements of
our distributors or customers. Before investing in our common stock, you should
consider the challenges, expenses and difficulties that we will face as an
emerging technology company seeking to sustain a viable commercial market for
our new and existing products. If we are unable to sustain a viable commercial
market for our products, that failure would have a material adverse effect on
our business, prospects, financial condition and results of operations.
Our purchase orders may not ship, be commissioned or installed, or
convert to revenue, and our pending orders may not convert to purchase orders,
which may have a material adverse effect on our revenue and cash flow.
Some of the orders we accept from customers require
certain conditions or contingencies to be satisfied prior to shipment or prior
to commissioning or installation, some of which are outside of our control.
Historically, shipments made against these orders have generally occurred
between ninety days and twenty-four months from the date of acceptance of
the order. Orders received in the nine months ended September 30, 2012 were
353 units for approximately $10.0 million in value. Backlog on September 30,
2012 was $25.5 million, with approximately $4.3 million of this backlog older
than 12 months. The time periods from receipt of an order to shipment date and
installation vary widely and are determined by a number of factors, including
the terms of the customer contract and the customers deployment plan. There
may also be product redesign or modification requirements that must be
satisfied prior to shipment of units under certain of our agreements. If the
redesigns or modifications are not completed, some or all of our orders may not
ship or convert to revenue. We also have publicly discussed anticipated, pending
orders with prospective customers; however, those prospective customers may
require certain conditions or contingencies to be satisfied prior to issuing a
purchase order to us, some of which are outside of our control. Such conditions
or contingencies that may be required to be satisfied before we receive a
purchase order may include, but are not limited to, successful product
demonstrations or field trials. Some conditions or contingencies that are
out of our control may include, but are not limited to, government tax policy,
government funding programs, and government incentive programs.
Additionally, some conditions and contingencies may extend for several years.
We may have to compensate customers, by either reimbursement, forfeiting portions
of associated revenue, or other methods depending on the terms of the customer
contract, based on the failure on any of these conditions or
contingencies. This could have an adverse impact on our revenue and cash
flow.
8
Certain GenDrive component quality issues have resulted in adjustments to
our warranty reserves, which negatively impacted our results and delayed our
new order momentum, and unanticipated future product reliability and quality
issues could impair our ability to service long term warranty and maintenance
contracts profitably.
Isolated quality issues have arisen with respect to
certain components in our next-generation GenDrive units that are currently being used at
customer sites. The product and service revenue contracts we entered into
generally provide a one-to-two-year product warranty to customers from date of
installation. We have had to retrofit the units subject to component quality
issues with replacement components that will improve the reliability of our
next-generation GenDrive products for those customers. We have estimated the costs of
satisfying those warranty claims and have recorded a reserve adjustment of $3.3
million in the third quarter of 2012, as reported in our Quarterly Report on
Form 10-Q for the quarter ended September 30, 2012, and as a result, our product
and warranty reserve as of September 30, 2012 is approximately $3.0 million and
is included in product warranty reserve in the consolidated balance sheets. However, if any unanticipated additional
quality issues or warranty claims arise, additional material charges may be incurred
in the future. We continue to work with
our vendors on these component issues to recover charges taken and improve
quality and reliability of components to prevent a reoccurrence of the isolated
quality issues we have experienced. However, any liability for damages
resulting from malfunctions or design defects could be substantial and could
materially adversely affect our business, financial condition, results of
operations and prospects. In addition, a well-publicized actual or perceived
problem could adversely affect the markets perception of our products
resulting in a decline in demand for our products and could divert the
attention of our management, which may materially and adversely affect our
business, financial condition, results of operations and prospects.
Our GenDrive product depends on the availability of hydrogen and our
lack of control over or limited availability of such fuel may adversely impact
our sales and product deployment.
Our products depend largely on the availability of natural
gas and hydrogen gas. We are dependent upon hydrogen suppliers for success with
the profitable commercialization of our GenDrive product. Although we
will continue to work with hydrogen suppliers to mutually agree on terms for
our customers, including, but not limited to, price of the hydrogen molecules,
liquid hydrogen, hydrogen infrastructure and service costs, to the benefit of
our GenDrive product value proposition, ultimately we have no control over such
third parties. If these fuels are not readily available or if their prices are
such that energy produced by our products costs more than energy provided by
other sources, then our products could be less attractive to potential users
and our products value proposition could be negatively affected. If
hydrogen suppliers elect not to participate in the material handling market,
there may be an insufficient supply of hydrogen for this market that could
negatively affect our sales and deployment of our GenDrive product.
Unless we lower the cost of our GenDrive products and demonstrate their
reliability, our product sales could be adversely affected.
The initial capital cost of our GenDrive products is
currently higher than many established competing technologies. If we are unable
to successfully complete the development of GenDrive or any future products we
develop that are competitive with competing technologies in terms of price,
reliability and longevity, customers will be unlikely to buy our products. The
profitability of our products depends largely on material and manufacturing costs.
We cannot guarantee that we will be able to lower these costs to the level
where we will be able to produce a competitive product or that any product
produced using lower cost materials and manufacturing processes will not suffer
from a reduction in performance, reliability and longevity.
Our GenDrive products face intense competition and we may be unable to
compete successfully.
The markets for energy products are intensely competitive.
Some of our competitors in the fuel cell sector and in incumbent technologies
are much larger than we are and may have the manufacturing, marketing and sales
capabilities to complete research, development and commercialization of
profitable, commercially viable products more quickly and effectively than we
can. There are many companies engaged in all areas of traditional and
alternative energy generation in the United States, Canada and abroad,
including, among others, major electric, oil, chemical, natural gas, battery,
generator and specialized electronics firms, as well as universities, research
institutions and foreign government-sponsored companies. These firms are
engaged in forms of power generation such as solar and wind power,
reciprocating engines and micro turbines, advanced battery technologies,
generator sets, fast charged technologies and other types of fuel cell
technologies. Many of these entities have substantially greater financial,
research and development, manufacturing and marketing resources than we
do. Technological advances in alternative energy products, battery
systems or other fuel cell technologies may make our products less attractive
or render them obsolete.
9
We depend on only a few customers for the majority of our revenues and the
loss of any one or more of these customers, or a significant loss, reduction or
rescheduling of orders from any of these customers, would have a material
adverse effect on our business, financial condition and results of operations.
We sell most of our products to a small number of
customers, and while we are continually seeking to expand our customer base, we
expect this will continue for the next several years. As of December 31,
2011, five of our customers comprised 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 that amount. For the year ended December 31, 2011,
contracts with three customers comprise approximately 39.0% of total
consolidated revenues, with each customer individually representing 14.5%,
14.0% and 10.5%, of total consolidated revenues, respectively.
For
the nine months ended September 30, 2012, contracts with three customers
comprise approximately 55.5% of total consolidated revenues, with each customer
representing 25.8%, 19.4%, and 10.3%, respectively.
Any decline
in business with these small numbers of customers could have an adverse impact
on our business, financial condition and results of operations. Our future
success is dependent upon the continued purchases of our products by a small
number of customers. Any fluctuations in demand from such customers or other
customers may negatively impact our business, financial condition and results
of operations. If we are unable to broaden our customer base and expand
relationships with potential customers, our business will continue to be
impacted by unanticipated demand fluctuations due to our dependence on a small
number of customers. Unanticipated demand fluctuations can have a negative
impact on our revenues and business, and an adverse effect on our business,
financial condition and results of operations. In addition, our dependence on a
small number of major customers exposes us to numerous other risks,
including: a slowdown or delay in a customers deployment of our products
could significantly reduce demand for our products; reductions in a single
customers forecasts and demand could result in excess inventories; the current
or future economic conditions could negatively affect one or more of our major
customers and cause them to significantly reduce operations, or file for
bankruptcy; consolidation of customers can reduce demand as well as increase
pricing pressure on our products due to increased purchasing leverage; each of
our customers has significant purchasing leverage over us to require changes in
sales terms including pricing, payment terms and product delivery schedules;
and concentration of accounts receivable credit risk, which could have a
material adverse effect on our liquidity and financial condition if one of our
major customers declared bankruptcy or delayed payment of their receivables.
The loss of one or more of our key supply partners could have a material
adverse effect on our business.
We have certain key suppliers, such as Ballard and Air
Squared, that we rely on for critical components in our products and there are
numerous other components for our products that are sole sourced. A suppliers
failure to develop and supply components in a timely manner or at all, or to
develop or supply components that meet our quality, quantity or cost
requirements, or our inability to obtain substitute sources of these components
on a timely basis or on terms acceptable to us, could harm our ability to
manufacture our products. For example, in the
fourth quarter of 2012, Ballard had temporarily stopped shipping fuel
cell stacks for our GenDrive product line due to a dispute with us, but we have
since resolved this dispute and we are once again in good standing with Ballard
as our supplier. In addition, to the extent that our supply partners use
technology or manufacturing processes that are proprietary, we may be unable to
obtain comparable components from alternative sources.
A robust
market for our GenDrive products may never
develop or may take longer to develop than we anticipate.
We believe we have identified viable markets for our
GenDrive products, however our products represent emerging technologies, and we
do not know the extent to which our targeted customers will want to purchase
them and whether end-users will want to use them. If a sizable market fails to
develop or develops more slowly than we anticipate, we may be unable to recover
the losses we will have incurred to develop our products and may be unable to
achieve profitability. The development of a sizable market for our products may
be impacted by many factors which are out of our control, including: the cost
competitiveness of our products; the future costs of natural gas, hydrogen and
other fuels expected to be used by our products; consumer reluctance to try a
new product; consumer perceptions of our products safety; regulatory
requirements; barriers to entry created by existing energy providers; and the
emergence of newer, more competitive technologies and products.
We may be unable to establish or maintain relationships with third parties
for certain aspects of continued product development, manufacturing,
distribution and servicing and the supply of key components for our products.
We will need to maintain and may need to enter into
additional strategic relationships in order to complete our current product
development and commercialization plans. We will also require partners to
assist in the sale, servicing and supply of components for our anticipated
products, which are in development. If we are unable to identify or enter into
satisfactory agreements with potential partners, including those relating to
the distribution, service and support of our anticipated products, we may not
be able to complete our product development and commercialization plans on
schedule or at all. We may also need to scale back these plans in the absence
of needed partners, which would adversely affect our future prospects for
development and commercialization of future products. In addition, any
arrangement with a strategic partner may require us to issue a significant
amount of equity securities to the partner, provide the partner with
representation on our board of directors and/or commit significant financial
resources to fund our product development efforts in exchange for their
assistance or the contribution to us of intellectual property. Any such
issuance of equity securities would reduce the percentage ownership of our then
current stockholders. While we have entered into relationships with suppliers
of some key components for our products, we do not know when or whether we will
secure supply relationships for all required components and subsystems for our
products, or whether such relationships will be on terms that will allow us to
achieve our objectives. Our business prospects, results of operations and
financial condition could be harmed if we fail to secure relationships with
entities which can develop or supply the required components for our products
and provide the required distribution and servicing support. Additionally, the
agreements governing our current relationships allow for termination by our
partners under certain circumstances, some of which are beyond our control. If
any of our current strategic partners were to terminate any of its agreements with
us, there could be a material adverse impact on the continued development and
profitable commercialization of our products and the operation of our business,
financial condition, results of operations and prospects.
10
We face risks associated with our plans to market, distribute and service
our GenDrive products internationally.
We intend to market, distribute, sell and service our
GenDrive products internationally. We have limited experience developing and
manufacturing our products to comply with the commercial and legal requirements
of international markets. Our success in international markets will depend, in
part, on our ability and that of our partners to secure relationships with
foreign sub-distributors, and our ability to manufacture products that meet
foreign regulatory and commercial requirements. Additionally, our planned
international operations are subject to other inherent risks, including
potential difficulties in enforcing contractual obligations and intellectual
property rights in foreign countries and fluctuations in currency exchange
rates. Also, to the extent our operations and assets are located in foreign
countries, they are potentially subject to nationalization actions over which
we will have no control.
For example, we have formed a joint venture company based
in France with Axane, S.A. under the name Hypulsion to develop and sell
hydrogen fuel cell systems for the European material handling market.
However, for the reasons discussed above, Hypulsion may not be able to accomplish
its goals or become profitable.
Delays in our product development could have a material impact on the
profitable commercialization of our products.
If we experience delays in meeting our development goals,
our products exhibit technical defects, or if we are unable to meet cost or
performance goals, including power output, useful life and reliability, the
profitable commercialization of our products will be delayed. In this event,
potential purchasers of our products may choose alternative technologies and
any delays could allow potential competitors to gain market advantages. We
cannot assure you that we will successfully meet our commercialization schedule
in the future.
We may enter into contracts for products that have not yet been developed
or produced, which may give such customers the right to terminate their
agreements with us.
We may enter into contracts with our customers for certain
products that have not been developed or produced. There can be no
assurance that we will complete the development of these products and meet the
specifications required to fulfill customer agreements and deliver products on
schedule. Pursuant to such agreements, the customers would have the right to
provide notice to us if, in their good faith judgment, we have materially
deviated from such agreements. Should a customer provide such notice, and we
cannot mutually agree to a modification to the agreement, then the customer may
have the right to terminate the agreement, which could adversely affect our
future business.
We may never complete the research and development of certain commercially
viable products, which may adversely affect our revenue, profitability and
result in possible warranty claims.
Other than certain products within our GenCore, GenSys and
GenDrive product families, which we believe to be commercially viable at this
time, we do not know when or whether we will successfully complete research and
development of other commercially viable products. If we are unable to develop
additional commercially viable products, we may not be able to generate
sufficient revenue to become profitable. The profitable commercialization of
our products depends on our ability to reduce the costs of our components and
subsystems, and we cannot assure you that we will be able to sufficiently
reduce these costs. In addition, the profitable commercialization of our
products requires achievement and verification of their overall reliability,
efficiency and safety targets, and we cannot assure you that we will be able to
develop, acquire or license the technology necessary to achieve these targets.
We must complete additional research and development to fill out product
portfolios and deliver enhanced functionality and reliability in order to
manufacture additional commercially viable products in commercial quantities.
In addition, while we are conducting tests to predict the overall life of our
products, we may not have run our products over their projected useful life
prior to large-scale commercialization. As a result, we cannot be sure that our
products will last as long as predicted, resulting in possible warranty claims
and commercial failures.
11
We are a named party in a contract dispute for which an adverse outcome
could result in us being liable for damages and subject to indemnification
claims.
In July 2008, Soroof Trading Development Company Ltd., or
Soroof, filed a demand for arbitration against GE Fuel Cell Systems, LLC, or
GEFCS, claiming breach of a distributor agreement and seeking damages of $3
million. Prior to GEFCS dissolution in 2006, we held a 40% membership interest
and GE Microgen, Inc., or GEM, held a 60% membership interest in GEFCS. In
January 2010, Soroof requested, and GEM and we agreed, that the arbitration
proceeding be administratively closed pending final resolution of the matter in
United States District Court, Southern District of New York. On January 22,
2010, Soroof filed a complaint in United States District Court, Southern
District of New York naming, among others, Plug Power Inc., GEFCS, and GEM as
defendants. On January 24, 2012, following a motion for judgment on the
pleadings and motion for summary judgment, the Court dismissed with prejudice
four of Soroofs claims and dismissed without prejudice two of Soroofs
claims. The Court also dismissed with prejudice all claims against
GEFCS. Soroof filed an amended complaint on May 14, 2012 against us, GEM,
and General Electric Company, re-pleading the two claims that were dismissed
without prejudice. On December 12, 2012, the parties participated in a
court settlement conference with the presiding judge at the United States
District Court for the Southern District of New York. The case was not
resolved at the settlement conference and discovery continues. Accordingly, we
believe that it is too early to determine whether there is likely exposure to
an adverse outcome and whether or not the probability of an adverse outcome is
more than remote. We, GEFCS, GEM and General Electric Company, or GE, are party
to an agreement under which we agreed to indemnify such parties for up to $1
million of certain losses related to the Soroof distributor agreement. GE has
made a claim for indemnification against us under this agreement for all losses
it may suffer as a result of the Soroof dispute. To the extent that the
dispute results in an adverse outcome for us or for any of the parties for
which we have agreed to indemnify, we could suffer financially as a result of
the damages it would have to pay on behalf of itself or its indemnitees.
Failure of our prospective customer demonstrations could negatively impact
demand for our products.
We conduct demonstrations with a number of our prospective
customers, and we plan to conduct additional demonstrations for prospective
customers as required in the future. We may encounter problems and delays
during these demonstrations for a number of reasons, including the failure of
our technology or the technology of third parties, as well as our failure to
maintain and service our products properly. Many of these potential problems
and delays are beyond our control. Any problem or perceived problem with our
demonstrations with these prospective customers could materially harm our
reputation and impair market acceptance of, and demand for, our products.
Product liability or defects could negatively impact our results of
operations.
Any liability for damages resulting from malfunctions or
design defects could be substantial and could materially adversely affect our
business, financial condition, results of operations and prospects. In
addition, a well-publicized actual or perceived problem could adversely affect
the markets perception of our products resulting in a decline in demand for
our products and could divert the attention of our management, which may
materially and adversely affect our business, financial condition, results of
operations and prospects.
The raw materials on which our products rely may not be readily available
or available on a cost-effective basis.
For example, platinum is a key material in our PEM fuel
cells. Platinum is a scarce natural resource and we are dependent upon a
sufficient supply of this commodity. Any shortages could adversely affect our
ability to produce commercially viable fuel cell systems and significantly
raise our cost of producing our fuel cell systems.
Our future plans could be harmed if we are unable to attract or retain key
personnel.
We have attracted a highly skilled management team and
specialized workforce, including scientists, engineers, researchers, manufacturing,
marketing and sales professionals. Our future success will depend, in part, on
our ability to attract and retain qualified management and technical personnel.
We do not know whether we will be successful in hiring or retaining qualified
personnel. Our inability to hire qualified personnel on a timely basis, or the
departure of key employees, could materially and adversely affect our
development and profitable commercialization plans and, therefore, our business
prospects, results of operations and financial condition.
Adverse changes in general economic conditions in the United States or any
of the major countries in which we do business could adversely affect our
operating results.
We are subject to the risks arising from adverse
changes in global economic conditions. For example, adverse changes in general
economic conditions, continuing economic uncertainties, and the direction and
relative strength of the U.S. economy has become increasingly uncertain. If
economic growth in the United States and other countries slows or recedes, our
current or prospective customers may delay or reduce technology purchases. This
could result in reductions in sales of our products, longer sales cycles,
slower adoption of new technologies and increased price competition, which could
materially and adversely affect our business, results of operations and
financial condition.
12
Our business may become subject to future government regulation,
which may impact our ability to market our products and costs and price of our
products.
Our products are subject to certain federal, local, and
non-U.S. laws and regulations, including, for example, state and local
ordinances relating to building codes, public safety, electrical and gas
pipeline connections, hydrogen transportation and siting and related matters.
See BusinessGovernment Regulations for additional information. Further, as
products are introduced into the market commercially, governments may impose
new regulations. We do not know the extent to which any such regulations may
impact our ability to distribute, install and service our products. Any
regulation of our products, whether at the federal, state, local or foreign
level, including any regulations relating to installation and servicing of our
products, may increase our costs and the price of our products.
Our products use flammable fuels that are inherently dangerous substances.
Our fuel cell systems use natural gas and hydrogen gas in
catalytic reactions. While our products do not use this fuel in a combustion
process, natural gas and hydrogen gas are flammable fuels that could leak in a
home or business and combust if ignited by another source. Further, while we
are not aware of any accidents involving our products, any such accidents
involving our products or other products using similar flammable fuels could
materially suppress demand for, or heighten regulatory scrutiny of, our
products.
We may not be able to protect important intellectual property and we could
incur substantial costs defending against claims that our products infringe on
the proprietary rights of others.
PEM fuel cell technology was first developed in the 1950s,
and fuel processing technology has been practiced on a large scale in the
petrochemical industry for decades. Accordingly, we do not believe that we can
establish a significant proprietary position in the fundamental component
technologies in these areas. However, our ability to compete effectively will
depend, in part, on our ability to protect our proprietary system-level
technologies, systems designs and manufacturing processes. We rely on patents,
trademarks, and other policies and procedures related to confidentiality to
protect our intellectual property. However, some of our intellectual property
is not covered by any patent or patent application. Moreover, we do not know
whether any of our pending patent applications will issue or, in the case of
patents issued or to be issued, that the claims allowed are or will be
sufficiently broad to protect our technology or processes. Even if all of our patent
applications are issued and are sufficiently broad, our patents may be
challenged or invalidated. We could incur substantial costs in prosecuting or
defending patent infringement suits or otherwise protecting our intellectual
property rights. While we have attempted to safeguard and maintain our
proprietary rights, we do not know whether we have been or will be completely
successful in doing so. Moreover, patent applications filed in foreign
countries may be subject to laws, rules and procedures that are substantially
different from those of the United States, and any resulting foreign patents
may be difficult and expensive to enforce. In addition, we do not know whether
the U.S. Patent & Trademark Office will grant federal registrations based
on our pending trademark applications. Even if federal registrations are
granted to us, our trademark rights may be challenged. It is also possible that
our competitors or others will adopt trademarks similar to ours, thus impeding
our ability to build brand identity and possibly leading to customer confusion.
We could incur substantial costs in prosecuting or defending trademark
infringement suits.
Further, our competitors may independently develop or
patent technologies or processes that are substantially equivalent or superior
to ours. If we are found to be infringing third party patents, we could be
required to pay substantial royalties and/or damages, and we do not know
whether we will be able to obtain licenses to use such patents on acceptable
terms, if at all. Failure to obtain needed licenses could delay or prevent the
development, manufacture or sale of our products, and could necessitate the
expenditure of significant resources to develop or acquire non-infringing
intellectual property.
Asserting, defending and maintaining our intellectual property rights could
be difficult and costly and failure to do so may diminish our ability to
compete effectively and may harm our operating results.
We may need to pursue lawsuits or legal action in the
future to enforce our intellectual property rights, to protect our trade
secrets and domain names, and to determine the validity and scope of the
proprietary rights of others. If third parties prepare and file applications
for trademarks used or registered by us, we may oppose those applications and
be required to participate in proceedings to determine the priority of rights
to the trademark. Similarly, competitors may have filed applications for
patents, may have received patents and may obtain additional patents and proprietary
rights relating to products or technology that block or compete with ours. We
may have to participate in interference proceedings to determine the priority
of invention and the right to a patent for the technology. Litigation and
interference proceedings, even if they are successful, are expensive to pursue
and time consuming, and we could use a substantial amount of our financial
resources in either case.
13
We rely, in part, on contractual provisions to protect our trade secrets
and proprietary knowledge
,
the adequacy of which may not
be sufficient.
Confidentiality agreements to which we are party may be
breached, and we may not have adequate remedies for any breach. Our trade
secrets may also be known without breach of such agreements or may be independently
developed by competitors. Our inability to maintain the proprietary nature of
our technology and processes could allow our competitors to limit or eliminate
any competitive advantages we may have.
Our government contracts could restrict our ability to profitably
commercialize our technology.
Some of our technology has been developed with state and
federal government funding in the United States, Canada and other countries.
The United States and Canadian governments have a non-exclusive, royalty-free,
irrevocable world-wide license to practice or have practiced some of our
technology developed under contracts funded by the respective government. In
some cases, government agencies in the United States or Canada can require us
to obtain or produce components for our systems from sources located in the
United States or Canada, respectively, rather than foreign countries. Our
contracts with government agencies are also subject to the risk of termination
at the convenience of the contracting agency, potential disclosure of our
confidential information to third parties and the exercise of march-in rights
by the government. March-in rights refer to the right of the United States or
Canadian governments or government agency to license to others any technology
developed under contracts funded by the government if the contractor fails to
continue to develop the technology. The implementation of restrictions on our
sourcing of components or the exercise of march-in rights could harm our
business, prospects, results of operations and financial condition. In
addition, under the Freedom of Information Act, any documents that we have
submitted to the government or to a contractor under a government funding
arrangement are subject to public disclosure that could compromise our
intellectual property rights unless such documents are exempted as trade
secrets or as confidential information and treated accordingly by such
government agencies.
Risks Related to Our Securities and this Offering
If our stock price continues to remain below $1.00, our common stock may be
subject to delisting from The NASDAQ Stock Market.
On October 12, 2012, we received a deficiency notice from NASDAQ
stating that we no longer comply with NASDAQ Marketplace Rule 5550(a)(2)
because the bid price of our common stock closed below the required minimum
$1.00 per share for the previous 30 consecutive business days. The notice also
indicated that, in accordance with Marketplace Rule 5810(c)(3)(A), we have a
period of 180 calendar days, until April 10, 2013, to regain compliance with
Rule 5550(a)(2). If at any time before April 10, 2013 the bid price of our
common stock closes at $1.00 per share or more for a minimum of 10 consecutive
business days, NASDAQ will notify us that we have regained compliance with Rule
5550(a)(2). In the event we do not regain compliance with Rule 5550(a)(2) prior
to the expiration of the 180-day period, NASDAQ will notify us that our common
stock is subject to delisting. We may appeal the delisting determination to a NASDAQ
hearing panel and the delisting will be stayed pending until the panel's
determination. At such hearing, we would present a plan to regain compliance
and NASDAQ would then subsequently render a decision. We are currently
evaluating our alternatives to resolve the listing deficiency. To the extent
that we are unable to resolve the listing deficiency, there is a risk that our
common stock may be delisted from NASDAQ, which would adversely impact
liquidity of our common stock and potentially result in even lower bid prices
for our common stock.
Our stock price has been and could remain volatile, which could further adversely
affect the market price of our stock, our ability to raise additional capital
and/or cause us to be subject to securities class action litigation.
The market price of our common stock has historically
experienced and may continue to experience significant volatility. In 2012, the
closing market price of our common stock fluctuated from a high of $2.60 per
share in the first quarter of 2012 to a low of $0.47 per share in the fourth quarter
of 2012.
Our progress in developing and commercializing our
products, our quarterly operating results, announcements of new products by us
or our competitors, our perceived prospects, changes in securities analysts
recommendations or earnings estimates, changes in general conditions in the
economy or the financial markets, adverse events related to our strategic
relationships, significant sales of our common stock by existing stockholders,
including one or more of our strategic partners, and other developments
affecting us or our competitors could cause the market price of our common
stock to fluctuate substantially. In addition, in recent years, the stock
market has experienced significant price and volume fluctuations. This
volatility has affected the market prices of securities issued by many
companies for reasons unrelated to their operating performance and may
adversely affect the price of our common stock. Such market price volatility
could adversely affect our ability to raise additional capital. In addition, we
may be subject to additional securities class action litigation as a result of
volatility in the price of our common stock, which could result in substantial
costs and diversion of managements attention and resources and could harm our
stock price, business, prospects, results of operations and financial
condition.
14
Two of our stockholders, JSC INTER RAO Capital, or INTER RAO Capital, and
affiliates and associates of AWM Investment 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., or, collectively,
SSF, has substantial control over us and could limit our other stockholders
ability to influence the outcome of key transactions, including a change of
control.
As of December 31, 2012, INTER RAO Capital and SSF owned
approximately 11.75% and 23.8 %, respectively, of the outstanding shares of our
common stock. As a result, each of INTER RAO Capital and SSF can significantly
influence or control certain matters requiring approval by our stockholders,
including the approval of mergers or other extraordinary transactions. The
interests
of
INTER RAO Capital and SSF may differ from
our interest and the interest of our other stockholders, and INTER RAO Capital and/or
SSF may vote in a way which may be adverse to our interests and the interests
of our other stockholders. This concentration of ownership may have the effect
of delaying, preventing or deterring key transactions such as a change of
control of our Company, could deprive our stockholders of an opportunity to
receive a premium for their common stock as part of a sale of our Company and
might ultimately affect the market price of our common stock. There may be
other shareholders who beneficially own significant shares of our common stock
such that they may influence or have control over certain Company
matters. However, such shareholders have not yet filed reports to
disclose their ownership of us and we cannot confirm the exact ownership of
those shareholders at this time.
The sale by INTER RAO Capital or SSF of a substantial number of shares of our
common stock could cause the market price of our common stock to decline and
adversely affect our ability to remain listed on an exchange and/or raise
capital through equity offerings.
INTER RAO Capital held 4,462,693 shares of common stock as
of December 31, 2012, which represented in the aggregate approximately 11.75%
of our outstanding common stock. SSF held 8,511,620 shares of common stock as
of December 31, 2012, which represented in the aggregate approximately 23.8 %
of our outstanding common stock. If INTER RAO Capital or its affiliates sell
substantial amounts of our common stock in the public market, the market price
of our common stock could decrease significantly.
Our management will have broad discretion in the use of the net proceeds we
receive in this offering and might not apply the proceeds in ways that increase
the value of your investment.
Our management will have broad discretion over the use of
our net proceeds from this offering, and you will be relying on the judgment of
our management regarding the application of these proceeds. Our management
might not apply our net proceeds in ways that ultimately increase the value of
your investment and we might not be able to yield a significant return, if any,
on any investment of these net proceeds. Our failure to apply these funds
effectively could have a material adverse effect on our business, delay the
development of our products and cause the price of our common stock to decline.
There may be future sales or other dilution of our equity, which may
adversely affect the market price of our common stock.
Except as described under Underwriting, we are not
restricted from issuing additional shares of our common stock, including any
securities that are convertible into or exchangeable for, or that represent the
right to receive, our common stock. The market price of our common stock could
decline as a result of sales of shares of our common stock or sales of such
other securities made after this offering or the perception that such sales
could occur.
The market price of our common stock may be adversely affected by market
conditions affecting the stock markets in general, including price and trading
fluctuations on the NASDAQ Capital Market.
Market conditions may result in volatility in the level
of, and fluctuations in, the market prices of stocks generally and, in turn, our
common stock and sales of substantial amounts of our common stock in the
market, in each case being unrelated or disproportionate to changes in our
operating performance. The overall weakness in the economy has recently
contributed to the extreme volatility of the markets which may have an effect
on the market price of our common stock.
Provisions in our charter documents and Delaware law may discourage or
delay an acquisition that stockholders may consider favorable, which could
decrease the value of our common stock.
Our certificate of incorporation, our
bylaws, and Delaware corporate law contain provisions that could make it harder
for a third party to acquire us without the consent of our board of directors.
These provisions include those that: authorize the issuance of up to 5,000,000
shares of preferred stock in one or more series without a stockholder vote;
limit stockholders ability to call special meetings; establish advance notice
requirements for nominations for election to our board of directors or for
proposing matters that can be acted on by stockholders at stockholder meetings;
and provide for staggered terms for our directors. We have a shareholders
rights plan that may be triggered if a person or group of affiliated or
associated persons acquires beneficial ownership of 15% or more of the
outstanding shares of our common stock. In addition, in certain circumstances,
Delaware law also imposes restrictions on mergers and other business
combinations between us and any holder of 15% or more of our outstanding common
stock.
15
Investors in this offering will experience immediate and substantial
dilution.
The public offering price of the securities offered
pursuant to this prospectus is substantially higher than the net tangible book
value per share of our common stock. Therefore, if you purchase shares of
common stock and warrants in this offering, you will incur immediate and
substantial dilution in the pro forma net tangible book value per share of
common stock from the price per share that you pay for the common stock.
If the holders of outstanding options or warrants exercise those options or
warrants at prices below the public offering price, you will incur further
dilution. Because the public offering price in this offering is less
than $2.27 per share, the exercise price of our existing 2011 five-year
warrants to purchase shares of our common stock, which were reduced from $3.00
per share to $2.27 per share in March of 2012, will be further reduced from $2.27
to $ per share in accordance with the anti-dilution provisions of such
warrants, and the number of shares issuable upon exercise of such warrants
would increase from shares to shares, both of
which could result in further dilution to our stockholders. See the section
entitled Dilution below for a more detailed discussion of the dilution
associated with this offering.
If our common stock is not listed on a national securities exchange,
U.S. holders of warrants may not be able to exercise their warrants without
compliance with applicable state securities laws and the value of your warrants
may be significantly reduced.
If our common stock is delisted from The NASDAQ Stock
Market and is not eligible to be listed on another national securities
exchange, the exercise of the warrants by U.S. holders may not be exempt from
state securities laws. As a result, depending on the state of residence of a
holder of the warrants, a U.S. holder may not be able to exercise its warrants
unless we comply with any state securities law requirements necessary to permit
such exercise or an exemption applies. Although we plan to use our reasonable
efforts to assure that U.S. holders will be able to exercise their warrants
under applicable state securities laws if no exemption exists, there is no
assurance that we will be able to do so. As a result, in the event that our
common stock is delisted from The NASDAQ Stock Market and is not eligible to be
listed on another securities exchange, your ability to exercise your warrants
may be limited. The value of the warrants may be significantly reduced if U.S.
holders are not able to exercise their warrants under applicable state
securities laws.
If our common stock is not listed on a national securities exchange,
compliance with applicable state securities laws may be required for subsequent
offers, transfers and sales of the shares of common stock and warrants offered
hereby.
The shares of our common stock and the warrants are being
offered pursuant to one or more exemptions from registration and qualification
under applicable state securities laws. Because our common stock is listed on
The NASDAQ Stock Market, we are not required to register or qualify in any
state the subsequent offer, transfer or sale of the common stock or warrants.
If our common stock is delisted from The NASDAQ Stock Market and is not
eligible to be listed on another national securities exchange, subsequent
transfers of the shares of our common stock and warrants offered hereby by U.S.
holders may not be exempt from state securities laws. In such event, it will be
the responsibility of the holder of shares or warrants to register or qualify
the shares or the warrants for any subsequent offer, transfer or sale in the
United States or to determine that any such offer, transfer or sale is exempt
under applicable state securities laws.
We have not paid cash dividends to our shareholders and currently
have no plans to pay future cash dividends.
We plan to retain earnings to finance future growth and
have no current plans to pay cash dividends to shareholders. Because we have
not paid cash dividends, holders of our securities will experience a gain on
their investment in our securities only in the case of an appreciation of value
of our securities. You should neither expect to receive dividend income from
investing in our securities nor an appreciation in value.
There is no public market for the warrants to purchase common stock being
offered in this offering.
There is no established public trading market for the
warrants being offered in this offering, and we do not expect a market to
develop. In addition, we do not intend to apply for listing of the warrants on
any securities exchange. Without an active market, the liquidity of the
warrants will be limited.
Holders of our warrants will have no rights as a common stockholder until
such holders exercise their warrants and acquire our common stock.
Until holders of warrants acquire shares of our common
stock upon exercise of the warrants, holders of warrants will have no rights with
respect to the shares of our common stock underlying such warrants. Upon
exercise of the warrants, the holders thereof will be entitled to exercise the
rights of a common stockholder only as to matters for which the record date
occurs after the exercise date.
16
The warrants included in this offering may not have any value.
The warrants will expire on the fifth anniversary of the
date they are issued. In the event our common stock price does not exceed the
exercise price of the warrants during the period when the warrants are
exercisable, the warrants may not have any value.
17
This prospectus, including the sections entitled
Prospectus Summary, Risk Factors, Managements Discussion and Analysis of
Financial Condition and Results of Operations and Business, contains
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:
-
we continue to incur losses and
might never achieve or maintain profitability;
-
we do not have enough cash to fund
our operations to profitability and if we are unable to secure additional
capital, we may need to reduce and/or cease our operations;
-
despite this offering, we will
still require significant additional capital funding and such capital may not
be available to us.
-
the recent restructuring plan we
adopted may adversely impact managements ability to meet financial reporting
requirements.
-
our lack of extensive experience
in manufacturing and marketing our products may impact our ability to sustain a
profitable commercial market for our new and existing products;
-
unit orders will not ship, be
installed and/or converted to revenue, in whole or in part;
-
pending orders may not convert to
purchase orders, in whole or in part;
-
if our stock price continues to
remain below $1.00, our common stock may be subject to delisting from The NASDAQ
Stock Market;
-
the cost and timing of developing,
marketing and selling our products and our ability to raise the necessary
capital to fund such costs;
-
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 referenced under Risk Factors and elsewhere in this prospectus.
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 prospectus or the respective
dates of documents incorporated herein or therein that include forward-looking
statements.
The forward-looking statements in this prospectus
represent our views as of the date of this prospectus. We anticipate that subsequent
events and developments will cause our views to change. However, while we may
elect to update these forward-looking statements at some point in the future,
we have no current intention of doing so except to the extent required by
applicable law. You should, therefore, not rely on these forward-looking
statements as representing our views as of any date subsequent to the date of
this prospectus.
18
We estimate that our net proceeds
from the sale of shares of our common stock and warrants to purchase common
stock by us in this offering will be approximately $ million based on an
assumed public offering price of $ per share, which was the last
reported sale price of our common stock on January , 2013, and after deducting
underwriting discounts and commissions and estimated offering expenses payable
by us.
We currently intend to use all of the net proceeds of this
offering received by for working capital and other general corporate purposes,
including capital expenditures. The amount of what, and timing of when, we
actually spend for these purposes may vary significantly and will depend on a
number of factors, including our future revenue and cash generated by
operations and the other factors described under Risk Factors in this
prospectus. Accordingly, our management will have broad discretion in applying
a portion of the net proceeds of this offering. Pending these uses, we intend
to invest the net proceeds in high quality, investment grade, short-term fixed
income instruments which include corporate, financial institution, federal
agency or U.S. government obligations.
Our common stock has traded on The NASDAQ Stock Market
under the symbol PLUG since June 21, 2011 and under the symbol PLUGD prior
to June 20, 2011. The following table sets forth, for the periods indicated,
the high and low sales prices for our common stock as reported on The NASDAQ
Stock Market.
|
Sales prices
|
|
High
|
|
Low
|
2013
|
|
|
|
1st Quarter
(through January 14, 2013)
|
$0.76
|
|
$0.47
|
2012
|
|
|
|
1st Quarter
|
$2.60
|
|
$1.26
|
2nd Quarter
|
$1.41
|
|
$1.10
|
3rd Quarter
|
$1.30
|
|
$0.76
|
4th Quarter
|
$0.92
|
|
$0.47
|
2011
|
|
|
|
1st Quarter
|
|
$10.70
|
|
|
$3.60
|
2nd Quarter
|
|
$7.80
|
|
|
$1.91
|
3rd Quarter
|
|
$2.63
|
|
|
$1.35
|
4th Quarter
|
|
$2.71
|
|
|
$1.50
|
On January 14, 2013, the last reported closing price of
our common stock on The NASDAQ Stock Market was $0.59. On January 14, 2013, we
had approximately 631 holders of record of our common stock.
DIVIDEND POLICY
We have never declared or paid cash dividends on our
common stock and do not anticipate paying cash dividends in the foreseeable
future. We currently intend to retain all available funds and any future
earnings to fund the development and growth of our business. Any future
determination as to the payment of dividends will depend upon capital
requirements and limitations imposed by our credit agreements, if any, and such
other factors as our board of directors may consider. Investors should not
purchase our common stock with the expectation of receiving cash dividends.
19
The following table sets forth our capitalization as of
September 30, 2012:
on an actual basis;
on a pro forma basis to give
further effect to our sale in this offering
of shares of our common stock at
an assumed offering price of
$ per share, which was the last
reported sale price of our common stock on January , 2013, after deducting
the underwriting discounts and commissions and estimated offering expenses
payable by us.
|
As of
September 30, 2012
(Unaudited)
|
|
(
in thousands
)
|
|
|
|
Cash and cash equivalents...................................................................................................
|
|
|
|
|
|
Stockholders
equity (deficit):
|
|
|
Common
stock, $0.01 par value per share; 245,000,000 shares authorized,
actual and
pro forma; 38,197,255 shares issued and outstanding (including
165,906 shares
in treasury), actual;
shares
issued and outstanding, pro
forma...............................................................................................................................
|
$
382
|
|
Additional
paid-in capital...................................................................................................
|
801,352
|
|
Accumulated
other comprehensive income....................................................................
|
1,035
|
|
Accumulated
deficit.............................................................................................................
|
(778,172)
|
|
Less
common stock in treasury:
|
|
|
165,906 shares
|
|
|
Total
stockholders equity..................................................................................................
|
|
|
Total
capitalization..............................................................................................................
|
|
|
|
|
|
The number of shares of our common stock to be outstanding
after the offering is based on 38,197,255 shares of common stock outstanding as
of September 30, 2012 and excludes:
|
1,999,521 shares of common stock issuable upon exercise of
outstanding options as of September 30, 2012 at a weighted average exercise
price of $9.01 per share (of which options to acquire 665,305 shares of
common stock are vested as of September 30, 2012);
|
|
|
|
275,262 shares of common stock issuable upon the exercise of
unvested restricted stock awards outstanding as of September 30, 2012;
|
|
|
|
5,485,229 shares of our common stock reserved for future
issuance under our equity incentive plans as of September 30, 2012;
|
|
|
|
9,421,008 shares of common stock issuable upon the exercise
of warrants outstanding as of September 30, 2012, which number of shares
will increase as a result of the offering due to anti-dilution provisions
contained in such warrants; and
|
|
|
|
shares of common stock issuable upon the exercise of the warrants to be
sold in this offering.
|
Except as otherwise indicated, all information in this prospectus assumes no
exercise by the underwriter of its over-allotment option.
You should read this table in conjunction with the
sections of this prospectus entitled Selected Consolidated Financial Data and
Managements Discussion and Analysis of Financial Condition and Results of
Operations and our financial statements and related notes included elsewhere
in this prospectus.
20
If you invest in our common stock and warrants, your
ownership interest will be diluted by the difference between the price per
share you pay and the net tangible book value per share of our common stock
immediately after this offering.
Our net tangible book value as of September 30, 2012
was approximately $17.1
million, or $0.45
per share of our common
stock, based upon 38,031,349 shares of our common stock outstanding.
Net tangible book value per share is determined by dividing our total
tangible assets, less total liabilities, by the number of shares of our common
stock outstanding as of September 30, 2012. Dilution in net tangible book value
per share represents the difference between the amount per share paid by purchasers
of shares of common stock and warrants in this offering and the net tangible
book value per share of our common stock immediately after this offering.
After giving effect to the sale of shares
of our common stock and warrants to purchase up to shares of our
common stock in this offering at the public offering price of $ per
combination and after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us, our as adjusted net tangible book
value as of September 30, 2012 would have been approximately $
million, or $ per share. This represents an immediate increase in net
tangible book value of $ per share to existing stockholders and
immediate dilution in net tangible book value of $ per share to new
investors purchasing our common stock and warrants in this offering at the
public offering price. The following table illustrates this dilution on a per
share basis:
Public
offering price per combination
|
|
|
|
$
|
Net
tangible book value per share as of September 30, 2012
|
|
|
|
|
$0.45
|
Increase
in net tangible book value per share attributable to this offering
|
|
|
|
|
|
Adjusted
net tangible book value per share as of September 30, 2012 after giving
effect to this offering
|
|
|
|
|
|
Dilution
in net tangible book value per share to new investors
|
|
|
|
|
|
If the underwriter exercises in full its option to
purchase additional shares of common stock and warrants to purchase
up to shares of common stock at the public offering price, the as
adjusted net tangible book value after this offering would have been
$ per share, representing an increase in net tangible book value of
$ per share to existing stockholders and immediate dilution in net
tangible book value of $ per share to new investors purchasing our
common stock and warrants in this offering at the public offering price.
The foregoing table and discussion is based on
38,197,255 shares of common stock outstanding as of September 30, 2012 and
excludes:
|
1,999,521 shares of common stock issuable upon exercise of
outstanding options as of September 30, 2012 at a weighted average exercise
price of $9.01 per share (of which options to acquire 665,305 shares of
common stock are vested as of September 30, 2012);
|
|
|
|
275,262 shares of common stock issuable upon the exercise of
unvested restricted stock awards outstanding as of September 30, 2012;
|
|
|
|
5,485,229 shares of our common stock reserved for future
issuance under our equity incentive plans as of September 30, 2012;
|
|
|
|
9,421,008 shares of common stock issuable upon the exercise
of warrants outstanding as of September 30, 2012, which number of shares
will increase as a result of the offering due to anti-dilution provisions
contained in such warrants; and
|
|
|
|
shares of common stock issuable upon the exercise of the warrants to be
sold in this offering.
|
The above
share information assumes no exercise by the underwriter of its over-allotment
option.
In addition, we may choose to raise additional capital due
to market conditions or strategic considerations even if we believe we have
sufficient funds for our current or future operating plans. To the extent that
additional capital is raised through the sale of equity or convertible debt
securities, the issuance of these securities could result in further dilution
to our stockholders. Also, as a result of this offering, the exercise price of
our existing 2011 five-year warrants to purchase shares of our common stock,
which was adjusted from $3.00 to $2.27 in March of 2012, will be adjusted downward
further from $2.27 to $
in accordance with the weighted-average
anti-dilution provisions of such warrants, and the number of shares issuable
upon exercise of such warrants would increase from shares
to shares, both of which could result in further dilution to our
stockholders. See Risk Factors Investors in this offering will
experience immediate and substantial dilution.
21
The following tables present selected financial data and
other operating information for the periods indicated. The consolidated
statement of operations
and comprehensive income (loss)
data for the years ended December 31, 2009, 2010 and
2011 and the balance sheet data as of December 31, 2010 and 2011 have been
derived from our audited consolidated financial statements included elsewhere
in this prospectus. The consolidated statement of operations
and comprehensive income (loss)
data for the years ended December 31, 2007 and 2008 and t
he balance sheet data as of
December 31, 2007, 2008 and 2009 and September 30, 2011 have been derived from our audited
consolidated financial statements and unaudited interim consolidated financial
statements, respectively, that are not included in this prospectus. The
consolidated statement of operations
and comprehensive income (loss)
data for the nine months ended September
30, 2011 and 2012 and the consolidated balance sheet data as of September 30,
2012 have been derived from our unaudited interim consolidated
financial statements that are included elsewhere in this prospectus. The
unaudited consolidated financial statements have been prepared on the same
basis as the audited consolidated financial statements, and in the opinion of
management, reflect all adjustments of a normal recurring nature considered
necessary to present fairly our financial position for such periods. Our
historical results are not necessarily indicative of future operating results,
and the interim results set forth below are not necessarily indicative of
expected results for the year ended December 31, 2012 or for any future period.
Effective January 1, 2012, the company adopted the Financial
Accounting Standards Boards Accounting Standards Update (ASU) No. 2011-5,
Comprehensive Income (Topic 220): Presentation of Comprehensive Income, as
amended by ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective
Date for Amendments to the Presentation of Reclassifications of Items Out of
Accumulated Other Comprehensive Income in Accounting Standards Update No.
2011-05. These updates revise the manner in which entities present
comprehensive income in their financial statements. The statement of
comprehensive income (loss) data presented below revises historical information
to illustrate the new presentation required by this pronouncement for those
periods prior to adoption.
You should read the information presented below in
conjunction with our audited consolidated financial statements and related
notes and other financial information included herein, and the sections
entitled Capitalization, Prospectus Summary Summary Consolidated Financial
Data and Managements Discussion and Analysis of Financial Condition and
Results of Operations.
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per
share data)
|
Statements Of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and
service revenue......................................
|
$3,082
|
|
$4,667
|
|
$4,833
|
|
$15,739
|
|
$23,223
|
|
$11,927
|
|
$18,712
|
Research and
development contract revenue........
|
13,189
|
|
13,234
|
|
7,460
|
|
3,598
|
|
3,886
|
|
3,342
|
|
1,475
|
Licensed
technology revenue....................................
|
-
|
|
-
|
|
-
|
|
136
|
|
517
|
|
489
|
|
-
|
Total revenue.........................................................
|
16,271
|
|
17,901
|
|
12,293
|
|
19,473
|
|
27,626
|
|
15,758
|
|
20,187
|
Cost of
product and service revenue.......................
|
9,399
|
|
11,442
|
|
7,246
|
|
23,111
|
|
30,670
|
|
19,188
|
|
28,552
|
Cost of
research and development
contract revenue..........................................................
|
19,045
|
|
21,505
|
|
12,433
|
|
6,371
|
|
6,232
|
|
5,506
|
|
2,390
|
Research and
development expense.......................
|
39,218
|
|
34,987
|
|
16,324
|
|
12,901
|
|
5,656
|
|
3,648
|
|
4,090
|
Selling,
general and administrative expenses.........
|
19,323
|
|
28,333
|
|
15,427
|
|
25,572
|
|
14,546
|
|
11,051
|
|
10,556
|
Goodwill impairment charge.....................................
|
-
|
|
45,843
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Gain on sale
of assets.................................................
|
-
|
|
-
|
|
-
|
|
(3,217)
|
|
(673)
|
|
(673)
|
|
-
|
Amortization
of intangible assets.............................
|
1,614
|
|
2,225
|
|
2,132
|
|
2,264
|
|
2,322
|
|
1,755
|
|
1,727
|
Other income
(expense), net......................................
|
11,757
|
|
4,734
|
|
560
|
|
570
|
|
3,673
|
|
4,429
|
|
3,740
|
Net loss....................................................................
|
(60,571)
|
|
(121,700)
|
|
(40,709)
|
|
(46,959)
|
|
(27,454)
|
|
(20,286)
|
|
(23,388)
|
Loss per share, basic and diluted..............................
|
$(6.94)
|
|
$(13.62)
|
|
$(3.15)
|
|
$(3.58)
|
|
$(1.46)
|
|
$(1.16)
|
|
$(0.71)
|
Weighted average number of common
shares outstanding........................................................
|
8,734
|
|
8,938
|
|
12,911
|
|
13,123
|
|
18,778
|
|
17,442
|
|
33,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of
Comprehensive Income (Loss) Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
$(60,571)
|
|
$(121,700)
|
|
$(40,709)
|
|
$
(46,959)
|
|
$
(27,454)
|
|
$(20,286)
|
|
$(23,388)
|
Other
comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain (loss)................
|
7,739
|
|
(8,325)
|
|
1,294
|
|
277
|
|
(56)
|
|
(74)
|
|
107
|
Unrealized
gain (loss) on
available-for-sale securities....................................
|
142
|
|
156
|
|
(131)
|
|
(114)
|
|
19
|
|
19
|
|
-
|
Comprehensive
Loss......................................................
|
$(52,690)
|
|
$(129,869)
|
|
$(39,546)
|
|
$(46,796)
|
|
$(27,491)
|
|
$(20,341)
|
|
$(23,281)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(at end of the period)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrestricted cash, cash equivalents and
available-for-sale securities.........................................
|
$165,701
|
|
$104,688
|
|
$62,541
|
|
$21,359
|
|
$13,857
|
|
$22,802
|
|
$9,461
|
Trading securities auction rate debt securities.....
|
-
|
|
52,651
|
|
53,397
|
|
-
|
|
-
|
|
-
|
|
-
|
Total assets...................................................................
|
268,392
|
|
209,112
|
|
164,185
|
|
59,177
|
|
55,656
|
|
53,312
|
|
45,567
|
Borrowings under line of credit.................................
|
-
|
|
62,875
|
|
59,375
|
|
-
|
|
5,405
|
|
-
|
|
1,000
|
Current portion of long-term obligations.................
|
1,384
|
|
401
|
|
533
|
|
-
|
|
-
|
|
-
|
|
-
|
Long-term obligations.................................................
|
4,580
|
|
1,313
|
|
2,426
|
|
3,141
|
|
9,577
|
|
5,768
|
|
6,426
|
Stockholders' equity....................................................
|
248,900
|
|
125,864
|
|
88,269
|
|
42,913
|
|
29,036
|
|
35,728
|
|
23,045
|
Working capital............................................................
|
163,906
|
|
86,171
|
|
60,009
|
|
25,556
|
|
22,452
|
|
24,543
|
|
15,584
|
22
The following discussion and analysis of our financial
condition and results of operations should be read together with our
consolidated financial statements and the related notes and the other financial
information included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those discussed below and
elsewhere in this prospectus, particularly those under Risk Factors. Dollars
in tabular format are presented in thousands, except share and per share data,
or otherwise indicated.
Overview
We are 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. By the third quarter
of 2012, the majority of units produced and shipped were based on the
simplified architecture. During the fiscal year ended December 31, 2012, we
received new orders from Stihl, Mercedes Benz, Lowes, Carters and Ace
Hardware. We also experienced add-on orders from Walmart, P&G, Coca-Cola,
Sysco, Wegmans, Kroger and BMW.
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. We have since further restructured by
adopting a restructuring plan on December 11, 2012, aimed at improving
organizational efficiency and conserve working capital needed to support the
growth of our GenDrive business. As a result of the recent restructuring, we
expect to reduce annual expenses by $3.0 to $4.0 million.
As of September 30, 2012, we had approximately $15.6
million of working capital, which includes $9.5 million of cash and cash
equivalents to fund our future operations. We currently estimate that we had,
as of December 31, 2012, cash and cash equivalents of approximately $9.4
million and accounts payable of approximately $3.5 million.
We also
estimate that as of December 31, 2012, of our total accounts payable,
approximately $1.6 million were more than 30 days past due and approximately $0.3
million were more than 120 days past due.
Our future liquidity
and capital requirements will depend upon numerous factors, including those
identified under the heading Risk Factors above. As a result, we can provide
no assurance that we will be able to fund our operations without additional external
financing. If adequate funds are not available, we may be required to reduce
and/or cease our operations and/or seek bankruptcy protection.
We are party to a Loan and Security Agreement with Silicon
Valley Bank, or SVB, dated as of August 9, 2011 and modified most recently on
November 29, 2012, which provides us with access of up to $15 million financing,
subject to borrowing base limitations, to support working capital needs. Based
on the borrowing base calculation and our current outstanding loan balance, we
currently do not have any availability under this facility.
We believe that our current cash, cash equivalents and
cash generated from future sales, as well as the cash proceeds from this
offering, will provide sufficient liquidity to fund operations through the end
of 2013. This projection is based on our current expectations regarding
product sales, cost structure, cash burn rate and operating assumptions. To
date, we have funded our operations primarily through public and private
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.
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. If we are unable to fund our
operations without additional external financing and therefore cannot sustain
future operations, we may be required to delay, reduce and/or cease our
operations and/or seek bankruptcy protection. Alternatives we would consider
for additional funding include equity or debt financing, a sale-leaseback of
our real estate, or licensing of our technology. In addition to raising
capital, we may also consider strategic alternatives including business
combinations, 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 operations and may be required to delay, reduce and/or cease our
operations and/or seek bankruptcy protection. After this offering, 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.
23
Additionally, even if we raise sufficient capital through additional
equity or debt financing, strategic alternatives 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. Similarly, if our
common stock is delisted from the NASDAQ Capital Market, it may limit 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.
Recent Developments
Loan and Security Agreement.
On August 9, 2011, we
entered into a revolving credit facility arrangement, or the Loan Agreement
with SVB providing availability to an additional $7.0 million to support
working capital needs See "Liquidity and Capital Resources" for
further disclosure on the credit facility with SVB. On September 28, 2011, we
executed a First Loan Modification Agreement, or the Loan Modification, with SVB,
amending the Loan Agreement. The Loan Modification removed the $750,000
sublimit for outstanding letters of credit, foreign exchange contract financing
and amounts utilized for cash management services, making the full $7.0 million
credit facility available for financing accounts receivable and eligible
inventory. All remaining terms of the Loan and Security Agreement remain in
full force and effect. On March 30, 2012, we executed a Second Loan
Modification Agreement with SVB which increased our credit facility, providing
us access of up to $15.0 million financing, subject to borrowing base
limitations, to support working capital needs. On November 29, 2012 we
executed a Third Loan Modification Agreement with SVB, which, among other
things, waived our failure to comply with the Adjusted Quick Ratio financial
covenant as of the months ended September 30, 2012 and October 31, 2012,
revised the future Adjusted Quick Ratio covenant level and removed our ability
to request financing for Inventory Placeholder Invoices. Based on the
borrowing base calculation and our outstanding loan balance, we currently have
no availability under this facility.
NASDAQ Notice.
On October 12, 2012, we
received a deficiency notice from The NASDAQ Stock Market, or NASDAQ, stating
that we no longer comply with NASDAQ Marketplace Rule 5550(a)(2) because the
bid price of our common stock closed below the required minimum $1.00 per share
for the previous 30 consecutive business days. The notice also indicated that,
in accordance with Marketplace Rule 5810(c)(3)(A), we have a period of 180
calendar days, until April 10, 2013, to regain compliance with Rule 5550(a)(2).
If at any time before April 10, 2013 the bid price of our common stock closes
at $1.00 per share or more for a minimum of 10 consecutive business days, NASDAQ
will notify us that we have regained compliance with Rule 5550(a)(2). In the
event we do not regain compliance with Rule 5550(a)(2) prior to the expiration
of the 180-day period, NASDAQ will notify us that our common stock is subject
to delisting. We may appeal the delisting determination to a NASDAQ hearing
panel and the delisting will be stayed pending until the panel's determination.
At such hearing, we would present a plan to regain compliance and NASDAQ would
then subsequently render a decision. We are currently evaluating our
alternatives to resolve the listing deficiency.
Restructuring.
On December 11, 2012, we
adopted a restructuring plan to improve organizational efficiency and conserve
working capital needed to support the growth of our GenDrive business. In
doing so, 22 full-time positions were eliminated at our U.S. facilities.
This workforce reduction was substantially completed on December 13, 2012.
As a result of the restructuring, we expect to reduce annual expenses by $3.0
to $4.0 million.
We currently estimate that we will incur pre-tax
restructuring charges in the fourth quarter resulting from the restructuring of
approximately $600,000 related to severance pay and other related costs. We
expect to pay the majority of these restructuring charges within the next few
months. The estimates of total charges and cash expenditures that we
expect to incur in connection with the restructuring, and the timing thereof,
is subject to a number of assumptions, and actual results may materially differ
from those stated above.
24
Financial Overview
Product and service revenue.
Product and service
revenue relates to revenue recognized from multiple deliverable revenue
arrangements. Effective April 1, 2010, we
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 (see note 18 of our
consolidated financial statements for further discussion of our
multiple-deliverable revenue arrangements).
For all product and service revenue transactions entered
into prior to the implementation of ASU No. 2009-13, we 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.
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 related to our current product development efforts.
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
that ended in October 2011.
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 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.
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.
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.
Gain on Sale of Assets.
Gain on sale of assets
represents the gain on sale of leased assets during the nine months ended
September 30, 2012, the nine months ended September 30, 2011 and the year ended
December 31, 2011, and the sale of inventory, equipment and certain other
assets during the year ended December 31, 2010. In December 2010, we assigned
all of our rights, title and interest in its leased property to Somerset
Capital Group, Ltd., or Somerset. Due to contingent provisions in the
agreement, the full amount of the sale could not be recognized at the time.
During the quarter ended September 30, 2011 the contingent provisions of the
agreement were met, and an additional $673,000 was recorded as gain on sale of
leased assets.
25
Effective October 26, 2010, we licensed the intellectual
property relating to our stationary power products, GenCore and GenSys, to
IdaTech plc on a non-exclusive basis. We maintain ownership of, and the
right to use, the patents and other intellectual property licensed to
IdaTech. As part of the transaction, we also sold inventory, equipment
and certain other assets related to our stationary power business. Total
consideration for the licensing and assets was $5 million and was received
during October 2010. This consideration was net against costs incurred to close
the transaction. Accordingly, $3.2 million was recorded to gain on sale of
assets in 2010.
Amortization of intangible assets.
Amortization of
intangible assets represents the amortization associated with our acquired
identifiable intangible assets from Plug Power Canada Inc., including acquired
technology and customer relationships, which are being amortized over eight
years.
Interest and other income and net realized gains
from available-for-sale securities.
Interest and other income and net realized
gains from available-for-sale securities consists primarily of interest earned
on our cash, cash equivalents, available-for-sale and trading securities, other
income, and the net realized gain/loss from the sale of available-for-sale
securities.
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 consolidated statement of
operations as change in the fair value of common stock warrant liability.
Gain on auction rate debt securities repurchase
agreement.
In December 2008, we entered into a Repurchase Agreement with
the third-party lender which may require the third-party lender to repurchase
the auction rate debt securities pledged as collateral for the Credit Line
Agreement, at their par value, from June 30, 2010 through July 2, 2012. As a
result of the Repurchase Agreement entered into with a third party lender in
December 2008, we reclassified the auction rate debt securities from
available-for-sale securities to trading securities. We elected to record this
item at its fair value in accordance with FASB ASC No. 825-10-25, Fair Value
Option. The third-party lender repurchased the securities on July 1, 2010 in
accordance with the Repurchase Agreement. The corresponding Credit Line
Agreement was paid in full on July 1, 2010 in conjunction with the repurchase
of the auction rate debt securities. The change in fair value of approximately
$6.0 million and $4.2 million during the years ended December 31, 2010 and
2009, respectively was recorded as a loss in the consolidated statements of
operations which is offset by the change in fair value of the auction rate debt
securities held as collateral of approximately $6.0 million and $4.2 million
that is recorded as a gain in the consolidated statements of operations for the
years ended December 31, 2010 and 2009, respectively.
Interest and other expense and foreign currency gain
(loss).
Interest and other expense and foreign currency gain (loss)
consists of interest related to the Loan and Security Agreement, loan
modification fees related to the Credit Line Agreement, and foreign currency
exchange gain (loss).
Income taxes.
We did not report a benefit for
federal and state income taxes in the condensed consolidated financial
statements for the nine months ended September 30, 2012, the nine months ended
September 30, 2011, the year ended December 31, 2011 or the years ended
December 31, 2010 and 2009 as the deferred tax asset generated from our net
operating loss has been offset by a full valuation allowance because it is more
likely than not that the tax benefits of the net operating loss carry forward
will not be realized.
Critical Accounting Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles and related disclosures requires
management to make estimates and assumptions.
We believe that the following are our most critical
accounting estimates and assumptions we must make in the preparation of our
Consolidated Financial Statements and related disclosures:
Revenue recognition:
Our fuel cell systems are
designed to replace incumbent electric power technologies in material handling
equipment. Our current product offerings are intended to offer complementary,
quality power while demonstrating the market value of fuel cells as a preferred
form of alternative distributed power generation. Subsequent enhancements to
our initial product are expected to expand the market opportunity for fuel
cells by lowering the installed cost, decreasing operating and maintenance
costs, increasing efficiency and improving reliability.
26
Effective April 1, 2010, we adopted ASU No. 2009-13
on Topic 605, Revenue Recognition Multiple Deliverable Revenue Arrangements
retroactive to January 1, 2010
.
The objective of this ASU is to address
the accounting for multiple-deliverable arrangements to enable vendors to
account for products or services (deliverables) separately rather than as a
combined unit. Vendors often provide multiple products or services to their
customers. Those deliverables often are provided at different points in time or
over different time periods. This ASU provides amendments to the criteria in
Subtopic 605-25 for separating consideration in multiple-deliverable
arrangements. The amendments in this ASU establish a selling price hierarchy
for determining the selling price of a deliverable. The selling price used for
each deliverable will be based on vendor-specific objective evidence, or VSOE
if available, third-party evidence, or TPE if VSOE is not available, or
estimated selling price, or ESP if neither VSOE nor TPE is available. The
amendments in this ASU also replace the term fair value in the revenue
allocation guidance with selling price to clarify that the allocation of
revenue is based on entity-specific assumptions rather than assumptions of a
marketplace participant and expands the disclosure requirements related to a
vendors multiple-deliverable revenue arrangements.
We enter into multiple-deliverable revenue
arrangements that may contain a combination of fuel cell systems or equipment,
installation, service, maintenance, fueling and other support services. We
were previously prohibited from separating these multiple deliverables into
individual units of accounting without VSOE of fair value or other TPE of fair
value. This evidence was not available due to our limited experience and lack
of evidence of fair value of the undelivered components of the sale. Without
this level of evidence, we had to treat each sale as a single unit of
accounting and defer the revenue recognition of each sale, recognizing revenue
over a straight-line basis as the continued service, maintenance and other
support obligations expired. Under ASU No. 2009-13, the requirement to have
VSOE or TPE in order to recognize revenue has been modified, and it now allows
the vendor to make its best estimate of the standalone selling price of
deliverables when more objective evidence of selling price is not available.
For all product and service revenue transactions entered
into prior to the implementation of ASU No. 2009-13, we 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. See Note 18 of our consolidated
financial statements for further discussion of our multiple-deliverable revenue
arrangements.
Product warranty reserve
: The product
and service revenue contracts entered into as of January 1, 2010 generally
provide a one to two-year product warranty to customers from date of
shipment. We currently estimate the costs of satisfying warranty claims
based on an analysis of past experience and provide for future claims in the
period the revenue is recognized. We carefully monitor the warranty work
requested by our customers and management believe that our current warranty
reserve appears adequate as of September 30, 2012. Our product and service
warranty reserve as of September 30, 2012 was approximately $3.0 million and is
included in product warranty reserve in the consolidated balance sheets.
In addition to the standard product warranty, we have
entered into certain contracts with customers that include extended warranty
and maintenance terms of five to ten years from the date of installation. These
contracts are accounted for as a deliverable in accordance with ASU 2009-13,
and accordingly, revenue generated from these transactions is deferred and
recognized in income over the warranty period. The fair value of the extended
warranty and maintenance deliverable has been estimated using the projected
cash outflows to meet the obligations in the related contract. Projected cash
outflows have been determined using estimated product run hours, failure rates
and other assumptions based on our historical experience. For more detailed
information, see the Risk Factor -
Certain GenDrive component quality issues have resulted
in adjustments to our warranty reserves, which negatively impacted our results
and delayed our new order momentum, and unanticipated future product
reliability and quality issues could impair our ability to service long term
warranty and maintenance contracts profitably.
Valuation of long-lived assets:
We assess the
impairment of long-lived assets, including identifiable intangible assets,
whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors we consider important that could trigger an
impairment review include, but are not limited to, the following:
-
significant underperformance
relative to expected historical or projected future operating results;
-
significant changes in the manner
of our use of the acquired assets or the strategy for our overall business;
-
significant negative industry or
economic trends;
-
significant decline in our stock
price for a sustained period; and
-
our market capitalization relative
to net book value.
When we determine that the carrying value of long-lived
assets, including identifiable intangible assets, may not be recoverable based
upon the existence of one or more of the above indicators of impairment, we
would measure any impairment based upon the provisions of FASB ASC No.
350-35-30-14, Intangibles - Goodwill and Other and FASB ASC No. 360-10-35-15,
Impairment or Disposal of Long-Lived Assets, as appropriate. Any resulting
impairment loss could have a material adverse impact on our financial condition
and results of operations.
Stock Based Compensation
: We recognize stock-based
compensation expense associated with the vesting of share based instruments in
the consolidated statements of operations. Determining the amount of
stock-based compensation to be recorded requires us to develop estimates to be
used in calculating the grant-date fair value of stock options. We calculate
the grant-date fair values using the Black-Scholes valuation model. The
Black-Scholes model requires us to make estimates of the following assumptions:
Expected volatilityThe estimated stock price
volatility was derived based upon our actual stock prices over an historical
period equal to the expected life of the options, which represents our best
estimate of expected volatility.
27
Expected option lifeOur estimate of an expected option
life was calculated in accordance with the simplified method for calculating
the expected term assumption. The simplified method is a calculation based on
the contractual life and vesting terms of the associated options.
Risk-free interest rateWe use the yield on
zero-coupon U.S. Treasury securities having a maturity date that is
commensurate with the expected life assumption as the risk-free interest rate.
The amount of stock-based compensation recognized during a
period is based on the value of the portion of the awards that are ultimately
expected to vest. FASB ASC No. 718-10-55, Compensation - Stock
Compensation Overall Implementation and Guidance Illustrations, requires
forfeitures to be estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those estimates. The term
forfeitures is distinct from cancellations or expirations and represents
only the unvested portion of the surrendered option. We review historical
forfeiture data and determine the appropriate forfeiture rate based on that
data. We re-evaluate this analysis periodically and adjust the forfeiture rate
as necessary. Ultimately, we will recognize the actual expense over the vesting
period only for the shares that vest.
Comparison of Nine Months Ended September 30, 2012 and Nine Months Ended
September 30, 2011
Product and service revenue.
Product and service
revenue for the nine months ended September 30, 2012 increased $6.8 million, or
57.1%, to $18.7 million from $11.9 million for the nine months ended September
30, 2011. During the nine months ended September 30, 2012, we shipped 873 fuel
cell systems to end customers as compared to 412 fuel cell systems shipped
during the nine months ended September 30, 2011. During the nine months
ended September 30, 2012, and September 30, 2011, we deferred $3.3 million and
$1.1 million in revenue, respectively, due to contingent provisions in our
agreements, as well as certain deliverables where the criteria for recognition
have not yet been met. Additionally, in the nine months ended September
30, 2012, we recognized approximately $1.7 million of deferred revenue in
connection with deliverables that met the criteria for recognition, whereas in
the nine months ended September 30, 2011, we recognized approximately $1.1
million of deferred revenue associated with deliverables that met the criteria for recognition.
Research and development contract revenue.
Research and development
contract revenue for the nine months ended September 30, 2012 decreased
approximately $1.8 million, or 54.5%, to $1.5 million from $3.3 million for the
nine months ended September 30, 2011. The decrease was
primarily related to fewer active projects in 2012. Additionally, in the
nine months ended September 30, 2011, we shipped 40 fuel cell systems under two
separate Department of Defense contracts.
Licensed technology revenue.
Licensed technology
revenue for the nine months ended September 30, 2011 was approximately
$489,000. There was no licensed technology revenue in 2012.
Cost of product and service revenue.
Cost of
product and service revenue for the nine months ended September 30, 2012
increased approximately $9.4 million, or 49.0%, to $28.6 million from $19.2
million for the nine months ended September 30, 2011. The increase in the
cost of product and service revenue primarily resulted from $3.3 million in
additional expenses for unanticipated warranty claims arising from GenDrive
component quality issues that were identified during the quarter ended
September 30, 2012. Additionally, during the nine months ended September
30, 2012, we shipped 873 fuel cell systems to end customers as compared to 412
fuel cell systems shipped during the nine months ended September 30, 2011.
Cost of research and development contract revenue
.
Cost of research and development contract revenue for the nine months ended
September 30, 2012 decreased approximately $3.1 million, or 56.4%, to $2.4
million from $5.5 million for the nine months ended September 30, 2011.
The decrease was primarily a result of fewer active contracts in 2012, coupled
with a lower percentage of cost sharing on active contracts in 2012.
Additionally, in the nine months ended September 30, 2011, we shipped 40 fuel
cell systems under two separate Department of Defense contracts.
Research and development expense.
Research and
development expense for the nine months ended September 30, 2012 increased
approximately $500,000, or 13.9%, to $4.1 million from $3.6 million for the nine
months ended September 30, 2011. This increase in expense was a result of a
decrease in engineering personnel charging time to government programs due to
fewer government contracts during 2012.
Selling, general and administrative expenses.
Selling, general and administrative expenses for the nine months ended
September 30, 2012 decreased approximately $500,000, or 4.5%, to $10.6 million
from $11.1 million for the nine months ended September 30, 2011. The decrease
was primarily the result of restructuring charges of approximately $474,000
recorded during 2011, coupled with a decrease in professional fees incurred
during 2012. These expenses were partly offset by an increase in travel
expenses, and a decline in selling, general and administrative expenses charged
to government programs due to fewer government contracts during 2012.
28
Amortization of intangible assets.
Amortization of intangible assets
decreased to approximately $1.7 million for the nine months ended September 30,
2012, compared to approximately $1.8 million for the nine months ended September
30, 2011. The decrease was 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 for the nine months ended September
30, 2012 decreased approximately $50,000, or 22.6%, to $171,000 from $221,000
for the nine months ended September 30, 2011. The decrease was primarily related
to a decrease in rental income, partially offset by a realized loss from
available-for-sale securities recorded in the first quarter of 2011.
Change in fair value of common stock warrant liability.
The change in fair value of common stock warrant liability for the nine months
ended September 30, 2012 decreased $500,000 or 11.9%, to $3.7 million from $4.2
million for the nine months ended September 30, 2011. These variances were
primarily due to changes in our common stock share price, and changes in
volatility of our common stock, which are significant inputs to the
Black-Scholes valuation model.
Interest and other expense and foreign currency gain
(loss).
Interest and other expense and foreign currency gain (loss) for the
nine months ended September 30, 2012 and 2011 was approximately $(158,000) and
$3,000, respectively. Interest and other expense related to the Credit Line
Agreement was approximately $153,000 and $0, respectively, for the nine months
ended September 30, 2012 and 2011.
Comparison of the Year Ended December 31, 2011 and Year Ended
December 31, 2010
Product and service revenue.
Product and service
revenue for the year ended December 31, 2011 increased $7.5 million, or 47.6%,
to $23.2 million from $15.7 million for the year ended December 31, 2010.
This increase was primarily related to increased shipments during the current
year. In the product and service revenue category, there were 984 fuel
cell shipments for the year ended December 31, 2011 as compared to 562 fuel
cell systems shipped for the year ended December 31, 2010.
Research and development contract revenue.
Research
and development contract revenue for the year ended December 31, 2011 increased
$288,000, or 8.0%, to $3.9 million from $3.6 million for the year ended
December 31, 2010. The increase was primarily related to two contracts
that began in 2011, partially offset by the completion of contracts from prior
years. In the research and development category, during the twelve months
ended December 31, 2011 we shipped 40 GenDrive fuel cell systems under
government programs.
Cost of product and service revenue.
Cost of
product and service revenue for the year ended December 31, 2011 increased $7.6
million, or 32.7%, to $30.7 million from $23.1 million for the year ended
December 31, 2010. The increase was directly related to increased fuel cell
shipments to end customers. In the cost of product and service revenue
category, there were 984 fuel cell shipments for the year ended December 31,
2011 and 562 fuel cell systems shipped for the year ended December 31,
2010. The increase also included an allocation of overhead costs charged
to cost of product and service revenue as a result of increased sales and a
focus on commercial production of our product. Accordingly, some of these costs
were included in research and development expense until the second quarter of
2010, due to our focus on research and development at that time.
Cost of research and development contract revenue
.
Cost of research and development contract revenue for the year ended December
31, 2011 decreased $139,000, or 2.2%, to $6.2 million from $6.4 million for the
year ended December 31, 2010. This decrease was primarily related to two
new contracts that began in 2011, partially offset by the completion of
contracts from prior years.
Research and development expense.
Research
and development expense for the year ended December 31, 2011 decreased $7.2
million, or 56.2%, to $5.7 million from $12.9 million for the year ended
December 31, 2010. This decline was primarily a result of our 2010
restructuring, which was focused on the commercialization of our GenDrive
product. Prior to this restructuring our focus had been on research and
development.
Selling, general and administrative expenses.
Selling,
general and administrative expenses for the year ended December 31, 2011
decreased $11.0 million, or 43.1%, to $14.6 million from $25.6 million for the
year ended December 31, 2010. This decrease was primarily a result of our
May 2010 restructuring plan, including $8.1 million in charges recorded in 2010
for this restructuring, and a $2.1 million write-off of assets from Plug Power
Canada.
Amortization of intangible assets.
Amortization of
intangible assets remained stable at $2.3 million for the years ended December
31, 2011 and December 31, 2010.
Interest and other income and net realized gains from
available-for-sale securities.
Interest and other income and net realized
gains from available-for-sale securities decreased to $248,000 for the year
ended December 31, 2011 from $1.1 million for the year ended December 31,
2010. This decrease was primarily related to the sale of trading
securities and available-for-sale securities during 2011 and 2010.
29
Interest and other expense.
Interest and other
expense for the year ended December 31, 2011 was approximately $22,000,
compared to approximately $487,000 for the year ended December 31, 2010
The decline was primarily related to the extinguishment of the Credit Line
Agreement effective July 1, 2010.
Comparison of the Year Ended December 31, 2010 and Year Ended December 31,
2009
Product and service revenue.
Product and service
revenue for the year ended December 31, 2010 increased $10.9 million, or
225.7%, to $15.7 million from $4.8 million for the year ended December 31,
2009. Approximately $10.5 million of the increase was related to the
adoption of ASU No. 2009-13.
Research and development contract revenue.
Research
and development contract revenue for the year ended December 31, 2010 decreased
$3.9 million, or 51.8%, to $3.6 million from $7.5 million for the year ended
December 31, 2009. The decrease was primarily related to having fewer active
contracts in 2010.
Cost of product and service revenue.
Cost of
product and service revenue for the year ended December 31, 2010 increased
$15.9 million, or 218.9%, to $23.1 million from $7.2 million for the year ended
December 31, 2009. The increase was primarily related to increased product and
service fuel cell system shipments to end customers. In the cost of product and
service revenue category, there were 562 fuel cell system shipments for the
year ended December 31, 2010, as compared to 117 for the year ended December
31, 2009. This does not include additional shipments of 98 and 140 fuel
cell shipments, respectively, that were being accounted for under a lease
arrangement (until we subsequently sold the lease). Cost recognized on leased
products were recorded on the consolidated balance sheets as investment in
leased property and depreciated over the lease term. The increase in cost of
product and service revenue was also due to an allocation of overhead costs
charged to cost of product and service revenue as a result of increased sales
and a focus on commercial production of our product. Accordingly, some of these
costs were included in research and development expense until the second
quarter of 2010, due to our focus on research and development at that time.
Cost of research and development contract revenue
.
Cost of research and development contract revenue for the year ended December
31, 2010 decreased $6.1 million, or 48.8%, to $6.4 million from $12.4 million
for the year ended December 31, 2009. This decrease was primarily related to
having fewer active contracts in 2010.
Research and development expense.
Research
and development expense for the year ended December 31, 2010 decreased $3.4
million, or 21.0%, to $12.9 million from $16.3 million for the year ended
December 31, 2009. This decrease was primarily a result of our 2010
restructuring, and corresponding wind-down of our operations in Plug Power
Energy India Private Limited, Plug Power Canada and Plug Power Holland
organizations. The decrease was also due to a higher allocation of overhead
costs charged to cost of product and service revenue as a result of increased
sales and a focus on commercial production of our product. Accordingly, some of
these costs were previously included in research and development expense due to
our focus on research and development at that time.
Selling, general and administrative expenses.
Selling, general and administrative expenses for the year ended December 31,
2010 increased $10.1 million, or 65.8%, to $25.6 million from $15.4 million for
the year ended December 31, 2009. This increase was primarily a result of the
corporate restructuring plan announced in May 2010, which totaled $8.1 million
and a $2.1 million write-off of assets from Plug Power Canada.
Amortization of intangible assets.
Amortization of
intangible assets increased to $2.3 million for the year ended
December 31, 2010, compared to $2.1 million for the year ended
December 31, 2009. The increase was related to foreign currency
fluctuations.
Interest and other income and net realized gains
from available-for-sale securities.
Interest and other income and net
realized gains from available-for-sale securities decreased to $1.1 million for
the year ended December 31, 2010 from $1.7 million for the year ended December
31, 2009. This decrease was primarily related to lower cash balances coupled
with lower yields on our investments due to a declining interest rate
environment offset by increased rental income received from our Latham
facility. Interest income on trading securities and available-for-sale
securities for the year ended December 31, 2010 was approximately $352,000 and
$179,000, respectively. Interest income on trading securities and
available-for-sale securities for the year ended December 31, 2009 was
approximately $906,000 and $307,000, respectively.
Interest and other expense.
Interest and other
expense for the year ended December 31, 2010 was approximately $487,000,
compared to approximately $1.1 million for the year ended December 31, 2009.
Interest expense related to the Credit Line Agreement was approximately
$305,000 and $915,000, respectively, for the years ended December 31, 2010 and
2009, respectively.
Liquidity and Capital Resources
We have experienced recurring operating losses and as of
September 30, 2012, we had an accumulated deficit of approximately $778.2
million. Substantially all of our accumulated deficit has 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 public and
private 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.
30
As of September 30, 2012, we had approximately $15.6
million of working capital, which includes $9.5 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 SVB 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. On November
29, 2012 we executed a Third Loan Modification Agreement with SVB, which, among
other things, waived our failure to comply with the Adjusted Quick Ratio
financial covenant as of the months ended September 30, 2012 and October 31,
2012, revised the future Adjusted Quick Ratio covenant level and removed our
ability to request financing for Inventory Placeholder Invoices. Based on the
borrowing base calculation and our outstanding loan balance, we currently have
no availability under this facility.
We believe that our current cash, cash equivalents and
cash generated from future sales, as well as the cash proceeds from this offering,
will provide sufficient liquidity to fund operations through the end of 2013.
This projection is based on our current expectations regarding product sales,
cost structure, 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 without additional external financing.
Alternatives we would consider for additional funding
include equity or debt financing, a sale-leaseback of our real estate, or
licensing of our technology. In addition to raising capital, we may also
consider strategic alternatives including business combinations, 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 operations
and may be required to delay, reduce and/or cease our operations and/or seek
bankruptcy protection. After this offering, 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 alternatives 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. Similarly, if our common stock is delisted from the NASDAQ
Capital Market, it may limit 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.
31
Several key indicators of
liquidity are summarized in the following table:
|
Years ended or at
December 31,
|
Nine months ended
or at
September 30,
|
(in thousands)
|
2009
|
2010
|
2011
|
2011
|
2012
|
Cash and cash equivalents at end of period
|
$ 14,581
|
$ 10,955
|
$ 13,857
|
$ 22,802
|
$ 9,461
|
Trading
securities auction rate debt securities at end of period
|
53,397
|
-
|
-
|
-
|
-
|
Available-for-sale
securities at end of period
|
47,960
|
10,403
|
-
|
-
|
-
|
Borrowings under line of credit at end of period
|
59,375
|
-
|
5,405
|
-
|
1,000
|
Working capital at end of period
|
60,009
|
25,556
|
22,452
|
24,543
|
15,584
|
Net loss
|
40,709
|
46,959
|
27,454
|
20,286
|
23,388
|
Net cash used in operating activities
|
38,228
|
40,770
|
33,310
|
19,152
|
15,548
|
Purchase of property, plant, and equipment
|
533
|
1,100
|
1,326
|
1,156
|
292
|
Effective July 1, 2010, all auction rate debt
securities were repurchased at par by the third-party lender holding the
collateral under the Repurchase Agreement, which resulted in a corresponding
reduction in amounts outstanding and the extinguishment of the Credit Line
Agreement. See Managements Discussion and Analysis of Financial Condition
and Results of Operations Results of Operations Gain on auction rate debt
securities repurchase agreement, as well as note 7 of our consolidated
financial statements.
We are a party to a loan and security agreement, as
amended, the Loan Agreement with Silicon Valley Bank, or SVB, providing us with
access to up to $15.0 million of financing in the form of revolving loans, letters
of credit, foreign exchange contracts and 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 an advanced rate of 80% on our eligible
accounts receivable and an advanced rate of 25% on our eligible inventory
(subject to a limit of the lesser of $3 million and 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: financed accounts receivables are equal to SVBs prime rate, which is
currently 3.25% per annum, plus 3.0% per annum or if we maintain 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 financed inventory is equal to SVBs prime rate plus
5.25% per annum or if we maintain 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 is secured by substantially all of our
properties, rights and assets, including substantially all of our 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 our operations, including restrictions pertaining to,
among other things: the condition of inventory; maintenance of an adjusted
quick ratio of at least 1.50 to 1.0; intellectual property right protection and
registration; dispositions of assets; changes in business, management, ownership
or business locations; mergers, consolidations or acquisitions; incurrence or
assumption of indebtedness; incurrence of liens on any of our property; paying
dividends or making distributions on, or redemptions, retirements or
repurchases of, capital stock; transactions with affiliates; and payments on or
amendments to subordinated debt. At September 30, 2012 we were in
compliance with all covenants except the Adjusted Quick Ratio covenant.
The Loan Agreement also contains events of default
customary for credit facilities of this type with, in some cases, corresponding
grace periods, including, failure to pay any principal or interest when due,
failure to comply with covenants, any material adverse change occurring, an
attachment, levy or restraint on our business, certain bankruptcy or insolvency
events , payment defaults relating to, or acceleration of, other indebtedness
or that could result in a material adverse change to our business, we or our
subsidiaries becoming subject to judgments, claims or liabilities in an amount
individually or in aggregate in excess of $150,000, any misrepresentations, or any
revocation, invalidation, breach or invalidation of any subordinated debt.
On November 29, 2012 we executed a Third Loan Modification
Agreement with SVB, which, among other things, waived our failure to comply
with the Adjusted Quick Ratio financial covenant as of the months ended
September 30, 2012 and October 31, 2012, revised the future Adjusted Quick
Ratio covenant level and removed our ability to request financing for Inventory
Placeholder Invoices.
32
The Loan Agreement will expire on March 29, 2013. The Loan
Agreement may be terminated prior to March 29, 2013; however, we would be
required to pay a $150,000 early termination fee in connection with a
termination by us for any reason or by SVB upon notice and after the occurrence
and during the continuance of an event of default. Based on the borrowing
base calculation and our outstanding loan balance, we currently have no
availability under this facility.
As of December 31, 2012, $3.4 million was outstanding
under the loan agreement. This amount was subsequently paid in full in
January, 2013.
In September 2011, we signed a letter of credit with SVB
in the amount of $525,000. The standby letter of credit is required by the
agreement negotiated between Air Products and Chemicals, Inc., or Air Products,
and us to supply hydrogen infrastructure and hydrogen to Central Grocers at
their distribution center. There are no collateral requirements associated
with this letter of credit.
Cash and Cash Equivalents
During the nine months ended September 30, 2012, cash used
for operating activities was $15.5 million, consisting primarily of a net loss
of $23.4 million, offset by changes in operating assets and liabilities of $6.8
million, and net non-cash expenses in the amount of $1.1 million, including
$3.2 million for amortization and depreciation, $1.5 million for stock based
compensation, $58,000 for loss on disposal of property, plant, and equipment,
offset by a $3.7 million reduction for the change in fair value of common stock
warrant liability. Cash used in investing activities for the nine months ended
September 30, 2012 was $234,000, consisting of purchases of property, plant,
and equipment of $292,000, offset by proceeds from the disposal of property,
plant and equipment of $58,000. Cash provided by financing activities for the
nine months ended September 30, 2012 was approximately $11.4 million consisting
primarily of $17.2 million in proceeds from the public offering offset by $1.4
million in public offering costs and $4.4 million in net repayment of
borrowings under line of credit.
Financing Activities
On May 31, 2011, we 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 us 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 described below 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 and we expect that
the exercise price of the warrants will be reduced and the number of shares
issuable upon exercise of these warrants will be increased as a result of this
offering.
On June 8, 2011, we 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, we 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, we 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 us, were approximately $13.6 million.
On March 29, 2012, we sold 1,950,000 additional shares of
common stock, pursuant to the underwriters exercise of its over-allotment
option in connection with our recently announced public offering, resulting in
additional net proceeds to the Company of $2,085,525.
Income Taxes
Under Internal Revenue Code (IRC) Section 382, the use of
loss carryforwards may be limited if a change in ownership of a company occurs.
If it is determined that due to transactions involving our shares owned by its
5 percent or greater shareholders a change of ownership has occurred under the
provisions of IRC Section 382, our Federal and state net operating loss
carryforwards could be subject to significant IRC Section 382 limitations.
33
Based upon an IRC Section 382 study, a Section 382
ownership change occurred in 2011 that resulted in approximately $675 million
of Federal and state net operating loss carryforwards being subject to IRC
Section 382 limitations and as a result of IRC Section 382 limitations,
approximately $618 million of the net operating loss carryforwards will expire
prior to utilization. As a result of the IRC Section 382 limitations, these net
operating loss carryforwards that will expire unutilized are not reflected in
our gross deferred tax asset as of December 31, 2011.
The ownership change in 2011 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 $9.4 million. This will
translate into unfavorable book to tax add backs in our 2011 to 2016 U.S.
corporate income tax returns that resulted in a gross deferred tax liability of
$3.6 million at the time of the ownership change and $2.6 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 has no impact on our
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, a Section 382 ownership change occurred during March 2012 that
resulted in all but approximately $14.9 million of the our Federal and
state net operating loss carry-forwards expiring prior to utilization, which
resulted in the our gross deferred tax asset and related valuation
allowance decreasing by approximately $24.6 million. 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 $36.5 million. This will translate into unfavorable book to tax
add backs in the our 2012 to 2017 U.S. corporate income tax returns that
would result in a gross deferred tax liability of $13.9 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 our financial position, results of operations, or cash flows.
However, these potential future tax benefits would no longer be available to
us.
Contractual Obligations
Contractual obligations as of December 31, 2011, under
agreements with non-cancelable terms are as follows:
|
|
Total
|
|
<1 year
|
|
1-3 Years
|
|
3-5 Years
|
|
> 5 Years
|
|
Operating lease obligations...........................
|
|
2,913,968
|
|
730,531
|
|
850,297
|
|
631,923
|
|
701,217
|
|
Purchase obligations (A)................................
|
|
6,121,642
|
|
6,121,642
|
|
-
|
|
-
|
|
-
|
|
Other long-term obligations (B),(C).............
|
|
114,703
|
|
114,703
|
|
-
|
|
-
|
|
-
|
|
Line of credit (D).............................................
|
|
5,405,110
|
|
5,405,110
|
|
-
|
|
-
|
|
-
|
|
|
|
$
|
14,555,423
|
|
$
|
12,371,986
|
|
$
|
850,297
|
|
$
|
631,923
|
|
$
|
701,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
Ballard -
During
2010, we signed a supply agreement with Ballard Power Systems, or Ballard,
which continues through December 31, 2014. Under this agreement, Ballard
will serve as the exclusive supplier of fuel cell stacks for the GenDrive
product line for North America and select European countries. An addendum
to this agreement was signed on June 30, 2011. We have contractual
obligations under this addendum to purchase 3,250 fuel cell stacks between the
dates of July 2, 2011 and December 31, 2012. We also have contractual
obligations related to building maintenance.
|
(B)
|
NYSERDA
-
We
have a contractual obligation to NYSERDA, a New York State Government agency,
to pay royalties to NYSERDA based on 0.5% of net sales of our GenCore and GenSys
products if product is manufactured in the state of New York. See Note 17
(Commitments and Contingencies) of the Consolidated Financial Statements for
more detail.
|
(C)
|
GE
- We have
a contractual obligation pursuant to a development collaboration agreement with
General Electric Company, or GE. We and GE agreed to extend the terms of the
agreement such that our remaining obligation to purchase approximately $363,000
of services as of December 31, 2009 under the agreement became due and payable;
however, we and GE entered into a Lease Agreement for space in our Latham, New
York facility whereby the parties mutually agreed that the amount owed by us to
GE under the development collaboration agreement would be offset by the rent
owed by GE to us each month. The development collaboration agreement is
scheduled to terminate on the earlier of (i) December 31, 2014 or
(ii) upon the completion of a certain level of program activity. See Note
17 (Commitments and Contingencies) of the Consolidated Financial Statements for
more detail.
|
(D)
|
SVB
- We
entered into a revolving credit facility arrangement with SVB on August 9,
2011, and as a result of the Second Loan Modification Agreement entered into
with SVB on March 30, 2012, the revolving credit facility now provides availability
of up to $15.0 million, subject to borrowing base limitations, to support
working capital needs. See Loan and Security Agreement for additional
information regarding the revolving credit facility.
|
34
Off-Balance Sheet Arrangements
None.
Quantitative and Qualitative Disclosures about Market Risk
The following discussion should be read together with our
consolidated financial statements and related notes to consolidated financial
statements included elsewhere in this prospectus.
We invest our excess cash in government, government backed
and interest-bearing investment-grade securities that we generally hold for the
duration of the term of the respective instrument. We do not utilize derivative
financial instruments, derivative commodity instruments or other market risk
sensitive instruments, positions or transactions in any material fashion.
Accordingly, other than with respect to auction rate debt securities, we
believe that, while the investment-grade securities we hold are subject to
changes in the financial standing of the issuer of such securities, we are not
subject to any material risks arising from changes in interest rates, foreign
currency exchange rates, commodity prices, equity prices or other market
changes that affect market risk sensitive instruments.
As of December 31, 2010, all of our operations had been
relocated to the United States. A portion of our 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, our results can be affected.
In addition, we may source inventory among our worldwide
operations. This practice can give rise to foreign exchange risk resulting from
the varying cost of inventory to the receiving location as well as from the
revaluation of intercompany balances. We mitigate this risk through local
sourcing efforts.
35
BUSINESS
Background
We are 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 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, or 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.
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, or OEMs, and their dealer networks. We sell to businesses,
government agencies and commercial consumers.
Business Strategy
We are committed to developing effective, economical and
reliable fuel cell products and services for businesses, government agencies
and commercial consumers. Building on our substantial fuel cell application and
product integration experience, we are focused on generating strong
relationships with customers who value increased reliability, productivity,
energy security and a sustainable future.
Our business strategy leverages our unique fuel cell
application and integration knowledge to identify early adopter markets for
which we can design and develop innovative systems and customer solutions that
provide superior value, ease-of-use and environmental design.
We have made significant progress in our analysis of the
material handling 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.
Our strategy is to focus our resources on the material
handling market with our GenDrive product line, which represents an alternative
to lead-acid battery configurations. Our strategy also includes the following
objectives: decrease product costs by leveraging the supply chain, lower
manufacturing costs, improve system reliability, expand our sales network to
effectively reach more of our targeted customers and provide customers with
high-quality products, service and post-sales support experience.
Our longer-term objectives are to deliver economic,
social, and environmental benefits in terms of reliable, clean, cost-effective
fuel cell solutions and, ultimately, sustainability.
We believe continued investment in research and
development is critical to the development and enhancement of innovative
products, technologies and services. In addition to evolving our direct
hydrogen fueled systems, we continue to capitalize on our investment and
expertise in power electronics, controls, and software design.
Products
We sell and continue to develop a range of fuel cell
products to replace lead-acid batteries in material handling vehicles and
industrial trucks for some of North Americas largest distribution and
manufacturing businesses. Our primary product line is GenDrive, a hydrogen
fueled PEM fuel cell system to provide power to industrial vehicles. We are
focusing our efforts on material handling applications (forklifts) at
multi-shift high volume manufacturing and high throughput distribution sites
where our products and services provide a unique combination of productivity,
flexibility and environmental benefits. In October, 2011 we introduced our next
generation GenDrive products. These next generation fuel cell units
include a simplified architecture featuring 30% fewer components and a scalable
design for low power applications, giving customers greater flexibility in
managing their deployments. By the third quarter of 2012, the majority of
units produced and shipped were based on the simplified architecture. During
the fiscal year ended December 31, 2012, we received new orders from Stihl,
Mercedes Benz, Lowes, Carters and Ace Hardware. We also experienced add-on
orders from Walmart, P&G, Coca-Cola, Sysco, Wegmans, Kroger and BMW.
36
We continue to develop and monitor future iterations of
our products aligned with our evolving product roadmap. According to Fuel Cells
Bulletin, an industry publication, we had 85% world-wide market share in the
fuel cell powered material handling industry as of September 2010.
Product Support & Services
To promote fuel cell adoption and maintain post-sale
customer satisfaction, we offer a range of service and support options. These
options include installation, commissioning, remote monitoring, product
manuals, as well as on-site technical support.
Additionally, GenDrive product support and services may
also include customer training and using service personnel from lift truck
dealer networks. Such personnel may assist with the commissioning and
installation of GenDrive products and, in some cases, regularly scheduled
preventative maintenance.
Markets/Geography & Order Status
Our commercial sales for GenDrive products are in the
material handling market, which primarily consist of large fleet, multi-shift
operations in high-volume manufacturing and high-throughput distribution
centers. In 2012, all of our GenDrive product installations were in North
America.
We shipped 873 units and received 353 orders for our GenDrive product during the nine months ended September 30, 2012, representing
$9.7
million in orders from material handling customers. We
shipped 1,024 units and received 2,503 orders for our GenDrive product during
the year ended December 31, 2011, representing $46.1 million in orders from
material handling customers; $18.1 million of which were received during the
fourth quarter. Backlog on December 31, 2012 is estimated to have been
1,319 units, representing
approximately $26.2 million in value. Backlog on December 31,
2011 was 1,969 units representing approximately $36.0 million in value. Backlog
on December 31, 2010 was 527 units representing approximately $12.8 million in
value including approximately $700,000 related to 20 units that were awarded
under a government project.
The following table sets forth certain shipment, order and
backlog information (in units):
|
|
Nine Months
ended
September 30
|
|
|
|
|
Product Shipments
|
552
|
1,024
|
873
|
Lease Shipments
|
98
|
-
|
-
|
Cancellations/Adjustments
|
(20)
|
(37)
|
-
|
Orders
|
543
|
2,503
|
353
|
Backlog
|
527
|
1,969
|
1,449
|
We have accepted orders that require certain conditions or
contingencies to be satisfied prior to shipment, some of which are outside of
our control. Historically, shipments made against these orders generally occur
between ninety days and twenty-four months from the date of acceptance of the
order.
The assembly of GenDrive products that we sell is
performed at our manufacturing facility in Latham, New York. Currently, the
supply and manufacture of several critical components used in our products are
performed by sole-sourced third-party vendors in the U.S., Canada and China.
We intend to focus our efforts on developing,
manufacturing and selling our GenDrive products and do not expect to develop or
manufacture GenSys or GenCore products in the near term. The company took no
GenCore or GenSys orders in 2012 and did not ship any of these products in
2012.
37
Distribution, Marketing and Strategic Relationships
We have developed strategic relationships with
well-established companies in key areas including distribution, service,
marketing, supply, technology development and product development. We sell our
products worldwide, with a primary focus on North America, through our direct
product sales force, OEMs and their dealer networks.
Competition
We are confronted by aggressive competition in all areas
of our business. The markets we address for motive power are characterized by
the presence of well-established battery and combustion generator products in
addition to several competing fuel cell companies. Over the past several
years, there has been price competition in these markets. The principal
competitive factors in the markets in which we operate include price, product
features, including size and weight, relative price and performance, product
quality and reliability, design innovation, marketing and distribution
capability, service and support and corporate reputation.
In the material handling market, we believe our
GenDrive products have an advantage over lead-acid batteries for customers who
run high-throughput distribution centers with multi shift operations by
offering increased productivity with lower operational costs. However, we
expect competition in this space to intensify as competitors attempt to imitate
our approach with their own offerings. Some of these current and potential
competitors have substantial resources and may be able to provide such products
and services at little or no profit or even at a loss to compete with our
offerings.
Intellectual Property
We believe that neither we nor our competitors can achieve
a significant proprietary position on the basic technologies currently used in
PEM fuel cell systems. However, we believe the design and integration of our
system and system components, as well as some of the low-cost manufacturing
processes that we have developed, are intellectual property that can be
protected. Our intellectual property portfolio covers among other things: fuel
cell components that reduce manufacturing part count; fuel cell system designs
that lend themselves to mass manufacturing; improvements to fuel cell system
efficiency, reliability and system life; and control strategies, such as added
safety protections and operation under extreme conditions. In general,
our employees are party to agreements providing that all inventions, whether
patented or not, made or conceived while being our employee, which are related
to or result from work or research that we perform, will remain our sole and
exclusive property.
During 2012, the U.S. Patent and Trademark Office, or USPTO,
issued two new patents to us and we have a total of 159 issued patents
currently active with the USPTO. At the close of 2012, we had
approximately 9 U.S. patent applications pending. The number of pending
patent applications decreased in 2012 relative to 2011. Additionally, we have
six
trademarks registered with the USPTO.
In October 2010, we licensed the intellectual property
relating to its stationary power products, GenCore and GenSys, to IdaTech plc
on a non-exclusive basis. We maintain ownership of, and the right to use,
the patents and other intellectual property licensed to IdaTech. As part
of the transaction, we also sold inventory, equipment and certain other assets
related to its stationary power business. Total consideration for the
licensing and assets was $5 million and was received during October 2010. The
consideration was subject to reduction by a maximum of $1 million in the
event that we did not deliver certain of the assets sold. As of December
31, 2010, $1.0 million was included in assets held for sale and $1.0 million
was included in other current liabilities in the consolidated balance
sheets. Upon delivery of those certain assets in the quarter ended June
30, 2011 the $1.0 million in consideration was released.
We formed a joint venture company based in France with
Axane, S.A. under the name Hypulsion to develop and sell hydrogen fuel cell
systems for the European material handling market. As part of the formation of
Hypulsion, we and Hypulsion entered into a License Agreement dated as of
February 29, 2012 under which we granted a license to Hypulsion of certain
intellectual property.
Government Regulation
Our products and their installations are subject to
oversight and regulation at the state and local level in accordance with state
and local statutes and ordinances relating to, among others, building codes,
fire codes, public safety, electrical and gas pipeline connections and hydrogen
siting. The level of regulation may depend, in part, upon where a system is
located.
In addition, product safety standards have been
established by the American National Standards Institute, or ANSI, covering the
overall fuel cell system. The class 1, 2 and 3 GenDrive products are designed with
the intent of meeting the requirements of UL 2267 Fuel Cell Power Systems for
Installation in Industrial Electric Trucks and NFPA 505 Fire Safety Standard
for Powered Industrial Trucks. The hydrogen tanks used in these systems
have been either certified to ANSI/CSA NGV2-2007 Compressed Natural Gas
Vehicle Fuel Containers or ISO/TS 15869 Gaseous hydrogen and hydrogen
blends-Land vehicle fuel tanks. A limited production of our class 1
GenDrive product was approved by a European Notified Body to carry the CE Mark.
We will continue to design our GenDrive products to meet ANSI and/or other
standards in 2013. We will also pursue the approval to carry the CE Mark
for class 1, 2 and 3 GenDrive Products from a European Notified Body. The
hydrogen tanks used in these systems will be certified to the Pressure
Equipment Directive by a European Notified Body. Other than these
requirements, at this time we do not know what additional requirements, if any,
each jurisdiction will impose on our products or their installation. We also do
not know the extent to which any new regulations may impact our ability to
distribute, install and service our products. As we continue distributing our
systems to our target markets, the federal, state or local government entities
may seek to impose regulations or competitors may seek to influence regulations
through lobbying efforts.
38
Raw Materials
Although most components essential to our business are
generally available from multiple sources, we currently obtain certain key components
including, but not limited to, fuel cell stack materials and energy storage
devices, from single or limited sources. In 2010, we signed a supply agreement
with Ballard Power Systems, or Ballard, which continues through December 31,
2014. An addendum to this agreement was signed on June 30, 2011. Under this
agreement, Ballard will serve as the exclusive supplier of fuel cell stacks for
Plug Powers GenDrive product line for North America and select European
countries. In the fourth quarter of 2012,
Ballard had temporarily stopped shipping fuel cell stacks for our GenDrive
product line due to a dispute with us, but we have since resolved this dispute
and we are once again in good standing with Ballard as our supplier.
We believe there are a few component suppliers and
manufacturing vendors whose loss to us could have a material adverse effect
upon our business and financial condition. Such vendors include Ballard and Air
Squared, Inc. We attempt to mitigate these potential risks by working
closely with these and other key suppliers on product introduction plans,
strategic inventories, coordinated product introductions and internal and
external manufacturing schedules and levels.
Research and Development
Because the fuel cell industry is characterized by its
early state of adoption, our ability to compete successfully is heavily
dependent upon our ability to ensure a continual and timely flow of competitive
products, services, and technologies to the marketplace. We continue to develop
new products and technologies and to enhance existing products in the areas of
cost, size, weight, and in supporting service solutions in order to drive
commercialization. We may expand the range of our product offerings and
intellectual property through licensing and/or acquisition of third-party
business and technology. Our research and development expense totaled $5.7
million, $12.9 million and $16.3 million in 2011, 2010 and 2009, respectively.
We also had cost of research and development contract revenue of $6.2 million,
$6.4 million and $12.4 million in 2011, 2010 and 2009, respectively. These
expenses represent the cost of research and development programs that are
partially funded under cost reimbursement research and development arrangements
with third parties.
Employees
As of December 31, 2012, we had 156 employees,
including 6 temporary employees. On December 11, 2012, we adopted a
restructuring plan to improve organizational efficiency and conserve working
capital needed to support the growth of our GenDrive business. In doing so, 22
full-time positions were eliminated at our U.S. facilities. This workforce
reduction was substantially completed on December 13, 2012. As a result of the
restructuring, we expect to reduce annual expenses by $3.0 to $4.0 million.
Facilities
Our principal offices are located in Latham, New York. At
our 36-acre campus, we own a 140,000 square foot facility that includes our
general office building, our manufacturing facility, and our research and
development center. We believe that this facility is sufficient to
accommodate our anticipated production volumes for at least the next two
years.
39
Legal Proceedings
In July 2008, Soroof Trading Development Company Ltd., or
Soroof, filed a demand for arbitration against GE Fuel Cell Systems, LLC, or
GEFCS, claiming breach of a distributor agreement and seeking damages of $3
million. Prior to GEFCS dissolution in 2006, we held a 40% membership interest
and GE Microgen, Inc., or GEM, held a 60% membership interest in GEFCS. In
January 2010, Soroof requested, and GEM and Plug Power Inc. agreed, that the
arbitration proceeding be administratively closed pending final resolution of
the matter in United States District Court, Southern District of New York. On
January 22, 2010, Soroof filed a complaint in United States District Court,
Southern District of New York naming, among others, Plug Power Inc., GEFCS, and
GEM as defendants. On January 24,
2012, following a motion for judgment on the pleadings and motion for summary
judgment, the Court dismissed with prejudice four of Soroofs claims and
dismissed without prejudice two of Soroofs claims. The Court also
dismissed with prejudice all claims against GEFCS. Soroof filed an
amended complaint on May 14, 2012 against us, GEM, and General Electric
Company, re-pleading the two claims that were dismissed without prejudice. On
December 12, 2012, the parties participated in a court settlement conference
with the presiding judge at the United States District Court for the Southern
District of New York. The case was not resolved at the settlement conference
and discovery continues. Accordingly, we believe that it is too early to
determine whether there is likely exposure to an adverse outcome and whether or
not the probability of an adverse outcome is more than remote. We, GEFCS, GEM
and General Electric Company, or GE, are party to an agreement under which we
agreed to indemnify such parties for up to $1 million of certain losses related
to the Soroof distributor agreement. GE has made a claim for indemnification
against us under this agreement for all losses it may suffer as a result of the
Soroof dispute. To the extent that the dispute results in an adverse
outcome for us or for any of the parties for which we have agreed to indemnify,
we could suffer financially as a result of the damages we would have to pay on
our behalf or that of our indemnitees.
40
Executive Officers and Directors
The following table sets forth certain information about
our executive officers, key employees and directors as of the date of this
prospectus.
Name
|
|
Age
|
|
Position(s)
|
Executive
Officers
|
|
|
|
|
Andrew
Marsh
|
|
56
|
|
President,
Chief Executive Officer and Director
|
Gerald
A. Anderson
|
|
55
|
|
Chief
Financial Officer
|
Gerard
L. Conway, Jr.
|
|
48
|
|
General
Counsel, Corporate Secretary and Senior Vice President
|
Erik
Hansen
|
|
41
|
|
Senior
Vice President
|
Adrian
Corless
|
|
46
|
|
Chief
Technology Officer, Senior Vice President
|
Directors
|
|
|
|
|
George
C. McNamee(1)
|
|
66
|
|
Chairman
of the Board
|
Gary
K. Willis(1)(2)
|
|
67
|
|
Director
|
Maureen
O. Helmer(2)(3)
|
|
56
|
|
Director
|
Evgeny
Rasskazov
|
|
28
|
|
Director
|
Larry
G. Garberding(2)(3)
|
|
74
|
|
Director
|
Douglas
T. Hickey(1)(2)(3)
|
|
57
|
|
Director
|
Evgeny
Miroshnichenko
|
|
32
|
|
Director
|
|
(1)
|
Member of the
Compensation Committee.
|
|
(2)
|
Member of the
Audit Committee.
|
|
(3)
|
Member of the
Nominating and Corporate Governance Committee.
|
Andrew J. Marsh
has served as our Chief Executive
Officer, President and member of the Board of Directors since April 8, 2008.
Previously, Mr. Marsh was a co-founder of Valere Power, where he served as CEO
and a member of the companys board of directors from the companys inception
in 2001 through its sale to Eltek ASA in 2007. Under his leadership, Valere
grew into a profitable global operation with over 200 employees and $90 million
in revenues derived from the sale of DC power products to the
telecommunications sector. During Mr. Marshs tenure, Valere Power received
many awards such as the Tech Titan award as the fastest growing technology
company in the Dallas Fort Worth area and the Red Herring Top 100 Innovator
Award. Prior to founding Valere, he spent almost 18 years with Lucent Bell
Laboratories in a variety of sales and technical management positions. Mr.
Marsh is a member of the board of directors of the California Hydrogen Business
Council, a non-profit group comprised of organizations and individuals in the
business of hydrogen. Mr. Marsh holds a Bachelor of Science in Electrical
Engineering Technology from Temple University, a Master of Science in
Electrical Engineering from Duke University and a Masters of Business
Administration from Southern Methodist University. We believe Mr. Marshs
qualifications to sit on our Board include his record of success in leadership
positions in technology companies having attributes similar to our Company, his
extensive experience in management positions as well as his educational
background in engineering and business administration.
41
Gerald A. Anderson
joined Plug Power as Chief
Financial Officer in July 2007 and, since March 2009, has also served as our
Senior Vice President. He is responsible for managing all aspects of our
financial, manufacturing operations and information services operations. Prior
to joining Plug Power, Mr. Anderson was the Treasurer and Director of Finance
for Intermagnetics General Corporation. Utilizing an acquisition growth
strategy, he managed finance, treasury, risk management and business valuation
functions for the medical device manufacturing company. Prior to that, he was
Chief Financial Officer for J Management Company. In addition to managing
finance, controllership, merger and acquisition and treasury functions, he also
helped set the strategic direction of the company. Earlier in his career, Mr.
Anderson spent 15 years with KeyCorp, eventually as Senior Vice President,
Director of Business Analysis and Management Reporting. He has thirty years of
financial experience. Mr. Anderson is a Director of the Cloud Institute
for Sustainability Education, a New York City nonprofit organization. He holds
a Bachelor of Science degree in Business Administration, with a concentration
in Accounting, from the University of Arizona.
Gary K. Willis
has been our director since 2003.
Mr. Willis joined Zygo Corporations Board of Directors in June 2009 after
retiring as Chairman of the Board of Directors in November 2000, having served
in that capacity since November 1998. Zygo Corporation is a provider of
metrology, optics, optical assembly, and systems solutions to the semiconductor,
optical manufacturing, and industrial/automotive markets. Mr. Willis had
been a director of Zygo Corporation since February 1992 and also served as
President from 1992 to 1999 and as Chief Executive Officer from 1993 to 1999.
Prior to joining Zygo Corporation, Mr. Willis served as the President and
Chief Executive Officer of The Foxboro Company, a manufacturer of process
control instruments and systems. Mr. Willis is also a director of
Rofin-Sinar Technologies, Inc. and Middlesex Health Services, Inc.
Mr. Willis holds a Bachelor of Science degree in Mechanical Engineering
from Worcester Polytechnic Institute. We believe Mr. Willis
qualifications to sit on our Board include his extensive experience in
management and director positions with similar companies as well as his
educational background in mechanical engineering.
Gerard L. Conway, Jr.
has served as General Counsel
and Corporate Secretary since September 2004 and, since March 2009, has also
served as our Senior Vice President. In that capacity, Mr. Conway is responsible
for advising us on legal issues such as corporate law, securities, contracts,
strategic alliances and intellectual property. He also serves as the
Compliance Officer for securities matters affecting us. During his tenure, Mr.
Conway served as Vice President of Government Relations from 2005 to June 2008
and in that capacity he advocated on energy issues, policies, legislation and
regulations on the state, federal, national and international levels on our
behalf and the alternative energy sector. Prior to his appointment to his
current positions, Mr. Conway served as our Associate General Counsel and Director
of Government Relations beginning in July 2000. Prior to joining Plug Power,
Mr. Conway spent four years as an Associate with Featherstonhaugh, Conway,
Wiley & Clyne, LLP, where he concentrated in government relations, business
and corporate law. Mr. Conway has more than nineteen years of experience
in general business, corporate real estate and government relations. Mr.
Conway holds a Bachelor of Arts degree in English and Philosophy from Colgate
University and a Juris Doctorate from Boston University School of Law.
Erik Hansen
joined Plug Power Inc. as Vice
President of Business Development in 2008 and was appointed Senior Vice
President in October of 2009. Mr. Hansen is responsible for directing our
sales efforts. Mr. Hansen has more than 15 years of experience with
cutting edge technologies related to energy storage systems. Prior to
joining Plug Power, he was General Manager of Sales and Systems Engineering for
Cobasys LLC in Orion, Michigan, where he worked for eight years. In that
role, Mr. Hansen led the decision-making and strategic planning for the
manufacture and sales of advanced energy storage solutions for both the
transportation and uninterruptible power systems. Mr. Hansen holds a
Bachelor of Science degree in Electrical Engineering and a Bachelor of Science
degree in Computer Engineering, both from West Virginia University.
Adrian Corless
joined Plug Power in April
2007 as Vice President of Technology and was appointed Chief Technology officer
in June 2008. In February 2010, Mr. Corless was appointed Senior Vice
President and Chief Technology Officer and is currently responsible for the
development of Plug Powers products as well as guiding Plug Powers overall
technology and Intellectual Property strategies. Prior to joining Plug
Power, Mr. Corless was the Chief Technical Officer of Cellex Power Products and
was responsible for the technical aspects of the product development
process. Prior to joining Cellex, Mr. Corless worked for Ballard Power
Systems Inc. and Excellsis Inc. latterly as Program Manager for the Phase 4
fuel cell bus program. Mr. Corless is an active participant in the
Industrial Truck Association, an executive board member of the Canadian
Hydrogen and Fuel Cell Association, a Technical Advisory Board member for the
NRC Institute for Fuel Cell Innovation, and a member of both UL and CSA
standards development committees. Mr. Corless holds a Masters of Applied
Science degree in Mechanical Engineering from the University of Victoria and is
a Registered Professional Engineer in British Columbia, Canada.
42
Maureen O. Helmer
has been our director since 2004.
Maureen O. Helmer is currently a member of the law firm Hiscock & Barclay
LLP and is the Chair of the firms Regulatory Practice Group. Prior to
her joining Hiscock & Barclay LLP, Ms. Helmer was a member of Green &
Seifter Attorneys, PLLC. From 2003 through 2006 she practiced as a partner
in the law firm of Couch White, LLP and then as a solo practitioner. In
addition to serving as Chair of the New York State Public Service Commission
from 1998 to 2003, Ms. Helmer also served as Chair of the New York State Board
on Electric Generation Siting and the Environment. Ms. Helmer has advised
international energy, telecommunications and industrial companies on policy and
government affairs issues. Prior to her appointment as Chair,
Ms. Helmer served as Commissioner of the Public Service Commission from
1997 until 1998 and was General Counsel to the Department of the Public Service
Commission from 1995 through 1997. From 1984 through 1995, Ms. Helmer held
several positions in the New York Legislature. She also served as a board
member of the New York State Energy Research and Development Authority, the New
York State Environmental Board and the New York State Disaster Preparedness
Commission during her tenure as Chair of the PSC. In addition, she was
Vice Chair of the Electricity Committee of the National Association of
Regulatory Utility Commissioners and a member of the NARUC Board of
Directors. She was also appointed to serve as a member of the New York
State Cyber-Security Task Force. Ms. Helmer earned her Bachelor of Science
from the State University at Albany and her Juris Doctorate from the University
of Buffalo law school. She is admitted to practice law in New York.
We believe Ms. Helmers qualifications to sit on our Board include her long
history of experience with energy regulation, policy and government affairs and
advising energy and industrial companies.
George C. McNamee
serves as Chairman of our Board
of Directors and has served as such since 1997. Mr. McNamee is a Director of
iRobot Corporation. He was previously Chairman of First Albany Companies
(now GLCH) and a Managing Partner of FA Tech Ventures, an information and
energy technology venture capital firm. Mr. McNamees background in
investment banking has given him broad exposure to many financing and merger and
acquisition issues. As an executive, he has dealt with rapid-growth
companies, technological change, crisis management, team building and strategy.
As a public company director, Mr. McNamee has led board special
committees, chaired audit committees, chaired three boards and has been an
active lead director. Mr. McNamee has previously served on public company
boards, including Mechanical Technology Inc. and Home Shopping Network.
He has been an early stage investor, director and mentor for private
companies that subsequently went public including MapInfo (now Pitney Bowes),
META Group (now Gartner Group) and iRobot. He served as a NYSE director
from 1999 to 2004 and chaired its foundation. In the aftermath of the
1987 stock market crash, he chaired the Group of Thirty Committee to reform the
Clearance and Settlement System. Mr. McNamee has been active as a
director or trustee of civic organizations including The Albany Academies and
Albany Medical Center, whose finance Committee he chaired for a dozen years. He
is also a director of several private companies, a member of the Yale
Development Board and a Trustee of The American Friends of Eton College.
He received his Bachelor of Arts degree from Yale University. We believe
Mr. McNamees qualifications to sit on our Board include his experience serving
on countless boards, his background in investment banking and experience with
the financial sector and its regulatory bodies.
Larry G. Garberding
has served as
director since 1997. Mr. Garberding was a Director and Executive Vice President
and Chief Financial Officer of DTE Energy Company and the Detroit Edison
Company from 1990 until retiring in 2001. Mr. Garberding was a Certified Public
Accountant, a partner with a major public accounting firm, and has been on the
board of several corporations, having had responsibility for financial,
operational, regulatory and sales activities. Mr. Garberding is
currently a director of Altarum Institute, a non-profit research and
innovations institute and Intermap Technologies Corporation, a digital mapping
company. Mr. Garberding received a Bachelor of Science degree in
Industrial Administration from Iowa State University. We believe Mr.
Garberdings qualifications to sit on our Board include his extensive experience
with power and energy companies and his background in accounting, financing and
operations.
Douglas T. Hickey
has served as director since
October 2011. Mr. Hickey previously served on our Board of
Directors from September 1, 2000 to April 24, 2006. Mr. Hickey most recently
was Managing Director at Hummer Winblad Venture Partners (HWVP), one of the
nations leading software venture capital firms. Prior to joining HWVP in 2001,
Mr. Hickey served as CEO for Critical Path, Inc. During his time there, the
company grew revenue from less than $1M to more than $150M and earned
Forbes.com Number-One Fastest Growing Company Award in 2000. Mr. Hickey
previously held the CEO and President position for Global Center Inc. At
Global Center, he grew the companys revenue from zero to more than $50M of
recurring revenue and achieved profitability. His focus of the companys
strategy enabled rapid growth, securing customers like Yahoo, Netscape and Oracle,
ultimately leading to our successful sale to Frontier Communications,
(NYSE:FRO). Prior to Global Center, Mr. Hickey was CEO and President of MFS
DataNet, the leading supplier of data related services to internet service
providers and enterprise customers worldwide. MFS grew to more than $1 billion
in revenue and subsequently completed a successful IPO and trade sale. We
believe Mr. Hickeys qualifications to sit on our Board include his extensive
corporate leadership experience and his proven background growing company
revenues.
Evgeny Rasskazov
has been a director since October
2011. Mr. Rasskazov is the Head of Department for target capital
structure for INTER RAO, or the Group. He is responsible for the Groups
projects and initiatives in equity capital markets, optimization of the Groups
capital structure and management of equity participations in the asset
portfolio. Mr. Rasskazov has extensive experience in investment banking and
corporate finance projects, developed through positions held previously in
global investment banking firms Merrill Lynch and Barclays Capital. We
believe Mr. Rasskazovs qualifications to sit on our Board include his
experience with corporate financing and investment banking as well as his
background in equity capital markets.
Evgeny Miroshnichenko
has been a director since
October 2011. Mr. Miroshnichenko is the Director for Strategic
Development for INTER RAO. He is responsible for organization of strategic
management process, development and implementation of corporate strategy,
realization of strategic projects, as well as management of financial
investments of the Group. Mr. Miroshnichenko has also built solid experience in
corporate governance as he has held director positions in Boards of Directors
in a number of Russian electricity companies. We believe Mr.
Miroshnichenkos qualifications to sit on our Board include his experience with
strategic corporate projects and background in financial investment management
and corporate governance.
43
Composition of our Board of Directors
The number of our directors is fixed at eight (8), and the
Board of Directors currently consists of eight (8) members. The Board of
Directors is divided into three classes, with three directors in Class I, two
directors in Class II, and three (3) directors in Class III. Directors in
Classes I, II and III serve for three-year terms with one class of directors
being elected by our stockholders at each Annual Meeting of Stockholders. Our
directors are divided among the three classes as follows:
-
The Class I directors are Andrew
Marsh, Gary K. Willis and Maureen O. Helmer, and their terms will expire at the
annual general meeting of stockholders to be held in 2015;
-
The Class II directors are George
C. McNamee and Mr. Evgeny Rasskazov, and their terms will expire at the annual
general meeting of stockholders to be held in 2013; and
-
The Class III directors are Larry
G. Garberding, Mr. Douglas T. Hickey and Mr. Evgeny Miroschnichenko, and their
terms will expire at the annual general meeting of stockholders to be held in
2014.
-
We expect that additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors.
The Board of Directors has determined that Ms. Helmer and
Messrs. Garberding, McNamee, Willis, Hickey, Rasskazov and Miroshnichenko are
independent directors as defined in Rule 5605(a)(2) under the Marketplace Rules
of the NASDAQ, or the NASDAQ Rules.
Board Leadership Structure and Boards Role in Risk Oversight
The Board of Directors administers its risk oversight
function directly and through its Audit Committee and Corporate Governance and
Nominating Committee. The Board and each of these Committees regularly
discuss with management our major risk exposures, their potential financial
impact on Plug Power and the steps we take to manage them. The Audit
Committee is responsible for oversight of Company risks relating to accounting
matters, financial reporting and legal and regulatory compliance, while the
Corporate Governance and Nominating Committee is responsible for oversight of
risks relating to management and Board succession planning, stakeholder
responses to our ethics and business practices.
The Chief Financial Officer and the General Counsel
report to the Board of Directors regarding ongoing risk management activities
at the regularly scheduled, quarterly Board of Directors meetings and may
report on risk management activities more frequently, as appropriate.
Additionally, risk management is a standing agenda item for the regularly
scheduled, quarterly Audit Committee meetings.
Committees of our Board of Directors
Audit Committee
The Audit Committee consists of Messrs. Garberding
(Chair), Willis and Hickey, and Ms. Helmer.
Our Board of Directors has determined that each of the
members of our Audit Committee is an independent director as defined in the
NASDAQ Rules and the applicable rules of the Securities and Exchange
Commission, or SEC. In addition, the Board of Directors has made a
determination that Mr. Garberding qualifies as an audit committee financial
expert as defined in the applicable rules of the SEC. Mr. Garberdings
designation by the Board as an audit committee financial expert is not
intended to be a representation that he is an expert for any purpose as a
result of such designation, nor is it intended to impose on him any duties,
obligations, or liability greater than the duties, obligations or liability
imposed on him as a member of the Audit Committee and the Board in the absence
of such designation.
44
The Audit Committees primary responsibility is to have
oversight of our accounting and financial reporting processes and audits of our
financial statements. In accordance with the Audit Committees charter,
management has the primary responsibility for the financial statements and the
financial reporting process, including maintaining an adequate system of
internal controls over financial reporting. Our independent auditors, KPMG
LLP, or KPMG, report directly to the Audit Committee and are responsible for
performing an independent audit of the our consolidated financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). The Audit Committee, among other matters, is responsible for
(i) appointing our independent auditors, (ii) evaluating such independent
auditors qualifications, independence and performance, (iii) determining the
compensation for such independent auditors, and (iv) approving all audit and
non-audit services. Additionally, the Audit Committee is responsible for
oversight of our accounting and financial reporting processes and audits of our
financial statements including the work of the independent auditors. The Audit
Committee reports to the Board of Directors with regard to:
-
the
scope of the annual audit;
-
fees to be paid to the auditors;
-
the performance of our independent
auditors;
-
compliance with accounting and
financial policies; and
-
our procedures and policies
relative to the adequacy of internal accounting controls.
Compensation Committee
The Compensation Committee consists of Messrs. Willis
(Chair), McNamee and Hickey, each of whom is an independent director under the
NASDAQ Rules. The Compensation Committees primary responsibilities include:
discharging the responsibilities of our Board of Directors relating to
compensation of our executive officers, providing oversight of our benefit,
perquisite and employee equity programs, and reviewing the adequacy of our
management succession plans.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee, or the
Governance Committee, consists of Ms. Helmer (Chair) and Messrs. Garberding and
Hickey, each of whom is an independent director under the NASDAQ Rules. The
Governance Committees responsibilities include establishing criteria for Board
and committee membership, considering director nominations consistent with the
requirement that a majority of the Board be comprised of independent directors
as defined in the NASDAQ Rules, identifying individuals qualified to become
board members, and selecting the director nominees for election at each Annual
Meeting of Stockholders. The Governance Committee is also responsible for
developing and recommending to the Board a set of corporate governance
guidelines applicable to us and periodically reviewing such guidelines and recommending
any changes thereto.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee is or
has at any time during the past year been one of our officers or employees.
None of our executive officers currently serves or in the past year has served
as a member of the board of directors or compensation committee, or other
committee serving an equivalent function, of any other entity that has one or
more executive officers serving as a member of our board of directors or as a
member of our compensation committee.
45
Compensation Discussion and Analysis
Overview
We provide what we believe is a competitive total
compensation package to our executive management team through a combination of
base salary, annual incentive bonuses, long-term equity incentive compensation,
and broad-based benefits programs. We place emphasis on pay-for-performance
based incentive compensation, which is designed to reward our executives based
on the achievement of predetermined performance goals. This Compensation
Discussion and Analysis explains our compensation objectives, policies and
practices with respect to our Chief Executive Officer, Chief Financial Officer,
the other three most highly-compensated executive officers and an additional
individual for whom disclosure would have been provided but for the fact that
he was not serving as an executive officer at the end of the last completed
fiscal year as determined in accordance with applicable SEC rules, who are
collectively referred to as the Named Executive Officers.
Objectives of Our Executive Compensation Programs
Our compensation programs for our named executive officers
are designed to achieve the following objectives:
-
Attract and retain talented and experienced executives;
-
Motivate and reward executives whose knowledge, skills and
performance are critical to our success;
-
Provide a competitive compensation package which is weighted
towards pay-for-performance and in which total compensation is primarily
determined by Company and individual results and the creation of shareholder
value;
-
Ensure fairness among the executive management team by
recognizing the contributions each executive makes to our success; and
-
Motivate our executives to manage our business to meet our short-
and long-term objectives and reward them for meeting these objectives.
Our
Executive Compensation Programs
Our executive compensation primarily consists of base
salary, annual incentive bonuses, long-term equity incentive compensation and
broad-based benefits programs. Consistent with the emphasis we place on
pay-for-performance based incentive compensation, long-term equity incentive
compensation in the form of stock options and restricted stock constitute a
significant portion of our total executive compensation.
Within the context of the overall objectives of our
compensation programs, our Compensation Committee determined the specific
amounts of compensation to be paid to each of our executives in 2012 based on a
number of factors, including:
-
Its understanding of the amount of compensation generally paid by
similarly situated companies to their executives with similar roles and
responsibilities;
-
Our executives performance during 2012 in general and as
measured against predetermined performance goals;
-
The nature, scope and level of our executives responsibilities;
-
Our executives effectiveness in leading our initiatives to
increase customer value, productivity and revenue growth;
-
The individual experience and skills of, and expected
contributions from, our executives;
-
The executives contribution to our commitment to corporate
responsibility, including the executives success in creating a culture of
unyielding integrity and compliance with applicable law and our ethics
policies;
-
The amounts of compensation being paid to our other executives;
-
The executives contribution to our financial results;
46
Each of the primary elements of our executive compensation
is discussed in detail below, including a description of the particular element
and how it fits into our overall executive compensation. Compensation
paid to our named executive officers in 2012 is discussed under each
element. In the descriptions below, we have identified particular
compensation objectives which we have designed our executive compensation
programs to serve; however, we have designed our compensation programs to
complement each other and to collectively serve all of our executive
compensation objectives described above. Accordingly, whether or not
specifically mentioned below, we believe that, as a part of our overall
executive compensation, each element to a greater or lesser extent serves each
of our objectives.
Base Salary
We pay our executives a base salary which we review and
determine annually. We believe that a competitive base salary is a
necessary element of any compensation program designed to attract and retain
talented and experienced executives. We also believe that attractive base
salaries can motivate and reward executives for their overall
performance. Base salaries are, in part, established based on the
individual experience, skills, expected contributions of our executives, and
our executives performance during the prior year.
In 2012 the base salaries for our executives was as
follows: Mr. Marshs base salary increased from $375,000 to $450,000 per year,
Mr. Andersons base salary increased from $300,000 to $330,000 per year, Mr.
Conways base salary increased from $200,000 to $250,000 per year, Mr. Corless
base salary increased from $215,000 to $230,000 per year, and Mr. Hansens base salary was $230,000
per year. Our executives base salaries reflect the initial base
salaries that we negotiated with each of our executives at the time of his or
her initial employment or promotion and our subsequent adjustments to these
amounts to reflect market increases, the growth and stage of development of our
Company, our executives performance and increased experience, any changes in
our executives roles and responsibilities, and other factors. The
initial base salaries that we negotiated with our executives were based on our
understanding of the market at the time, the individual experience and skills
of, and expected contribution from, each executive, the roles and
responsibilities of the executive, the base salaries of our existing executives,
and other factors.
Annual Incentive Bonuses
Our named executive officers are eligible to receive
annual incentive bonuses based on our pay-for-performance incentive
compensation program. They are eligible to receive annual incentive
bonuses primarily based upon their performance as measured against
predetermined individual performance goals, including financial measures,
achievement of strategic objectives, and other factors. The primary
objective of this program is to motivate and reward our named executive
officers for meeting individual performance goals. We do not believe that
every important aspect of executive performance is capable of being
specifically quantified in a predetermined performance goal. For example,
events outside of our control may occur after we have established the named
executive officers individual performance goals for the year that require our
named executive officers to focus their attention on different or other
strategic initiatives; thus, the individual performance goals may be modified
during the fiscal year by the President and Chief Executive Officer, or the
Board of Directors in the case of the President and Chief Executive Officer
himself, to account for such events beyond our control.
Within our pay-for-performance incentive compensation
program, specific performance attainment levels are indicated for each
performance goal. These performance attainment levels correlate to
potential award amounts that are calculated as a percent of each executives base
salary.
We established attainment levels for each of our
executives, other than Mr. Marsh, as 10%, 20% or 30% of his or her base
salary. Since the annual incentive bonus is payable based on the
achievement of each of the different levels of performance, the executive
officer may earn between 0% and 30% of his base salary given his actual
performance. The 20% attainment level is considered the target level for
each performance goal because it is challenging for the executive to attain,
and the executive would meet expectations if he achieved this level. The
10% attainment level is considered the threshold level for each performance
goal because although still challenging, it is the minimum acceptable
performance level. The 30% attainment level is considered the maximum, or
stretch, level for each performance goal because it is most challenging for the
executive to attain, and the executive would have to exceed expectations to
achieve this level. Our maximum and threshold performance attainment
levels are determined in relation to our target attainment levels and are
intended to provide for correspondingly greater or lesser incentives in the
event that performance is within an appropriate range above or below the target
performance attainment level.
47
We also established attainment levels for our Chief
Executive Officer as 17%, 34% or 50% of his base salary. Since the annual
incentive bonus is payable based on the achievement of each of the different
levels of performance, the Chief Executive Officer may earn between 0% and 50%
of his base salary given his actual performance. The 34% attainment level
is considered the target level for each performance goal because it is
challenging for the Chief Executive Officer to attain, and the executive would
meet expectations if he achieved this level. The 17% attainment level is
considered the threshold level for each performance goal because although still
challenging, it is the minimum acceptable performance level. The 50%
attainment level is considered the maximum, or stretch, level for each
performance goal because it is most challenging for the Chief Executive Officer
to attain, and the Chief Executive Officer would have to exceed expectations to
achieve this level. Our maximum and threshold performance attainment
levels are determined in relation to our target attainment levels and are
intended to provide for correspondingly greater or lesser incentives in the
event that performance is within an appropriate range above or below the target
performance attainment level.
As a way of linking each executives performance to
corporate-wide strategy, the executives individual performance goals directly
correlate to our corporate milestones, which management recommends to the Board
of Directors and the Board of Directors approves after appropriate discussion
and review. The executives individual performance goals are determined
in the same way as the corporate milestones such that management reviews how
each executive may contribute to the corporate milestones and recommends
individual performance goals to the Board of Directors. The Board of
Directors, after appropriate discussion and review, ultimately approves the
individual performance goals. Because disclosure of the specific
individual performance goals would give competitors information that could be
leveraged for competitive advantage, we do not disclose these specific
individual performance goals or our executives actual performance against such
goals. Generally the individual performance goals, as well as the
corporate milestones, include, but are not limited to, one or more of the
following categories: annual shipment targets, revenue, gross margin on product
sales, EBITAS and decreases in costs of business operations.
Initially, the CEO, and other members of
management as appropriate, make a recommendation to the Compensation Committee
of the Board of Directors for each executives potential award amount based on
his level of attainment of each of his individual performance goals (with the
exception of the CEO himself whose level of attainment is evaluated by the
Compensation Committee directly). Ultimately, the Board of Directors,
after review and discussion and recommendation from the Compensation Committee,
determines the final achieved level of attainment for each executives
individual performance goals. In 2012, no bonuses related to performance
goals accrued to any of our named executive officers.
Long-Term Equity Incentive Compensation
We grant long-term equity incentive awards in the form of
stock options and restricted stock to executives as part of our total
compensation package. Consistent with our emphasis on pay-for-performance
based incentive compensation, these awards represent a significant portion of
total executive compensation. Based on the stage of our Companys
development and the incentives we aim to provide to our executives, we have
chosen to use either stock options or a combination of stock options and
restricted stock as our long-term equity incentive awards. Our decisions
regarding the amount and type of long-term equity incentive compensation and
relative weighting of these awards among total executive compensation have also
been based on our understanding of market practices of similarly situated
companies and our negotiations with our executives in connection with their
initial employment or promotion by our Company.
Additionally, the Board adopted stock ownership guidelines
for named executives, effective as of August 15, 2005, which are also
considered when granting long-term equity incentive awards to executives.
These guidelines provide a target level of Company equity holdings with which
named executives are expected to comply within five (5) years from the latter
of the effective date of the guidelines or the date the individual is first
appointed as an executive. The target stock holdings are determined as a
multiple of the named executives base salary and then converted to a fixed
number of shares. The named executives base salary is multiplied by five (5)
for Chief Executive Officer and by three (3) for all other named executives;
that product is divided by Plug Powers 200-day average common stock price as
reported by the NASDAQ Capital Market; and finally that amount is then rounded
to the nearest 100 shares. The following count towards satisfaction of
these stock ownership guidelines: (i) shares owned outright by the executive or
his or her immediate family members residing in the same household; (ii) stock
held in the Plug Power Inc. Savings and Retirement Plan (401K Plan); (iii)
restricted stock issued as part of an executives annual or other bonus whether
or not vested; (iv) shares acquired upon the exercise of employee stock
options; (v) shares underlying unexercised employee stock options as part of
the Plug Power Inc. Employee Stock Option Plan (ESOP) times a factor of
thirty-three percent; and (vi) shares held in trust.
Stock option awards provide our executive officers with
the right to purchase shares of our common stock at a fixed exercise price typically
for a period of up to ten years, subject to continued employment with our
Company. Stock options are earned on the basis of continued service and
generally vest over three years, beginning with one-third vesting on the first
anniversary of the grant date, one-third vesting on the second anniversary of
the grant date and the final one-third vesting on the third anniversary of the
grant date, subject to acceleration in certain circumstances. Stock
option awards are made pursuant to our 2011 Stock Option and Incentive
Plan. Except as may otherwise be provided in the applicable stock option
award agreement, stock option awards become fully exercisable upon a change of
control under the 2011 Stock Option and Incentive Plan. The exercise price
of each stock option granted under our 2011 Stock Option and Incentive Plan is
the closing price of our common stock on the NASDAQ Capital Market as of the
effective date of each grant.
48
Grants to new hires and grants relating to an existing
executive officers promotion may be made on a periodic basis. All grants
to executive officers are approved by the Compensation Committee. We
consider a number of factors in determining the number of stock options, if
any, to grant to our executives, including:
-
the number of shares subject to, and exercise price of,
outstanding options, both vested and unvested, held by our named executive
officers;
-
the vesting schedule of the unvested stock options held by our
named executive officers; and
-
the amount and percentage of our total equity on a diluted basis
held by our named executive officers.
Restricted stock awards provide our executive officers
with shares of our stock that they may retain or trade; however, all executive
officers must trade within their rights according to our Insider Trading
Policy. The restricted stock is intended to be a long-term incentive
alternative to the stock option awards that may be appropriate for executive
officers based on their performance and their critical skills. Restricted
stock awards may vest over three years, beginning with one-third vesting one
year after the date of grant, then pro-rata vesting monthly thereafter.
Restricted stock awards are made pursuant to our 2011 Stock Option and
Incentive Plan.
On May 16, 2012, the stockholders approved an amendment to
the 2011 Plan, to increase the number of shares of the Companys common stock
authorized for issuance under the 2011 Plan from 1,000,000 to 6,500,000.
On October 28, 2009, the Compensation Committee
recommended and the Board of Directors approved a Long Term Incentive (LTI)
Plan pursuant to the terms of our 1999 Stock Option and Incentive Plan.
Designed as an incentive vehicle to support employee efforts, the LTI Plan sought
to increase shareholder value by encouraging Plug Power employees to continue
to work diligently to further our long term goals.
Under the LTI Plan, a select group of critical employees
received a Restricted Stock Unit Award Agreement (Agreement) awarding a one
time grant of restricted stock units (RSUs) calculated using a multiple of the
selected employees base salary. According to the Agreement, the restrictions
on each participants RSU allocation will lapse over a three year period upon
successful completion of weighted performance-based metrics. Specifically,
restrictions on 25% of RSUs are tied to our achievement of revenue targets,
while the restrictions on 75% of RSUs are tied to our achievement of earnings
before interest expense, taxes, depreciation, amortization and non-cash charges
for equity compensation (measurement referred to in the Agreement as EBITDAS)
targets. Intended to supplement the annual employee incentive plan payout, the
total number of RSUs on which restrictions shall lapse each year will vary
depending on our progress achieving the corresponding threshold, target or
stretch goals.
Pursuant to the terms of the Agreement, in the event
stretch revenue and EBITDAS metrics were reached during each of the three years
of the grant period commencing on January 1, 2010, we could have issued a
maximum of 8,667,666 shares to LTI Plan participants, which would represent
approximately 4.4% of total currently outstanding shares. Restrictions on these
shares only lapse in the event we perform at the articulated performance
metrics.
In 2010, 2011 and 2012, no threshold, target or stretch
revenue and EBITDAS performance-based metrics were reached. Accordingly,
no restrictions lapsed with respect to the 2010, 2011 and 2012 performance
periods and all of the total awarded RSUs for the Named Executive Officers were
forfeited.
Broad-Based Benefits
All
full-time employees, including our named
executive officers, may participate in our health and welfare benefit programs,
including medical, dental, and vision care coverage, disability insurance and
life insurance, and our 401(k) plan.
Our Executive Compensation Process
The Compensation Committee of our Board of Directors is responsible for
determining the compensation for our named executive officers. The
Compensation Committee is composed entirely of non-employee directors who are
independent as that term is defined in the applicable NASDAQ rules. In
determining executive compensation, our Compensation Committee annually reviews
the performance of our executives with our Chief Executive Officer, and our
Chief Executive Officer makes recommendations to our Compensation Committee
with respect to the appropriate base salary, annual incentive bonuses and
performance measures, and grants of long-term equity incentive awards for each
of our executives. The Chairman of the Compensation Committee makes
recommendations to the Compensation Committee with regards to the Chief
Executive Officers compensation. The Compensation Committee makes its
determination regarding executive compensation and then recommends such
determination to the Board of Directors. The Board of Directors
ultimately approves executive compensation.
49
As a result, the total amount of compensation that we paid
to our executives, the types of executive compensation programs we maintained,
and the amount of compensation paid to our executives under each program has
been determined by our Compensation Committee and Board of Directors based on
their understanding of the market, experience in making these types of
decisions, and judgment regarding the appropriate amounts and types of
executive compensation to provide.
Summary Compensation
The following table sets forth information concerning
compensation for services rendered in all capacities awarded to, earned by or
paid in the last three fiscal years to our Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
|
|
All Other
|
|
|
|
|
|
|
Name and Principal Position
|
Year
|
|
Salary ($)
|
|
Bonus Awards ($)
|
|
Option Awards ($)
|
|
Compensation ($)
|
|
|
Compensation ($)
|
|
|
Total ($)
|
|
|
|
|
|
|
(1)
|
|
(2)
|
|
(3)
|
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
Andrew Marsh
|
2012
|
443,654
|
-
|
-
|
-
|
14,758 (5)
|
458,412
|
President, Chief Executive Officer and Director
|
2011
|
375,000
|
-
|
740,588
|
121,125
|
14,276 (5)
|
1,250,989
|
|
|
2010
|
375,000
|
-
|
-
|
-
|
12,526 (5)
|
387,526
|
Gerald A. Anderson
|
2012
|
327,462
|
-
|
-
|
-
|
10,002 (6)
|
337,464
|
Chief Financial Officer and Senior Vice President
|
2011
|
300,000
|
-
|
421,708
|
57,000
|
9,507 (6)
|
788,215
|
|
2010
|
258,654
|
-
|
-
|
-
|
12,526 (6)
|
271,180
|
Gerard L. Conway, Jr.
|
2012
|
245,769
|
-
|
-
|
-
|
180 (7)
|
245,949
|
General Counsel, Corporate Secretary and
|
2011
|
200,000
|
-
|
245,130
|
38,000
|
180 (7)
|
483,310
|
Senior Vice President
|
2010
|
200,000
|
-
|
-
|
-
|
180 (7)
|
200,180
|
Erik J. Hansen
|
2012
|
230,000
|
43,700
|
-
|
-
|
11,399 (8)
|
285,099
|
Senior Vice President
|
2011
|
230,000
|
-
|
245,130
|
251,700
|
175,784 (8)
|
902,614
|
|
2010
|
209,034
|
-
|
-
|
-
|
9,346 (8)
|
218,380
|
Adrian Corless
|
2012
|
228,731
|
-
|
-
|
-
|
27,180 (9)
|
255,911
|
Chief Technology Officer, Senior Vice President
|
2011
|
215,000
|
-
|
245,130
|
40,850
|
5,215 (9)
|
506,195
|
|
2010
|
215,827
|
-
|
-
|
-
|
61,122 (9)
|
276,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
This column represents the dollar
amount of base salary actually paid to executives.
|
(2)
|
This column represents the dollar
amount of bonuses paid to executives in 2012.
|
(3)
|
This column represents the
aggregate grant date fair value of the option award computed in accordance with
Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) Topic 718. Pursuant to SEC rules, the amounts shown exclude the impact of
estimated forfeitures. For additional information on the valuation assumptions
with respect to option awards, refer to note 14
of our consolidated financial statements. These amounts reflect our accounting expense for
these awards, and do not correspond to the actual value that will be recognized
by the named executives.
|
(4)
|
This column represents the dollar
amount of bonuses paid to executives in 2012 under a non-equity incentive plan
earned in 2011.
|
(5)
|
Includes our share of
contributions on behalf of Mr. Marsh to the Plug Power 401(k) savings plan in
the amount of $14,242, $13,760, and $12,250 in the years ended 2012, 2011 and
2010, respectively, payments of $516, $516 and $276 for supplemental life
insurance premiums in the years ended 2012, 2011 and 2010.
|
(6)
|
Includes our share of contributions
on behalf of Mr. Anderson to the Plug Power 401(k) savings plan in the amount
of $9,486, $9,231, and $12,250 in the years ended 2012, 2011 and 2010,
respectively, and payments of $516, $276 and $276 for supplemental life
insurance premiums in the years ended 2012, 2011 and 2010, respectively.
|
50
(7)
|
Includes payments of $180, $180
and $180 for supplemental life insurance premiums in the years ended 2012, 2011
and 2010, respectively.
|
(8)
|
Includes our share of contributions on behalf of Mr. Hansen to the Plug
Power 401(k) savings plan in the amount of $11,279, $9,246, and $9,346
in the years ended 2012, 2011 and 2010, respectively, payment of
$166,418 for moving and relocation expenses in 2011, and payment of
$120, $120 and $0 for supplemental life insurance premiums in the years
ended 2012, 2011 and 2010, respectively.
|
(9)
|
Includes
payments of $180, $180 and $120 for supplemental life insurance premiums
in the years ended 2012, 2011 and 2010, respectively, as well as a
stipend of $5,035 and $61,002 related to moving and relocation expenses
in 2011 and 2010, respectively, and approximately $27,000 in moving and
relocation expenses in 2012.
|
|
|
Grants of Plan-Based Awards Table
There were no equity awards granted to the named
executive officers in 2012.
Employment Agreements
We and Mr. Marsh are parties to an employment agreement
which renews automatically for successive one-year terms unless Mr. Marsh or we
gives notice to the contrary. Mr. Marsh receives an annual base salary of $450,000
and is eligible to: (i) receive an annual incentive bonus of up to an amount
equal to fifty percent (50%) of his annual base salary; (ii) participate in all
savings and retirement plans; and (iii) participate in all benefit and
executive perquisites. Mr. Marshs employment may be terminated by us for
Cause, as defined in the agreement, or by Mr. Marsh for Good Reason, as
defined in the agreement, or without Good Reason upon written notice of
termination to us. If Mr. Marshs employment is terminated by us for any reason
other than Cause, death or disability, or in the event that Mr. Marsh
terminates his employment with us and is able to establish Good Reason, we
are obligated to pay Mr. Marsh the sum of the following amounts:
(i)
|
any earned but unpaid annual base salary,
|
(ii)
|
incentive bonus earned but not yet paid,
|
(iii)
|
unpaid expense reimbursements,
|
(iv)
|
accrued but unused vacation, plus
|
(v)
|
any benefits that may have vested under any of our
employee benefit plan through the date of termination; plus
:
|
|
(a) one (1) times annual base salary and
|
|
(b) one (1) times the annual incentive bonus for the
immediately preceding fiscal year.
|
In addition, Mr. Marsh is entitled to fully vest as of the
date of termination in any outstanding restricted stock, stock options and
other stock awards previously granted that would have vested had he remained an
employee for an additional twelve (12) months following the date of
termination. Furthermore, we are required to continue paying health insurance
and other benefits to Mr. Marsh and his eligible family members for twelve (12)
months following his termination. The agreement also provides, among other
things, that if, within twelve (12) months after a Change in Control, as
defined in the agreement, we terminate such executives employment without
Cause, then such
executive shall be entitled to:
(i)
|
receive a lump sum payment equal to three (3) times
the sum of (1) his current annual base salary plus (2) his average annual
incentive bonus over the three (3) fiscal years prior to the Change in
Control (or his annual incentive bonus for the fiscal year immediately
preceding to the Change of Control, if higher),
|
(ii)
|
continued vesting of his stock options and other
stock-based awards for twelve (12) months following the Change of Control as
if he had remained an active employee, and
|
(iii)
|
receive benefits, including health and life
insurance for twelve (12) months following the Change of Control.
|
51
We and Mr. Anderson are parties to an employment agreement
pursuant to which Mr. Anderson receives an annual base salary of $330,000. Mr.
Andersons employment may be terminated by us for Cause, as defined in the
agreement, or by Mr. Anderson for Good Reason, as defined in the agreement,
or without Good Reason upon written notice of termination to us. If Mr.
Andersons employment is terminated by us for any reason other than Cause,
death or disability, we are obligated to accelerate vesting in his options by
twelve (12) months following the termination, and also pay Mr. Anderson a lump
sum equal to the sum of:
(i)
|
two (2) times his current annual base salary and
|
(ii)
|
his annual bonus for the fiscal year immediately
prior to such termination
|
The agreement also provides, among other things, that if,
within twelve (12) months after a Change in Control, as defined in the
agreement, we terminate such executives employment without Cause, then such
executive shall be entitled to:
(i)
|
receive a lump sum payment equal to two (2) times
the sum of (1) his annual base salary in effect immediately prior to the
terminating event, plus (2) his annual bonus for the fiscal year immediately
prior to the terminating event;
|
(ii)
|
Accelerate vesting in his options for twelve months
following the terminating event; and
|
(iii)
|
receive benefits, including health and life
insurance for twelve (12) months following the terminating event.
|
We and Messrs. Conway, Hansen
and
Corless are parties to Executive Employment Agreements pursuant to which if any
of their employment is terminated by us for any reason other than Cause, as
defined in the agreement, death or disability, or in the event that any
terminates his employment with us and is able to establish Good Reason, as
defined in the agreement, we are obligated to pay each the sum of the following
amounts:
(i)
|
any earned but unpaid annual base salary,
|
(ii)
|
incentive bonus earned but not yet paid,
|
(iii)
|
unpaid expense reimbursements,
|
(iv)
|
accrued but unused vacation, plus
|
(v)
|
any benefits that may have vested under any of our
employee benefit plan through the date of termination; plus (a) one (1) times
annual base salary.
|
In addition, each is entitled to
exercise any vested stock options for twelve (12) months following the date of
termination. Furthermore, we are required to continue paying health insurance
and other benefits to each and his eligible family members for twelve (12)
months following his termination. The Executive Employment Agreements also
provide, among other things, that if, within twelve (12) months after a Change
in Control, as defined in the agreement, we terminate such executives
employment without Cause, then such executive shall be entitled to:
(i)
|
receive a lump sum payment equal to the sum of (1)
his average annual base salary over the three (3) fiscal years immediately
prior to the Change of Control (or the executives annual base salary in
effect immediately prior to the Change of Control, if higher) and (2) his
average annual bonus over the three (3) fiscal years prior to the Change in
Control (or the executives annual bonus in effect immediately prior to the
Change of Control, if higher),
|
(ii)
|
continued vesting of his stock options for twelve
(12) months following the Change of Control as if he had remained an active
employee, and
|
(iii)
|
receive benefits, including health and life
insurance for twelve (12) months following the Change of Control.
|
|
|
2012 Stock Option Grants
There
were no equity awards granted to the named executive officers in 2012.
52
Outstanding Equity Awards at 2012 Fiscal Year-End
The following table provides information on the
holdings of stock options by the Named Executive Officers as of December 31,
2012. For additional information about the option awards and stock
awards, see the description of equity incentive compensation in the section titled
Compensation Discussion and Analysis.
|
|
Option Awards
|
|
Number of
Securities
Underlying Unexercised Options (#)
Exercisable
|
Number of
Securities
Underlying Unexercised Options (#) Unexercisable
|
Option
Exercise
Price ($)
|
|
Andrew Marsh
|
|
40,000
|
|
35.80
|
04/08/18
|
|
|
|
|
|
250
|
|
9.50
|
05/20/19
|
|
|
|
35,529
|
71,071
|
6.10
|
04/13/21
|
|
|
|
|
66,660
|
133,340
|
2.17
|
12/13/21
|
Gerald A. Anderson
|
|
|
4,500
|
|
|
|
|
|
33.30
|
07/09/17
|
|
|
|
|
2,700
|
|
|
|
|
|
26.00
|
01/24/18
|
|
|
|
|
|
250
|
|
|
|
|
|
9.50
|
05/20/19
|
|
|
|
|
21,864
|
|
|
|
43,736
|
6.10
|
04/13/21
|
|
|
|
|
33,330
|
|
|
66,670
|
2.17
|
12/13/21
|
Gerard L. Conway, Jr.
|
|
|
|
800
|
|
|
|
|
|
67.30
|
12/22/13
|
|
|
|
|
1,200
|
|
|
|
|
|
|
53.90
|
01/28/15
|
|
|
|
|
3,000
|
|
|
|
|
|
|
55.80
|
02/01/16
|
|
|
|
|
3,000
|
|
|
|
|
|
|
37.50
|
02/14/17
|
|
|
|
|
2,700
|
|
|
|
|
|
|
26.00
|
01/24/18
|
|
|
|
|
|
250
|
|
|
|
|
|
|
|
9.50
|
05/20/19
|
|
|
|
|
13,665
|
|
|
|
|
27,335
|
|
6.10
|
04/13/21
|
|
|
|
|
16,665
|
|
|
|
|
33,335
|
|
2.17
|
12/13/21
|
Erik J. Hansen
|
|
|
5,000
|
|
|
|
|
|
|
|
8.60
|
10/29/18
|
|
|
|
|
|
250
|
|
|
|
|
|
|
|
9.50
|
05/20/19
|
|
|
|
|
13,665
|
|
|
|
|
27,335
|
|
6.10
|
04/13/21
|
|
|
|
|
16,665
|
|
|
|
|
33,335
|
|
2.17
|
12/13/21
|
Adrian Corless
|
|
|
3,000
|
|
|
|
|
|
|
|
32.40
|
04/04/17
|
|
|
|
|
2,700
|
|
|
|
|
|
|
|
24.20
|
07/30/18
|
|
|
|
|
|
250
|
|
|
|
|
|
|
|
9.50
|
05/20/19
|
|
|
|
|
13,665
|
|
|
|
|
27,335
|
|
6.10
|
04/13/21
|
|
|
|
|
16,665
|
|
|
|
|
33,335
|
|
2.17
|
12/13/21
|
53
Option Exercises and Stock Vested in Fiscal 2012
There were no option exercises or stock awards
vested during the year for the named executive officers.
Potential Payments Upon Termination or Change-in-Control
We and Messrs. Marsh, Anderson, Conway, Hansen and Corless
are parties to employment agreements, respectively, that provide for a
potential payment upon termination for other than Cause as discussed above in
Employment Agreements
.
Such payments by us to any of Messrs. Marsh, Anderson,
Conway, Hansen, or Corless are subject to the executive signing a general
release of claims in a form and manner satisfactory to us and in no event is
the executive entitled to receive any such payment after he breaches the
Employee Patent, Confidential Information and Non-Compete Agreement referenced
in the executives respective agreement or any non-compete, non-solicit or
non-disclosure covenants in any agreement between us and such executive.
We agreed to provide severance payments to such executives in these
circumstances based on our negotiations with each of our executives at the time
they joined our company, or as negotiated subsequent to hiring, and in order to
provide a total compensation package that we believed to be competitive.
Additionally, we believe that providing severance upon a termination without
cause can help to encourage our executives to take the risks that we believe
are necessary for our company to succeed and also recognizes the longer hiring
process typically involved in hiring a senior executive.
The following are excerpts of the definitions of Cause and
Terminating Events from the Employment Agreements referenced above.
Cause shall mean (i) a willful act of dishonesty by the
Executive with respect to any matter involving us or any subsidiary or
affiliate, or (ii) conviction of the Executive of a crime involving moral
turpitude, (iii) the failure to perform to the reasonable satisfaction of
the Board a substantial portion of the Executives duties and responsibilities
assigned or delegated under this Agreement (other than any such failure after
the Executive gives notice of termination for Good Reason), which failure
continues, in the reasonable judgment of the Board, after written notice given
to the Executive by the Board. For purposes of this definition (i)
hereof, no act, or failure to act, on the Executives part shall be deemed
willful unless done, or omitted to be done, by the Executive without
reasonable belief that the Executives act, or failure to act, was in our best
interests and the best interests of our subsidiaries and affiliates. Cause
may also include (i) the failure or refusal of the named executive to render
services to us in accordance with his obligations under the employment
agreement or a determination by us that the named executive has failed to
perform the duties of his employment; (ii) disloyalty, gross negligence,
dishonesty, breach of fiduciary duty or breach of the terms of the employment
agreement or the other agreements executed in connection therewith; (iii) the
commission by the named executive of an act of fraud, embezzlement or disregard
of our rules or policies or the commission by the named executive of any other
action which injures us; (iv) acts which, in the judgment of our board of
directors, would tend to generate adverse publicity toward us; (v) the
commission, or plea of nolo contendere, by the named executive of a felony;
(vi) the commission of an act which constitutes unfair competition with us or
which induces any of our customers to breach a contract with us; or (vii) a
breach by the named executive of the terms of the non-competition and
non-solicitation agreement or the employee nondisclosure and developments
agreement between us and the named executive.
Terminating Event shall mean a termination by us of the
employment of the Executive with us for any reason other than (i) a willful act
of dishonesty by the Executive with respect to any matter involving us or any
subsidiary or affiliate, or (ii) conviction of the Executive of a crime
involving moral turpitude, or (iii) the gross or willful failure by the
Executive to substantially perform the Executives duties with us, which
failure is not cured within thirty (30) days after a written demand for
substantial performance is received by the Executive from our Board of
Directors (the Board) which specifically identifies the manner in which the
Board believes the Executive has not substantially performed the Executives
duties, or (iv) the failure by the Executive to perform his full-time duties
with us by reason of his death or Disability. For purposes of clauses (i)
and (iii) of this Section 1(a), no act, or failure to act, on the Executives
part shall be deemed willful unless done, or omitted to be done, by the
Executive without reasonable belief that the Executives act, or failure to
act, was in the best interests of us and the interests of our subsidiaries and
affiliates. For purposes of this Agreement, Disability shall mean the
Executives incapacity due to physical or mental illness which has caused the
Executive to be absent from the full-time performance of his duties with us for
a period of six (6) consecutive months if we shall have given the Executive a
Notice of Termination and, within thirty (30) days after such Notice of
Termination is given, the Executive shall not have returned to the full-time
performance of his duties.
If Mr. Marsh had been terminated without cause on December
31, 2012, the approximate value of the severance package, including, as
mentioned above in
Employment Agreements
, salary, benefits and equity awards,
under his employment agreement would have been $733,492. This includes an
acceleration of any remaining unvested options granted to such named executive
under the 1999 Stock Option and Incentive Plan and the 2011 Stock Option and
Incentive Plan. If Mr. Anderson, Conway, Hansen or Corless had been terminated
without cause on December 31, 2012, the approximate value of the severance
packages, including, as mentioned above in
Employment Agreements
,
salary, benefits and equity awards, under the employment agreement for such
named executive would have been for Mr. Anderson $810,742, for Mr. Conway $311,359,
for Mr. Hansen $504,222 and Mr. Corless $293,054.
54
We and Messrs. Marsh, Anderson, Conway, Hansen, and
Corless are parties to employment agreements, respectively, that provide for a
potential payment upon a Change of Control, as discussed above in
Employment
Agreements
. Such payments by us to the executive are subject to the
executive signing a general release of claims in a form and manner satisfactory
to us and in no event is Messrs. Marsh, Anderson, Conway, Hansen or Corless entitled
to receive any such payment after he breaches the Employee Patent, Confidential
Information and Non-Compete Agreement referenced in the executives respective
agreement or any non-compete, non-solicit or non-disclosure covenants in any
agreement between us and such executive.
The following is an excerpt of the definition of Change of
Control from the Employment Agreements referenced above.
Change in Control shall be deemed to have occurred in
any one of the following events:
(i)
|
any person, as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the Exchange
Act), (other than us, any of our subsidiaries, any trustee, fiduciary or
other person or entity holding securities under any of our employee benefit
plan or our trust or any of our subsidiaries, INTER RAO Capital, together
with all Affiliates and Associates (as such terms are hereinafter defined) of
such person, shall become the beneficial owner (as such term is defined in
Rule 13d-3 of the Exchange Act), directly or indirectly, of our securities
representing 25% or more of the then our outstanding shares of common stock
(the Stock) (other than as a result of an acquisition of securities
directly from us); or
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|
|
(ii)
|
persons who, as of the effective date of this
Agreement (the Effective Date), constitute our Board of Directors (the
Incumbent Directors) cease for any reason, including, without limitation,
as a result of a tender offer, proxy contest, merger or similar transaction,
to constitute at least a majority of the Board, provided that any person
becoming our director subsequent to the Effective Date shall be considered an
Incumbent Director if such persons election was approved by or such person
was nominated for election by either (A) a vote of at least a majority of the
Incumbent Directors or (B) a vote of at least a majority of the Incumbent
Directors who are members of a nominating committee comprised, in the
majority, of Incumbent Directors; but provided further, that any such person
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of members of the Board
of Directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board, including by
reason of agreement intended to avoid or settle any such actual or threatened
contest or solicitation, shall not be considered an Incumbent Director; or
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(iii)
|
Upon (A) the consummation of any consolidation or
merger where our shareholders, immediately prior to the consolidation or
merger, did not, immediately after the consolidation or merger, beneficially
own (as such term is defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, shares representing in the aggregate more than 50% of the voting
shares of the corporation issuing cash or securities in the consolidation or
merger (or of its ultimate parent corporation, if any), (B) the consummation
of any sale, lease, exchange or other transfer (in one transaction or a
series of transactions contemplated or arranged by any party as a single
plan) of all or substantially all of our assets or (C) the completion of a
liquidation or dissolution that has been approved by our stockholders; or
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|
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(iv)
|
INTER RAO Capital, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such person, shall
become the beneficial owner (as such term is defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of our securities representing 50% or
more of the then outstanding Stock (other than as a result of an acquisition
of securities directly from us).
|
For purposes of this Agreement, Affiliate and
Associate shall have the respective meanings ascribed to such terms in Rule
12b-2 of the Exchange Act, as in effect on the date of this Agreement;
provided
,
however
, that no person who is our director or officer of shall be
deemed an Affiliate or an Associate of any other of our director or officer
solely as a result of his position as our director or officer.
Notwithstanding the foregoing, a Change in Control
shall not be deemed to have occurred for purposes of the foregoing clauses (i)
or (iv) solely as the result of an acquisition of securities by us which, by
reducing the number of shares of Stock outstanding, increases the proportionate
number of shares of Stock beneficially owned by any person to 25% or more (or 50%
or more in the case of clause (iv)) of the shares of Stock then outstanding;
provided, however, that if any such person shall at any time following such
acquisition of securities by us become the beneficial owner of any additional
shares of Stock (other than pursuant to a stock split, stock dividend, or
similar transaction) and such person immediately thereafter is the beneficial
owner of 25% or more (or 50% or more in the case of clause (iv)) of the shares
of Stock then outstanding, then a Change in Control shall be deemed to have
occurred for purposes of the foregoing clause (i) or (iv), as applicable.
55
Change-in-control may also generally mean any of
the following: (1) a sale or other disposition of all or substantially all of
our assets; or (2) a merger or consolidation after which our voting securities
outstanding immediately before the transaction cease to represent at least a
majority of the combined voting power of the successor entitys outstanding
voting securities immediately after the transaction. We agreed to provide
payments to these executives in these circumstances in order to provide a total
compensation package that we believed to be competitive. Additionally,
the primary purpose of our equity-based incentive awards is to align the interests
of our executives and our stockholders and provide our executives with strong
incentives to increase stockholder value over time. As change-in-control
transactions typically represent events where our stockholders are realizing
the value of their equity interests in our Company, we believe it is
appropriate for our executives to share in this realization of stockholder
value, particularly where their employment is terminated in connection with the
change-in-control transaction. We believe that this will also help to
better align the interests of our executives with our stockholders in pursuing
and engaging in these transactions.
If a change-in-control had occurred on December 31,
2012 and on that date Messrs. Marsh, Anderson, Conway, Hansen or Corless had
been terminated without Cause, experienced a material negative change in his or
her compensation or responsibilities or was required to be based at a location
more than fifty (50) miles from his or her current work location, the value of
the change-of-control provisions, including, as mentioned above, salary,
benefits, vested equity awards and expected bonus, under the employment or
executive severance agreements for each such named executive would have been as
follows: Mr. Marsh $1,849,780, Mr. Anderson $705,986, Mr. Conway $333,748, Mr.
Hansen $527,766 and Mr. Corless $316,598.
Director Compensation
The Compensation Committee periodically reviews our
Non-Employee Director Compensation Plan, or our Director Compensation Plan, to
ensure that the compensation aligns the directors interests with the long-term
interests of the stockholders and that the structure of the compensation is
simple, transparent and easy for stockholders to understand. The Compensation
Committee also considers whether our Director Compensation Plan fairly
compensates our directors when considering the work required in a company of
the our size and scope. Employee directors do not receive additional
compensation for their services as directors. The following is a summary of our
Director Compensation Plan:
Pursuant to the current form of our Director
Compensation Plan, upon initial election or appointment to the Board of
Directors, new non-employee directors receive non-qualified stock options to
purchase 65,000 shares (50,000 shares for any new non-employee Chairman) of
Common Stock with an exercise price equal to fair market value on the date of
grant and that are fully vested on the first anniversary of the date of the
grant. Each year of a non-employee directors tenure, the director will receive
non-qualified options to purchase 10,000 shares (15,000 shares for any
non-employee Chairman), plus non-qualified options to purchase an additional
5,000 shares if the director serves as chairman of the Audit Committee and
non-qualified options to purchase an additional 2,000 shares if the director
serves as chairman of any other committee, including the Compensation Committee
and the Corporate Governance and Nominating Committee. These annual options,
with an exercise price equal to fair market value on the grant date, fully vest
on the first anniversary of the date of the grant.
In addition, under the current form of our Director
Compensation Plan each non-employee director is paid an annual retainer of
$40,000 ($85,000 for any non-employee Chairman) for their services. Committee
members receive additional annual retainers in accordance with the following
table:
Committee
|
Non-Employee
Chairman
|
Non-Employee
Director
|
Audit Committee
|
$20,000
|
|
$15,000
|
|
|
|
|
|
|
Compensation Committee
|
15,000
|
|
5,000
|
|
|
|
|
|
|
Corporate
Governance and Nominating Committee
|
10,000
|
|
5,000
|
|
These additional payments for service on a committee are
due to the workload and broad-based responsibilities of the committees. The
total amount of the annual retainers are paid in a combination of fifty percent
(50%) cash and fifty percent (50%) Common Stock, with an option to receive up
to one hundred percent (100%) Common Stock, at the election of the non-employee
director. At the Boards discretion, directors may receive a greater
portion of the foregoing amounts, up to eighty percent (80%), in cash. All such
stock shall be fully vested at the time of issuance and is valued at its fair
market value on the date of issuance. Non-employee directors are also
reimbursed for their direct expenses associated with their attendance at board
meetings.
56
Non-Employee Director Compensation Table
The following table provides information for non-employee
directors who served during Fiscal 2012.
Name
|
Fees Earned or Paid in
Cash ($)
|
Stock Awards (1) ($)
|
Option Awards (2) ($)
|
Total ($)
|
Douglas Hickey
|
35,000
|
35,000
|
9,960
|
79,960
|
Evgeny Miroshnichenko
|
4,022
|
4,022
|
-
|
8,044
|
Evgeny Rasskazov
|
4,022
|
4,022
|
-
|
8,044
|
Gary Willis
|
35,000
|
35,000
|
9,960
|
79,960
|
George McNamee
|
72,000
|
18,000
|
12,450
|
102,450
|
Larry Garberding
|
32,500
|
32,500
|
12,450
|
77,450
|
Maureen Helmer
|
30,000
|
30,000
|
8,300
|
68,300
|
(1) This
column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2012 fiscal year for the fair value of
restricted stock earned in 2011. Fair value is calculated using the
closing price of Plug Power stock on the date of grant. Stock awards granted
to directors vest immediately.
|
a.
|
Douglas
Hickey has no unexercised stock awards. Stock awards earned by Mr. Hickey
in 2012 include 6,890 shares granted on April 2, 2012 with a grant date fair
value of $1.27, 7,675 shares granted July 2, 2012 with a grant date fair value
of $1.14, 10,542 shares granted October 1, 2012 with a grant date fair value of
$0.83, and 17,500 shares granted on January 2, 2013 with a grant date fair
value of $0.50.
|
|
b.
|
Evgeny
Miroshnichenko has no unexercised stock awards. Stock awards earned by Mr.
Miroshnichenko in 2012 include 8,043 shares granted on January 2, 2013 with a
grant date fair value of $0.50.
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|
c.
|
Evgeny Rasskazov has no unexercised stock awards. Stock awards earned
by Mr. Rasskazov in 2012 include 8,043 shares granted on January 2, 2013 with a
grant date fair value of $0.50.
|
|
d.
|
Gary
Willis has no unexercised stock awards. Stock awards earned by Mr. Willis in
2012 include 6,890 shares granted on April 2, 2012 with a grant date fair value
of $1.27, 7,675 shares granted July 2, 2012 with a grant date fair value of
$1.14, 10,542 shares granted October 1, 2012 with a grant date fair value of
$0.83, and 17,500 shares granted on January on 2, 2013 with a grant date fair
value of $0.50.
|
|
e.
|
George McNamee has no unexercised stock awards. Stock awards
earned by Mr. McNamee in 2012 include 3,543 shares granted on April 2, 2012
with a grant date fair value of $1.27, 3,947 shares granted July 2, 2012 with a
grant date fair value of $1.14, 5,422 shares granted October 1, 2012 with a
grant date fair value of $0.83, and 9,000 shares granted on January on 2, 2013
with a grant date fair value of $0.50.
|
|
f.
|
Larry Garberding has no unexercised stock awards. Stock awards
earned by Mr. Garberding in 2012 include 6,398 shares granted on April 2, 2012
with a grant date fair value of $1.27, 7,127 shares granted July 2, 2012 with a
grant date fair value of $1.14, 9,789 shares granted October 1, 2012 with a
grant date fair value of $0.83, and 16,250 shares granted on January on 2, 2013
with a grant date fair value of $0.50.
|
|
g.
|
Maureen Helmer has no unexercised stock awards. Stock awards
earned by Ms. Helmer in 2012 include 5,906 shares granted on April 2, 2012 with
a grant date fair value of $1.27, 6,579 shares granted July 2, 2012 with a
grant date fair value of $1.14, 9,036 shares granted October 1, 2012 with a
grant date fair value of $0.83, and 15,000 shares granted on January on 2, 2013
with a grant date fair value of $0.50.
|
57
(2) This
column represents the aggregate grant date fair value of the option award
computed in accordance with Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) Topic 718. Pursuant to SEC rules, the
amounts shown exclude the impact of estimated forfeitures. For additional
information on the valuation assumptions with respect to option awards, refer
to note 14 of the Companys consolidated financial statements in the Form 10-K
for the year ended December 31, 2011, as filed with the SEC. These amounts
reflect the Companys accounting expense for these awards, and do not
correspond to the actual value that will be recognized by the named executives.
|
a.
|
Douglas
Hickey has 81,000 unexercised option awards including 55,336 unvested
awards. Option awards for 2012 include 12,000 shares granted on
May 16, 2012 with a grant date fair value of $0.83.
|
|
b.
|
Gary Willis
has 101,600 unexercised option awards including 55,336 unvested awards.
Option awards for 2012 include 12,000 shares granted on May 16, 2012
with a grant date fair value of $0.83.
|
|
c.
|
George
McNamee has 118,500 unexercised option awards including 58,336 unvested
awards. Option awards for 2012 include 15,000 shares granted on
May 16, 2012 with a grant date fair value of $0.83.
|
|
d.
|
Larry Garberding has 106,000 unexercised option awards including 58,336 unvested
awards. Option awards for 2012 include 15,000 shares granted on May 16,
2012 with a grant date fair value of $0.83.
|
|
e.
|
Maureen Helmer has 98,200 unexercised option awards including 53,336
unvested awards. Option awards for 2012 include 15,000 shares granted on
May 16, 2012 with a grant date fair value of $0.83.
|
58
We are party to a Standstill and Support Agreement with
JSC INTER RAO Capital, or INTER RAO Capital, which, as of November 19, 2012,
directly owned (through nominee accounts) approximately 11.8% of the
outstanding shares of our common stock. The Standstill and Support Agreement
provides for certain voting support arrangements, director designation rights
and standstill arrangements.
Our Board of Directors related party transaction
policy requires that our General Counsel, together with outside counsel as
necessary, evaluate potential transaction before we enter into any agreements
with a related party. Certain transactions may require the Board of
Directors and its Audit Committees approval. The policy defines a related
party as: our directors or executive officers, our director nominees, security
holders known to Plug Power to beneficially own more than 5% of any class of
Plug Powers voting securities, or the immediate family members
1
of
any of the persons enumerated above.
__________________
1
For purposes of this policy, a person's immediate family should
include such persons child, stepchild, parent, stepparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
sister-in-law or any other person (other than a tenant or employee) sharing the
household of such person.
59
The following table sets forth information regarding the
beneficial ownership of Common Stock as of September 30, 2012, before and after
giving effect to this offering (except as
otherwise indicated) by:
-
all persons known by us to have beneficially owned 5% or more of
the Common Stock;
-
each of our directors;
-
the named executive officers; and
-
all directors and executive officers as a group.
Beneficial ownership is determined in accordance with Rule
13d-3 under the Exchange Act. Except as otherwise indicated in the footnotes to
the following table, we believe, based on the information provided to us, that
the persons named in the following table have sole vesting and investment power
with respect to the shares they beneficially own, subject to applicable
community property laws. The beneficial ownership of the stockholders listed
below is based on publicly available information and from representations of
such stockholders.
In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, we have included the shares
the person has the right to acquire within 60 days of the date above, including
through the exercise of any option, warrant or other right or conversion of any
security. The shares that a stockholder has the right to acquire within 60
days, however, are not included in the computation of the percentage ownership
of any other stockholder.
We have based our calculation of the percentage of
beneficial ownership prior to this offering on 38,197,255 shares of our common
stock deemed to be outstanding as of September 30, 2012, including 165,906
shares of common stock in treasury. The calculation of the percentage of
beneficial ownership after this offering gives effect to the issuance by us
of shares of common stock and warrants to purchase
shares of common stock in this offering. The percentage ownership information
assumes no exercise of the underwriters over-allotment option.
Name and Address of Beneficial Owner
|
Shares Beneficially Owned
|
|
Number
|
Percentage (%)
of
Voting Power
Before this Offering
|
Percentage (%)
of
Voting Power
After this
Offering
|
Austin
W. Marxe & David M. Greenhouse (1)
|
8,511,620
|
23.8%
|
|
JSC
INTER RAO Capital (2)
|
4,462,693
|
11.75%
|
|
Entities
affiliated with Interinvest Corporation Inc. (3)
|
3,115,845
|
8.2%
|
|
George
C. McNamee (4)
|
136,671
|
*
|
|
Andrew
Marsh (5)
|
123,712
|
*
|
|
Gary
K. Willis (6)
|
52,631
|
*
|
|
Larry
G. Garberding (7)
|
52,375
|
*
|
|
Gerald
A. Anderson (8)
|
50,296
|
*
|
|
Maureen
O. Helmer (9)
|
48,932
|
*
|
|
Gerard
L. Conway, Jr. (10)
|
36,127
|
*
|
|
Erik
J. Hansen (11)
|
31,795
|
*
|
|
Adrian
Corless (12)
|
29,987
|
*
|
|
Douglas
T. Hickey (13)
|
9,375
|
*
|
|
Evgeny
Rasskazov (2)
|
-
|
*
|
|
Evgeny
Miroshnichenko (2)
|
-
|
*
|
|
All
executive officers and directors as a group (12 persons)
|
571,901
|
1.5%
|
|
* Represents less than 1% of the outstanding shares of
Common Stock
60
1)
|
Information is based on a Schedule 13D filed with
the SEC on April 2, 2012 by Austin W. Marxe & David M. Greenhouse, which
is located at 527 Madison Ave., New York, New York 10022. Of the
8,511,620 shares beneficially owned, Austin W. Marxe & David M.
Greenhouse share sole voting power over 8,511,620 shares. According to
the 13D, Messrs. Marxe and Greenhouse also beneficially own warrants to
purchase 2,120,000 shares of common stock (which number of shares has been
increased to 2,801,762 as a result of an anti-dilution adjustment), but such
warrants are not currently exercisable and are not included in the 8,511,620
shares reflected in the table.
|
|
|
2)
|
The address for JSC INTER RAO Capital, or INTER
RAO Capital, is 27 Bolshaya Pirogovskaya Street, Moscow, 119435, Russia. The
Company and INTER RAO Capital are parties to a Standstill and Support
Agreement, which provides for certain voting support arrangements, director
designation rights and standstill arrangements. In a Schedule 13D filed with
the SEC on November 20, 2012, INTER RAO Capital reported that it is a
wholly-owned subsidiary of Joint Stock Co INTER RAO UES, or INTER RAO UES.
By virtue of its ownership interest in INTER RAO Capital, INTER RAO UES may
be deemed to have shared power to vote or direct the voting of and the shared
power to dispose or direct the disposition of the Common Stock owned by INTER
RAO Capital. the power to vote, or direct the voting of, and the power to
dispose, or direct the disposition of, the shares of Common Stock held by
OGK-3, and as such could be deemed the beneficial owner of such shares of
Common Stock. Mr. Evgeny Rasskazov, one of our directors, is the Director
for Strategic Development for INTER RAO UES, and Mr. Evgeny Miroschnichenko,
another of our directors, is the Head of Department for target capital
structure for INTER RAO UES.
|
|
|
3)
|
Consists of (i) 2,664,345 shares held by
Interinvest Corporation Inc., (ii) 1,500 shares held by Interinvest
Consulting Corporation of Canada Limited, (iii) 1,500 shares held by
Interinvest (Bermuda) Ltd. and (iv) 40,000 shares held by Hans P. Black.
Information is based on a Schedule 13D/A filed with the SEC on October 4,
2012. Each of these persons may be deemed to have the shared power to vote
or to direct the vote of (and the shared power to dispose of or direct the
disposition of) the 3,115,845 shares of Common Stock held. The principal
business address of Interinvest Corporation Inc. is 192 South Street, Suite
600, Boston, MA 02111. The principal business address of Interinvest
(Bermuda) Ltd. is The LOM Bldg, 27 Reid Street, Hamilton HM 11, Bermuda. The
principal business address of Interinvest Consulting Corporation of Canada
Limited is 3655 rue Redpath, Montreal, QC H3G 2W8. The principal business
address of Hans P. Black is 3655 rue Redpath, Montreal, QC H3G 2W8.
|
|
|
4)
|
Includes
40,500 shares of Common Stock issuable upon exercise of outstanding options
at a weighted average exercise price of $22.46.
|
|
|
5)
|
Includes 75,779 shares of Common Stock
issuable upon exercise of outstanding options at a weighted average exercise
price of $21.79.
|
|
|
6)
|
Includes 24,725 shares of Common Stock issuable upon
exercise of outstanding options at a weighted average exercise price of
$23.08.
|
|
|
7)
|
Includes
27,500 shares of Common Stock issuable upon exercise of outstanding options
at a weighted average exercise price of $27.09.
|
|
|
8)
|
Includes
29,314 shares of Common Stock issuable upon exercise of outstanding options
at a weighted average exercise price of $12.14.
|
|
|
9)
|
Includes
23,200 shares of Common Stock issuable upon exercise of outstanding options
at a weighted average exercise price of $23.71.
|
|
|
10)
|
Includes
24,615 shares of Common Stock issuable upon exercise of outstanding options
at a weighted average exercise price of $22.52.
|
|
|
11)
|
Includes 18,915 shares of Common Stock issuable upon
exercise of outstanding options at a weighted average exercise price of
$6.81.
|
|
|
12)
|
Includes 19,615 share of Common Stock issuable
upon exercise of outstanding options at a weighted average exercise price of
$12.66.
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13)
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Includes
5,000 shares of Common Stock issuable upon exercise of outstanding options at
a weighted average exercise price of $67.22.
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61
General
Our authorized capital stock consists of 245,000,000
shares of common stock, $0.01 par value per share, and 5,000,000 shares of
preferred stock, $0.01 par value per share. As of December 31, 2012,
there were 38,293,987 shares of our common stock outstanding and no shares of
preferred stock outstanding. In this offering, we are offering
shares of common stock and warrants to purchase up to shares of
common stock. Each share of common stock is being sold together with
of a warrant to purchase one share of common stock at an exercise price of
$ . The shares of common stock and warrants will be issued separately.
This prospectus also relates to the offering of shares of our common stock upon
exercise, if any, of the warrants.
The following summary description of our securities is
based on the provisions of our amended and restated certificate of incorporation
and amended and restated bylaws and the applicable provisions of the Delaware
General Corporation Law. This information is qualified entirely by reference to
the applicable provisions of our amended and restated certificate of
incorporation, amended and restated bylaws and the Delaware General Corporation
Law. For information on how to obtain copies of our amended and restated
certificate of incorporation and amended and restated bylaws, which are
exhibits to the registration statement of which this prospectus is a part, see
Where You Can Find Additional Information and Incorporation of Certain
Information by Reference.
Common Stock
Holders of shares of our common stock are entitled to one
vote for each share held of record on all matters to be voted on by
stockholders, including the election of directors. Our amended and restated
certificate of incorporation and amended and restated bylaws do not provide for
cumulative voting rights. Because of this, the holders of a majority of our
common stock entitled to vote in any election of directors can elect all of the
directors standing for election. Subject to the preferences that may be
applicable to any then outstanding preferred stock, the holders of our
outstanding shares of common stock are entitled to receive dividends, if any,
as may be declared from time to time by our board of directors out of legally
available funds. In the event of our liquidation, dissolution or winding up,
holders of our common stock will be entitled to share ratably in the net assets
legally available for distribution to stockholders after the payment of all of
our debts and other liabilities, subject to the satisfaction of any liquidation
preference granted to the holders of any outstanding shares of preferred stock.
Holders of our common stock have no preemptive, conversion or subscription
rights, and there are no redemption or sinking fund provisions applicable to
our common stock. The rights, preferences and privileges of the holders of our
common stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of our preferred stock that we may
designate and issue in the future.
Preferred Stock
Pursuant to our amended and restated certificate of
incorporation, our board of directors has the authority, without further action
by the stockholders (unless such stockholder action is required by applicable
law or NASDAQ rules), to designate and issue up to 5,000,000 shares of
preferred stock in one or more series, to establish from time to time the
number of shares to be included in each such series, to fix the rights,
preferences and privileges of the shares of each wholly unissued series, and
any qualifications, limitations or restrictions thereon, and to increase or
decrease the number of shares of any such series, but not below the number of
shares of such series then outstanding.
Our board of directors may authorize the issuance of
preferred stock with voting or conversion rights that could adversely affect
the voting power or other rights of the holders of our common stock. The
issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
have the effect of delaying, deferring or preventing a change in our control
and may adversely affect the market price of the common stock and the voting
and other rights of the holders of common stock. Additionally, the issuance of
preferred stock may have the effect of decreasing the market price of our common
stock.
Delaware Anti-Takeover Law and Provisions of our Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws
Delaware Anti-Takeover Law
. We are subject to
Section 203 of the Delaware General Corporation Law. Section 203
generally prohibits a public Delaware corporation from engaging in a business
combination with an interested stockholder for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless:
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prior to the date of the transaction, the
board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder;
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62
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the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding (a) shares owned by persons who are directors and
also officers and (b) shares owned by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
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on or subsequent to the date of the
transaction, the business combination is approved by the board and authorized
at an annual or special meeting of stockholders, and not by written consent,
by the affirmative vote of at least 66- 2/3% of the outstanding voting stock
which is not owned by the interested stockholder.
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Section 203 defines a business combination to
include:
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any merger or consolidation involving the
corporation and the interested stockholder;
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any sale, transfer, pledge or other
disposition involving the interested stockholder of 10% or more of the assets
of the corporation;
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subject to exceptions, any transaction that
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder; and
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the receipt by the interested stockholder
of the benefit of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation.
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In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation or any entity or person affiliated
with or controlling or controlled by the entity or person.
Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws
. Provisions of our amended and restated
certificate of incorporation and amended and restated bylaws may delay or
discourage transactions involving an actual or potential change in our control
or change in our management, including transactions in which stockholders might
otherwise receive a premium for their shares or transactions that our
stockholders might otherwise deem to be in their best interests. Therefore,
these provisions could adversely affect the price of our common stock. Among
other things, our amended and restated certificate of incorporation and amended
and restated bylaws:
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permit our board of directors to issue up
to 5,000,000 shares of preferred stock, with any rights, preferences and
privileges as they may designate;
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provide that the authorized number of
directors may be changed only by resolution of the board of directors;
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provide that all vacancies, including newly
created directorships, may, except as otherwise required by law and subject
to the rights of the holders of any series of preferred stock, be filled by
the affirmative vote of a majority of directors then in office, even if less
than a quorum;
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divide our board of directors into three classes;
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require that any action to be taken by our
stockholders must be effected at a duly called annual or special meeting of
stockholders and not be taken by written consent;
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provide that stockholders seeking to
present proposals before a meeting of stockholders or to nominate candidates
for election as directors at a meeting of stockholders must provide notice in
writing in a timely manner, and also specify requirements as to the form and
content of a stockholders notice;
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do not provide for cumulative voting rights
(therefore allowing the holders of a majority of the shares of common stock
entitled to vote in any election of directors to elect all of the directors
standing for election, if they should so choose); and
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provide that special meetings of our
stockholders may be called only by the chairman of the board, our chief
executive officer, our president or by the board of directors pursuant to a
resolution adopted by a majority of the total number of authorized directors.
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The amendment of any of these provisions, with the exception
of the ability of our board of directors to issue shares of preferred stock and
designate any rights, preferences and privileges thereto, would require
approval by the holders of at least 66- 2/3% of our then outstanding common
stock.
63
Shareholder Rights Plan
On June 22, 2009, we adopted a shareholder rights plan,
the purpose of which is, among other things, to enhance our Boards ability to
protect stockholder interests and to ensure that stockholders receive fair
treatment in the event any coercive takeover attempt is made in the
future. The shareholder rights plan was amended on March 23, 2012. The
shareholder rights plan could make it more difficult for a third party to
acquire, or could discourage a third party from acquiring, us or a large block
of our common stock. The following summarizes material terms of the shareholder
rights plan and the associated preferred share purchase rights. This
description is subject to the detailed provisions of, and is qualified by
reference to, the shareholder rights agreement which has been filed as an
exhibit to our Registration Statement on Form 8-A dated June 24, 2009, and the
amendment to the shareholder rights agreement, which has been filed as an
exhibit to our Registration Statement on Form 8-A/A, dated March 26, 2012, each
as previously filed with the Commission.
Each outstanding share of our common stock evidences one
preferred share purchase right. Under the terms of the shareholder rights
agreement, each preferred share purchase right entitles the registered holder
to purchase from us one ten-thousandth of a share (each, a unit) of our
Series A Junior Participating Cumulative Preferred Stock, par value $0.01 per
share, at a cash exercise price of $6.50 per unit, subject to adjustment.
Initially, the preferred share purchase rights are not exercisable and are
attached to and trade with all shares of common stock. The preferred share
purchase rights will separate from the common stock and will become exercisable
upon the earlier of:
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the close of business on the tenth
calendar day following the first public announcement that a person or group
of affiliated or associated persons has acquired beneficial ownership of 15%
or more of the outstanding shares of common stock, other than as a result of
repurchases of stock by us or certain inadvertent actions by a stockholder,
or
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the close of
business on the tenth business day (or such later day as the Board of
Directors may determine) following the commencement of a tender offer or
exchange offer that could result upon its consummation in a person or group
becoming the beneficial owner of 15% or more of the outstanding shares of
common stock.
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With respect to any person who beneficially owned 15% or
more of the outstanding shares of common stock as of June 23, 2009, such
person's share ownership will not cause the preferred share purchase rights to
be exercisable unless:
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such person acquires beneficial ownership
of shares of common stock representing more than an additional 0.5% of the
outstanding shares of common stock held by such person as of June 23,
2009; or
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if after June 23,
2009 such person reduces its beneficial ownership of shares of common stock
and such person subsequently acquires beneficial ownership of more than an
additional 0.5% of the common stock.
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In the event that a person or group of affiliated or
associated persons has acquired beneficial ownership of 15% or more of the
outstanding shares of common stock, proper provision will be made so that each
holder of a preferred share purchase right (other than an acquiring person or
its associates or affiliates, whose preferred share purchase rights shall
become null and void) will thereafter have the right to receive (a
subscription right) upon exercise, in lieu of a number of units, that number
of shares of our common stock (or, in certain circumstances, including if there
are insufficient shares of common stock to permit the exercise in full of the
preferred share purchase rights, units of preferred stock, other securities,
cash or property, or any combination of the foregoing) having a market value of
two times the exercise price of the preferred share purchase rights.
In the event that, at any time following the dated that a
person or group of affiliated or associated persons has acquired beneficial
ownership of 15% or more of the outstanding shares of common stock:
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we consolidate with, or merge with and
into, any other person, and we are not the continuing or surviving
corporation,
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any person consolidates with us, or
merges with and into us and we are the continuing or surviving corporation of
such merger and, in connection with such merger, all or part of the shares of
common stock are changed into or exchanged for stock or other securities of
any other person or cash or any other property, or
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50% or more of our
assets or earning power is sold, mortgaged or otherwise transferred, each
holder of a preferred share purchase right (other than an acquiring person or
its associates or affiliates, whose preferred share purchase rights shall
become null and void) will thereafter have the right to receive (a merger
right), upon exercise, common stock of the acquiring company having a market
value equal to two times the exercise price of the preferred share purchase
rights. The holder of a preferred share purchase right will continue to have
this merger right whether or not such holder has exercised its subscription
right. Preferred share purchase rights that are or were beneficially owned by
an acquiring person may (under certain circumstances specified in the
shareholder rights agreement) become null and void.
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64
The preferred share purchase rights may be redeemed in
whole, but not in part, at a price of $0.001 per preferred share purchase right
(payable in cash, common stock or other consideration deemed appropriate by the
Board of Directors) by the Board of Directors only until the earlier of:
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the time at which any person becomes an
acquiring person; or
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the expiration date
of the shareholder rights agreement.
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Immediately upon the action of the
Board of Directors ordering redemption of the preferred share purchase rights,
the preferred share purchase rights will terminate and thereafter the only
right of the holders of preferred share purchase rights will be to receive the
redemption price.
The shareholder rights agreement requires an independent
committee of the Board of Directors to review at least once every three years
whether maintaining the shareholder rights agreement continues to be in the
best interests of our stockholders.
The shareholder rights agreement may be amended by the
Board of Directors in its sole discretion at any time prior to the time at
which any person becomes an acquiring person. After such time the Board of
Directors may, subject to certain limitations set forth in the shareholder
rights agreement, amend the shareholder rights agreement only to cure any
ambiguity, defect or inconsistency, to shorten or lengthen any time period, or
to make changes that do not adversely affect the interests of preferred share
purchase rights holders (excluding the interests of an acquiring person or its
associates or affiliates). In addition, the Board of Directors may at any time
prior to the time at which any person becomes an acquiring person, amend the
shareholder rights agreement to lower the threshold at which a person becomes
an acquiring person to not less than the greater of:
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the sum of 0.001% and the largest
percentage of the outstanding common stock then owned by any person, and
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10%.
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Until a preferred share purchase right is exercised, the
holder will have no rights as our stockholder (beyond those as an existing
stockholder), including the right to vote or to receive dividends. While the
distribution of the preferred share purchase rights will not be taxable to
stockholders or to us, stockholders may, depending upon the circumstances,
recognize taxable income in the event that the preferred share purchase rights
become exercisable for units, other securities of ours, other consideration or
for common stock of an acquiring company.
The preferred share purchase rights will expire at the
close of business on June 23, 2019, unless previously redeemed or exchanged by
us.
We amended our shareholder rights agreement on March 23,
2012 to exempt 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), from purchasing shares of common stock in an
underwritten offering of our common stock that was consummated on March 28,
2012, so long as such purchasers and their affiliates and associates did 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 such purchasers and their affiliates and associates
immediately following the closing of the offering. As a result of the
amendment, such ownership by any such purchasers did not trigger the
exercisability of the preferred share purchase rights under the shareholder
rights agreement that would give each holder the right to receive upon exercise
one ten-thousandth of a share of our Series A Junior Participating Cumulative
Preferred Stock.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is
Broadridge Corporate Issuer Solutions, Inc. The transfer agent and registrars
address is Broadridge Corporate Issuer Solutions, Inc., P.O. Box 1342,
Brentwood NY 11717.
65
Warrants
The material terms and provisions of the warrants being
issued in this offering are summarized below. The following description is
subject to, and qualified in its entirety by, the form of common stock purchase
warrant, which will be filed as an exhibit to the registration statement, of
which this prospectus is a part. You should review a copy of the form of common
stock purchase warrant for a complete description of the terms and conditions
applicable to the warrants.
Term.
The warrants are exercisable beginning
on the date of original issuance and at any time up to the date that is 5 years
after such date.
Anti-Dilution Protection.
The warrants
contain weighted average anti-dilution protection upon the issuance of any
common stock, securities convertible into common stock or certain other
issuances at a price below the then-existing exercise price of the warrants,
with certain exceptions. The terms of the warrants, including these
antidilution protections, may make it difficult for us to raise additional
capital at prevailing market terms in the future.
Exercise Price.
The exercise price of the warrants is $
per share of common stock. The exercise price is subject to appropriate
adjustment in the event of certain stock dividends and distributions, stock
splits, stock combinations, stock issuances, reclassifications or similar events
affecting our common stock, as well as the anti-dilution protection described
above.
Exercisability.
Holders may exercise the
warrants beginning on the date of issuance and at any time during the
applicable term of the warrant. The warrants will be exercisable, at the option
of each holder, in whole or in part, by delivering to us a duly executed
exercise notice accompanied by payment in full for the number of shares of our
common stock purchased upon such exercise (except in the case of a cashless
exercise as discussed below). A holder (together with its affiliates) may not
exercise any portion of the warrant to the extent that the holder would own
more than 4.9% of the outstanding common stock after exercise, except that upon
at least 61 days prior notice from the holder to us, the holder may
increase the amount of ownership of outstanding stock after exercising the
holders warrants up to 9.9% of the number of shares of our common stock outstanding
immediately after giving effect to the exercise, as such percentage ownership
is determined in accordance with the terms of the warrants.
Cashless Exercise
. If, at the time a holder
exercises its warrant, there is no effective registration statement
registering, or the prospectus contained therein is not available for an
issuance of the shares underlying the warrant to the holder, then in lieu of
making the cash payment otherwise contemplated to be made to us upon such
exercise in payment of the aggregate exercise price, the holder may elect
instead to receive upon such exercise (either in whole or in part) the net
number of shares of common stock determined according to a formula set forth in
the warrant.
Transferability
. Subject to applicable laws
and the restriction on transfer set forth in the warrant, the warrant may be
transferred at the option of the holder upon surrender of the warrant to us
together with the appropriate instruments of transfer.
Authorized Shares.
During the period the
warrants are outstanding, we will reserve from its authorized and unissued
common stock a sufficient number of shares to provide for the issuance of
shares of common stock underlying the warrants upon the exercise of the
warrants.
Exchange Listing.
We do not plan on making an
application to list the warrants on the NASDAQ Capital Market, any national
securities exchange or other nationally recognized trading system.
Fundamental Transactions
. In the event of any
fundamental transaction, as described in the warrants and generally including
any merger with or into another entity, sale of all or substantially all of our
assets, tender offer or exchange offer, or reclassification of our common
stock, then upon any subsequent exercise of a warrant, the holder shall have
the right to receive as alternative consideration, for each share of our common
stock that would have been issuable upon such exercise immediately prior to the
occurrence of such fundamental transaction, the number of shares of common
stock of the successor or acquiring corporation or of Plug Power, if it is the
surviving corporation, and any additional consideration receivable upon or as a
result of such transaction by a holder of the number of shares of our common
stock for which the warrant is exercisable immediately prior to such event. In
addition, in the event of a fundamental transaction in which the amount of the
alternate consideration is less than the exercise price of the warrant, then we
or any successor entity shall pay at the holders option, exercisable at any
time concurrently with or within ninety (90) days after the consummation
of the fundamental transaction, an amount of cash equal to the value of the
warrant as determined in accordance with the Black Scholes option pricing
model.
Right as a Stockholder
. Except as otherwise
provided in the warrants or by virtue of such holders ownership of shares of
our common stock, the holders of the warrants do not have the rights or
privileges of holders of our common stock, including any voting rights, until
they exercise their warrants.
66
Waivers and
Amendments
. Any term of the warrants issued in the offering may be
amended or waived with our written consent and the written consent of the holder
of the warrant.
Enforceability of Rights by Holders of Warrants.
Each
warrant agent will act solely as our agent under the applicable warrant
agreement and will not assume any obligation or relationship of agency or trust
with any holder of any warrant. A single bank or trust company may act as
warrant agent for more than one issue of warrants. A warrant agent will have no
duty or responsibility in case of any default by us under the applicable
warrant agreement or warrant, including any duty or responsibility to initiate
any proceedings at law or otherwise, or to make any demand upon us. Any holder
of a warrant may, without the consent of the related warrant agent or the
holder of any other warrant, enforce by appropriate legal action its right to
exercise, and receive the securities purchasable upon exercise of, its
warrants.
67
We have entered into an
underwriting agreement with Roth Capital Partners, LLC with respect to the
shares of common stock and warrants, subject to this offering. Subject to
certain conditions, we have agreed to sell to the underwriter, and the
underwriter has agreed to purchase, the number of shares of common stock and
corresponding warrants provided below opposite its name.
Underwriter
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Number of Shares
of Common Stock
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Number of
Warrants
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Roth Capital Partners, LLC
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The underwriter is offering the shares of common stock and
corresponding warrants, subject to its acceptance of the shares of common stock
and corresponding warrants from us and subject to prior sale. The
underwriting agreement provides that the obligation of the underwriter to pay
for and accept delivery of the shares of common stock and corresponding
warrants offered by this prospectus is subject to the approval of certain legal
matters by its counsel and to certain other conditions. The underwriter
is obligated to take and pay for all of the shares of common stock and warrants
if any such shares and warrants are taken. However, the underwriter is
not required to take or pay for the shares of common stock and/or warrants
covered by the underwriters over-allotment option described below.
Over-Allotment Option
We have granted the underwriter an option, exercisable for
45 days from the date of this prospectus, to purchase up to an aggregate
of additional shares of common stock and/or additional
warrants to purchase up to shares of common stock to cover
over-allotments, if any, at the public offering price set forth on the cover
page of this prospectus, less underwriting discounts and commissions. The
underwriter may exercise this option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
common stock and the warrants offered by this prospectus.
Commission and Expenses
The underwriter has advised us that it proposes to offer
the shares of common stock and warrants to the public at the initial public
offering prices set forth on the cover page of this prospectus and to certain
dealers at that price less a concession not in excess of $ per share
of common stock and corresponding warrant. After this offering, the initial
public offering price and concession may be changed by the underwriter.
No such change shall change the amount of proceeds to be received by us as set
forth on the cover page of this prospectus. The per share of common stock
and corresponding warrant are offered by the underwriter as stated herein,
subject to receipt and acceptance by it and subject to its right to reject any
order in whole or in part. The underwriter has informed us that it does
not intend to confirm sales to any accounts over which it exercises
discretionary authority.
The following table shows the underwriting discounts and
commissions payable to the underwriter by us in connection with this
offering. Such amounts are shown assuming both no exercise and full
exercise of the underwriters over-allotment option to purchase additional
shares and/or warrants.
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Per Share of
Common Stock
and Corresponding Warrant
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Total Without
Exercise of Over-Allotment
Option
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Total With
Exercise of Over-Allotment
Option
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Public
offering price
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$
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$
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$
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Underwriting
discounts and commissions payable by us
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$
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$
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$
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We estimate that expenses payable by us in connection with
this offering, other than the underwriting discounts and commissions referred
to above, will be approximately $ . We have agreed to
reimburse the underwriter for certain out-of-pocket expenses not to exceed
$50,000 for all expenses, including legal fees and expenses.
Indemnification
We have agreed to indemnify the underwriter against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or the Securities Act, and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement, or to
contribute to payments that the underwriter may be required to make in respect
of those liabilities.
68
Lock-up Agreements
We, our officers and certain directors have agreed,
subject to certain exceptions, for a period of 90 days after the date of the
underwriting agreement, not to offer, sell, contract to sell, pledge, grant any
option to purchase, make any short sale or otherwise dispose of, directly or
indirectly any shares of common stock or any securities convertible into or
exchangeable for our common stock either owned as of the date of the
underwriting agreement or thereafter acquired without the prior written consent
of the underwriter. This 90-day period may be extended if (1) during
the last 17 days of the 90-day period, we issue an earnings release or material
news or a material event regarding us occurs or (2) prior to the
expiration of the 90-day period, we announce that we will release earnings
results during the 16-day period beginning on the last day of the 90-day
period, then the period of such extension will be 18 days, beginning on the
issuance of the earnings release or the occurrence of the material news or
material event. If after any announcement described in clause (2) of
the preceding sentence, we announce that we will not release earnings results
during the 16-day period, the lock-up period shall expire the later of the expiration
of the 90-day period and the end of any extension of such period made pursuant
to clause (1) of the preceding sentence. The underwriter may, in its
sole discretion and at any time or from time to time before the termination of
the lock-up period, without notice, release all or any portion of the
securities subject to lock-up agreements.
Electronic Distribution
This prospectus in electronic format may be made available
on websites or through other online services maintained by the underwriter, or
by its affiliates. Other than this prospectus in electronic format, the
information on the underwriters website and any information contained in any
other website maintained by the underwriter is not part of this prospectus, the
related registration statement of which this prospectus forms a part, has not
been approved and/or endorsed by us or the underwriter in its capacity as
underwriter, and should not be relied upon by investors.
Price Stabilization, Short Positions and Penalty Bids
In connection with the offering the underwriter may engage
in stabilizing transactions, over-allotment transactions, syndicate covering
transactions and penalty bids in accordance with Regulation M under the
Exchange Act:
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Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified maximum.
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Over-allotment involves sales by the underwriter of shares
in excess of the number of shares the underwriter is obligated to purchase,
which creates a syndicate short position. The short position may be either a
covered short position or a naked short position. In a covered short position,
the number of shares over-allotted by the underwriter is not greater than the
number of shares that it may purchase in the over-allotment option. In a naked
short position, the number of shares involved is greater than the number of
shares in the over-allotment option. The underwriter may close out any covered
short position by either exercising its over-allotment option and/or purchasing
shares in the open market.
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Syndicate covering transactions involve purchases of shares of
the common stock in the open market after the distribution has been completed
in order to cover syndicate short positions. In determining the source of shares
to close out the short position, the underwriter will consider, among other
things, the price of shares available for purchase in the open market as
compared to the price at which it may purchase shares through the
over-allotment option. If the underwriter sells more shares than could be
covered by the over-allotment option, a naked short position, the position can
only be closed out by buying shares in the open market. A naked short position
is more likely to be created if the underwriter is concerned that there could
be downward pressure on the price of the shares in the open market after
pricing that could adversely affect investors who purchase in the offering.
-
Penalty bids permit the underwriter to reclaim a selling
concession from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering
transactions and penalty bids may have the effect of raising or maintaining the
market price of our common stock or preventing or retarding a decline in the
market price of the common stock. As a result, the price of our common stock
may be higher than the price that might otherwise exist in the open market.
Neither we nor the underwriter makes any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the price of the common stock. In addition, neither we nor the
underwriter makes any representations that the underwriter will engage in these
stabilizing transactions or that any transaction, once commenced, will not be
discontinued without notice.
69
Listing and Transfer Agent
Our common stock is listed on the NASDAQ Capital Market
and trades under the symbol PLUG. The transfer agent of our common stock is
Broadridge Corporate Issuer Solutions, Inc.
We do not plan on making an application to list the
warrants on the NASDAQ Capital Market, any national securities exchange or other
nationally recognized trading system. We will act as the registrar and
transfer agent for the warrants.
Other
The underwriter and/or its affiliates have provided, and
may in the future provide, various investment banking and other financial
services for us for which services it has received and, may in the future
receive, customary fees. Except for services provided in connection with
this offering, the underwriter has not provided any investment banking or other
financial services during the 180-day period preceding the date of this
prospectus and we do not expect to retain the underwriter to perform any
investment banking or other financial services for at least 90 days after the
date of this prospectus.
Notice to Investors
Notice to Investors in the United Kingdom
In relation to each Member State of the European Economic
Area which has implemented the Prospectus Directive (each, a Relevant Member
State) an offer to the public of any securities which are the subject of the
offering contemplated by this prospectus may not be made in that Relevant
Member State except that an offer to the public in that Relevant Member State
of any such securities may be made at any time under the following exemptions
under the Prospectus Directive, if they have been implemented in that Relevant
Member State:
(a) to legal
entities which are authorized or regulated to operate in the financial markets
or, if not so authorized or regulated, whose corporate purpose is solely to
invest in securities;
(b) to any legal
entity which has two or more of (1) an average of at least 250 employees during
the last financial year; (2) a total balance sheet of more than €43,000,000 and
(3) an annual net turnover of more than €50,000,000, as shown in its last
annual or consolidated accounts;
(c) by the
underwriter to fewer than 100 natural or legal persons (other than qualified
investors as defined in the Prospectus Directive); or
(d) in any other
circumstances falling within Article 3(2) of the Prospectus Directive, provided
that no such offer of these securities shall result in a requirement for the
publication by the issuer or the underwriter of a prospectus pursuant to
Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression an
offer to the public in relation to any of the securities in any Relevant
Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and any such securities to be offered so
as to enable an investor to decide to purchase any such securities, as the same
may be varied in that Member State by any measure implementing the Prospectus
Directive in that Member State and the expression Prospectus Directive means
Directive 2003/71/EC and includes any relevant implementing measure in each
Relevant Member State.
The underwriter has represented, warranted and agreed
that:
(a) it has only
communicated or caused to be communicated and will only communicate or cause to
be communicated any invitation or inducement to engage in investment activity
(within the meaning of section 21 of the Financial Services and Markets Act
2000 (the FSMA)) received by it in connection with the issue or sale of any of
the securities in circumstances in which section 21(1) of the FSMA does not
apply to the issuer; and
(b) it has complied
with and will comply with all applicable provisions of the FSMA with respect to
anything done by it in relation to the securities in, from or otherwise
involving the United Kingdom.
European Economic Area
In particular, this document does not constitute an
approved prospectus in accordance with European Commissions Regulation on
Prospectuses no. 809/2004 and no such prospectus is to be prepared and approved
in connection with this offering. Accordingly, in relation to each Member State
of the European Economic Area which has implemented the Prospectus Directive
(being the Directive of the European Parliament and of the Council 2003/71/EC
and including any relevant implementing measure in each Relevant Member State)
(each, a Relevant Member State), with effect from and including the date on
which the Prospectus Directive is implemented in that Relevant Member State
(the Relevant Implementation Date) an offer of securities to the public may not
be made in that Relevant Member State prior to the publication of a prospectus
in relation to such securities which has been approved by the competent
authority in that Relevant Member State or, where appropriate, approved in
another Relevant Member State and notified to the competent authority in that
Relevant Member State, all in accordance with the Prospectus Directive, except
that it may, with effect from and including the Relevant Implementation Date,
make an offer of securities to the public in that Relevant Member State at any
time:
70
-
to legal entities which are authorized or regulated to operate in
the financial markets or, if not so authorized or regulated, whose corporate
purpose is solely to invest in securities;
-
to any legal entity which has two or more of (1) an average of at
least 250 employees during the last financial year; (2) a total balance sheet
of more than €43,000,000; and (3) an annual net turnover of more than
€50,000,000, as shown in the last annual or consolidated accounts; or
-
in any other circumstances which do not require the publication
by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression an
offer of securities to the public in relation to any of the securities in any
Relevant Member State means the communication in any form and by any means of
sufficient information on the terms of the offer and the securities to be
offered so as to enable an investor to decide to purchase or subscribe for the
securities, as the same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State. For these purposes
the shares and warrants offered hereby are securities.
71
The validity of the securities being offered by this
prospectus will be passed upon by Goodwin Procter LLP, Boston, Massachusetts. Certain
legal matters will be passed upon for the underwriter by Lowenstein Sandler LLP,
New York, New York.
The consolidated financial statements of Plug Power Inc.
and subsidiaries as of December 31, 2011 and 2010, and for each of the years in
the three-year period ended December 31, 2011, have been included herein in
reliance upon the report of KPMG LLP, independent registered public accounting
firm, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
The audit report covering the December 31, 2011
consolidated financial statements refers to a change in the method of
accounting for revenue arrangements with multiple-deliverables entered into or
substantially modified after January 1, 2010.
This prospectus is part of a registration statement that
we have filed with the SEC. Certain information in the registration statement
has been omitted from this prospectus in accordance with the rules of the
SEC. We are a public company and file proxy statements, annual, quarterly and
special reports and other information with the SEC. The registration statement,
such reports and other information can be inspected and copied at the Public
Reference Room of the SEC located at 100 F Street, N.E., Washington D.C.
20549. Copies of such materials, including copies of all or any portion of the
registration statement, can be obtained from the Public Reference Room of
the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain
information on the operation of the Public Reference Room. Such materials may
also be accessed electronically by means of the SECs home page on the
Internet
(www.sec.gov)
.
72
PLUG POWER INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Audited
Consolidated Financial Statements:
|
|
|
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
|
|
F-1
|
|
Consolidated
Balance Sheets as of December 31, 2011 and 2010
|
|
|
F-2
|
|
Consolidated
Statements of Operations for the years ended December 31, 2011, 2010 and 2009
|
|
|
F-3
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009
|
|
|
F-4
|
|
Consolidated
Statements of Stockholders Equity and Comprehensive Loss for the years ended
December 31, 2011, 2010 and 2009
|
|
|
F-5
|
|
Notes
to Consolidated Financial Statements
|
|
|
F-6
|
|
Schedule
II Valuation and Qualifying Accounts
|
|
|
F-35
|
|
|
|
|
|
|
|
|
Unaudited
Consolidated Interim Financial Statements:
|
|
|
Page
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011
|
|
|
FF-1
|
|
Condensed
Consolidated Statements of Operations for the three months and nine months
ended September 30, 2012 and 2011
|
|
|
FF-2
|
|
Condensed
Consolidated Statements of Comprehensive Income (Loss) for the three months
and nine months ended September 30, 2012 and 2011
|
|
|
FF-3
|
|
Condensed
Consolidated Statements of Cash Flows for the nine months ended September 30,
2012 and 2011
|
|
|
FF-4
|
|
Notes
to Condensed Consolidated Financial Statements
|
|
|
Ff-5
|
|
|
|
|
|
|
Report of Independent Registered Public Accounting
Firm
The Board of Directors and Stockholders
Plug Power Inc.:
We have audited the
accompanying consolidated balance sheets of Plug Power Inc. and subsidiaries
(the Company) as of December 31, 2011 and 2010, and the related consolidated
statements of operations, cash flows, and stockholders' equity and
comprehensive loss for each of the years in the three-year period ended
December 31, 2011. In connection with our audits of the consolidated financial
statements, we also have audited the consolidated financial statement schedule
II, Valuation and Qualifying Accounts. These consolidated financial statements
and financial statement schedule are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits
in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Plug Power Inc. and subsidiaries
as of December 31, 2011 and 2010, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
2011, in conformity with U.S. generally accepted accounting principles. Also in
our opinion, the related consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
As discussed in Note 18
to the consolidated financial statements, the Company changed its method of
accounting for revenue arrangements with multiple-deliverables entered into or
substantially modified after January 1, 2010 to adopt Accounting Standards
Update No. 2009-13 on Topic 605,
Revenue Recognition Multiple-Deliverable
Revenue Arrangements.
/S/ KPMG LLP
Albany, New York
March 30, 2012
F-1
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
13,856,893
|
|
$
|
10,955,403
|
|
Available-for-sale securities
|
|
|
-
|
|
10,403,315
|
|
Accounts receivable, less allowance of $0 in 2011 and $10,160 in 2010
|
13,388,909
|
|
4,196,361
|
|
Inventory
|
|
|
10,354,707
|
|
10,539,116
|
|
Assets held for sale
|
|
|
-
|
|
1,000,000
|
|
Prepaid expenses and other current assets
|
|
|
1,894,014
|
|
1,584,466
|
|
|
Total current assets
|
|
|
39,494,523
|
|
38,678,661
|
Restricted cash
|
|
|
-
|
|
525,000
|
Property, plant and equipment, net
|
|
|
8,686,840
|
|
9,838,631
|
Investment in leased property, net
|
|
|
-
|
|
263,239
|
Intangible assets, net
|
|
|
7,474,636
|
|
9,871,394
|
|
|
Total assets
|
|
|
$
|
55,655,999
|
|
$
|
59,176,925
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
4,668,721
|
|
$
|
3,560,048
|
|
Accrued expenses
|
|
|
3,172,998
|
|
4,336,229
|
|
Product warranty reserve
|
|
|
1,210,909
|
|
862,480
|
|
Borrowings under line of credit
|
|
|
5,405,110
|
|
-
|
|
Current portion long term debt
|
|
|
-
|
|
9,956
|
|
Deferred revenue
|
|
|
2,505,175
|
|
2,452,840
|
|
Other current liabilities
|
|
|
80,000
|
|
1,901,372
|
|
|
Total current liabilities
|
|
|
17,042,913
|
|
13,122,925
|
|
Common stock warrant liability
|
|
|
5,320,990
|
|
-
|
|
Deferred revenue
|
|
|
3,036,829
|
|
1,896,910
|
|
Other liabilities
|
|
|
1,219,602
|
|
1,243,728
|
|
|
Total liabilities
|
|
|
26,620,334
|
|
16,263,562
|
Stockholders' equity:
|
|
|
|
|
|
|
Common stock, $0.01 par value per share; 245,000,000 shares authorized;
|
|
|
|
|
Issued (including shares in treasury):
|
|
|
|
|
|
|
22,924,411 at December 31, 2011 and 13,369,924 at December 31, 2010
|
229,244
|
|
133,699
|
|
Additional paid-in capital
|
|
|
784,213,871
|
|
770,863,164
|
|
Accumulated other comprehensive income
|
|
|
928,744
|
|
965,868
|
|
Accumulated deficit
|
|
|
(754,783,812)
|
|
(727,329,858)
|
|
Less common stock in treasury, at cost:
|
|
|
|
|
|
|
165,906 shares at December 31, 2011 and 180,449 shares at December 31, 2010
|
(1,552,382)
|
|
(1,719,510)
|
|
|
Total stockholders' equity
|
|
|
29,035,665
|
|
42,913,363
|
|
|
Total liabilities and stockholders' equity
|
|
|
$
|
55,655,999
|
|
$
|
59,176,925
|
See accompanying notes to consolidated financial
statements.
F-2
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2011, 2010 and 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Product and service revenue
|
$
|
23,223,265
|
|
$
|
15,738,841
|
|
$
|
4,832,773
|
|
Research and development contract revenue
|
3,886,114
|
|
3,597,870
|
|
7,459,783
|
|
Licensed technology revenue
|
516,563
|
|
135,938
|
|
-
|
|
Total revenue
|
27,625,942
|
|
19,472,649
|
|
12,292,556
|
|
Cost of product and service revenue
|
30,669,602
|
|
23,111,151
|
|
7,246,453
|
|
Cost of research and development contract revenue
|
6,232,210
|
|
6,370,797
|
|
12,433,361
|
|
Research and development expense
|
5,655,748
|
|
12,901,170
|
|
16,324,373
|
|
Selling, general and administrative expenses
|
14,545,965
|
|
25,572,364
|
|
15,426,806
|
|
Gain on sale of assets
|
(673,358)
|
|
(3,217,594)
|
|
-
|
|
Amortization of intangible assets
|
2,322,876
|
|
2,263,627
|
|
2,132,333
|
|
|
Operating loss
|
(31,127,101)
|
|
(47,528,866)
|
|
(41,270,770)
|
|
Interest and other income and net realized losses
|
|
|
|
|
|
|
from available-for-sale securities
|
248,430
|
|
1,056,932
|
|
1,689,299
|
|
Change in fair value of common stock warrant liability
|
3,447,153
|
|
-
|
|
-
|
|
Change in fair value of auction rate securities repurchase agreement
|
-
|
|
(5,977,822)
|
|
(4,246,524)
|
|
Net trading gain
|
-
|
|
5,977,822
|
|
4,246,524
|
|
Interest and other expense and foreign currency gain (loss)
|
(22,436)
|
|
(486,987)
|
|
(1,127,081)
|
|
|
Net loss
|
$
|
(27,453,954)
|
|
$
|
(46,958,921)
|
|
$
|
(40,708,552)
|
|
Loss per share:
|
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(1.46)
|
|
$
|
(3.58)
|
|
$
|
(3.15)
|
|
Weighted average number of common shares
|
|
|
|
|
|
|
outstanding
|
18,778,066
|
|
13,123,162
|
|
12,911,066
|
Note Share and per share information for the prior
periods has been retroactively adjusted to reflect the May 19, 2011 one-for-ten
reverse stock split of the Companys common stock.
See accompanying notes to consolidated financial
statements.
F-3
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the years ended December 31, 2011, 2010 and 2009
|
|
|
|
Twelve months ended
|
|
|
|
|
December 31,
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(27,453,954)
|
|
$
|
(46,958,921)
|
|
$
|
(40,708,552)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment, and investment in leased property
|
2,132,117
|
|
4,969,263
|
|
3,634,668
|
|
|
Amortization of intangible assets
|
2,322,876
|
|
2,263,627
|
|
2,132,333
|
|
|
Stock-based compensation
|
1,452,259
|
|
1,174,576
|
|
1,928,501
|
|
|
Loss on disposal of property, plant and equipment
|
308,621
|
|
86,794
|
|
504,397
|
|
|
(Gain) loss on sale of leased assets
|
(673,358)
|
|
290,491
|
|
-
|
|
|
Provision for bad debts
|
-
|
|
10,160
|
|
92,560
|
|
|
Realized loss on available for sale securities
|
22,421
|
|
-
|
|
-
|
|
|
Net unrealized gains on trading securities
|
-
|
|
(5,977,822)
|
|
(4,246,524)
|
|
|
Change in fair value of auction rate debt securities repurchase agreement
|
-
|
|
5,977,822
|
|
4,246,524
|
|
|
Gain on repayable government assistance
|
-
|
|
-
|
|
(324,300)
|
|
|
Change in fair value of common stock warrant liability
|
(3,447,153)
|
|
-
|
|
-
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
(9,192,901)
|
|
(2,193,325)
|
|
65,440
|
|
|
Inventory
|
1,438,195
|
|
(4,409,582)
|
|
(95,935)
|
|
|
Prepaid expenses and other current assets
|
(310,089)
|
|
1,624,422
|
|
(684,277)
|
|
|
Accounts payable, accrued expenses, product warranty reserve and other liabilities
|
(1,101,356)
|
|
2,618,994
|
|
(3,944,407)
|
|
|
Deferred revenue
|
1,192,255
|
|
(246,968)
|
|
(828,675)
|
|
|
|
Net cash used in operating activities
|
(33,310,067)
|
|
(40,770,469)
|
|
(38,228,247)
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
(1,326,144)
|
|
(1,100,478)
|
|
(532,960)
|
|
|
Investment in leased property, net
|
-
|
|
(2,233,334)
|
|
(2,461,526)
|
|
|
Restricted cash
|
525,000
|
|
1,740,405
|
|
(2,265,405)
|
|
|
Proceeds from disposal of property, plant and equipment
|
46,650
|
|
121,564
|
|
223,000
|
|
|
Proceeds from sale of leased assets
|
673,358
|
|
3,221,168
|
|
-
|
|
|
Proceeds from trading securities
|
-
|
|
59,375,001
|
|
3,500,000
|
|
|
Proceeds from maturities and sales of available-for-sale securities
|
10,399,396
|
|
79,754,039
|
|
137,555,930
|
|
|
Purchases of available-for-sale securities
|
-
|
|
(42,311,734)
|
|
(161,803,208)
|
|
|
|
Net cash provided by (used in) investing activities
|
10,318,260
|
|
98,566,631
|
|
(25,784,169)
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
Purchase of treasury stock
|
(158,492)
|
|
(441,506)
|
|
(534,418)
|
|
|
Proceeds from issuance of common stock and warrants
|
22,583,877
|
|
-
|
|
-
|
|
|
Proceeds from stock option exercises and employee stock purchase plan
|
-
|
|
-
|
|
76,493
|
|
|
Stock issuance costs
|
(1,891,378)
|
|
-
|
|
-
|
|
|
Proceeds (repayment) of borrowings under line of credit
|
5,405,110
|
|
(59,375,000)
|
|
(3,500,000)
|
|
|
Proceeds from long-term debt
|
-
|
|
-
|
|
1,793,461
|
|
|
Principal payments on long-term debt
|
(9,956)
|
|
(1,561,371)
|
|
(229,602)
|
|
|
|
Net cash provided by (used in) financing activities
|
25,929,161
|
|
(61,377,877)
|
|
(2,394,066)
|
|
|
Effect of exchange rate changes on cash
|
(35,864)
|
|
(43,865)
|
|
142,965
|
|
|
Increase (decrease) in cash and cash equivalents
|
2,901,490
|
|
(3,625,580)
|
|
(66,263,517)
|
|
|
Cash and cash equivalents, beginning of period
|
10,955,403
|
|
14,580,983
|
|
80,844,500
|
|
|
Cash and cash equivalents, end of period
|
$
|
13,856,893
|
|
$
|
10,955,403
|
|
$
|
14,580,983
|
See accompanying notes to consolidated financial
statements.
F-4
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE LOSS
For the years ended December 31, 2011, 2010 and 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Total
|
|
Common Stock
|
|
Additional Paid-
|
|
Comprehensive
|
|
|
Treasury Stock
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
Comprehensive
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
in-Capital
|
|
Income (Loss)
|
|
|
Shares
|
|
Amount
|
|
Deficit
|
|
|
Equity
|
|
Loss
|
December 31, 2008
|
|
|
12,816,400
|
|
|
|
$
|
1,281,640
|
|
|
|
$
|
765,347,706
|
|
|
$
|
(359,253)
|
|
|
40,211
|
|
|
$
|
(743,586)
|
|
|
$
|
(639,662,385)
|
|
|
$
|
125,864,122
|
|
|
|
Net loss
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(40,708,552)
|
|
|
(40,708,552)
|
|
|
(40,708,552)
|
Foreign currency translation gain
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
1,293,770
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,293,770
|
|
|
1,293,770
|
Unrealized loss on available-for-sale securities, net of reclassification
adjustments for realized net losses and gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(131,308)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(131,308)
|
|
|
(131,308)
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(39,546,090)
|
Stock based compensation
|
|
|
221,900
|
|
|
|
22,190
|
|
|
|
2,264,858
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,287,048
|
|
|
|
Stock issued under employee stock purchase plan
|
|
|
20,824
|
|
|
|
2,083
|
|
|
|
196,008
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
198,091
|
|
|
|
Purchase of treasury stock
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
58,409
|
|
|
(534,418)
|
|
|
-
|
|
|
(534,418)
|
|
|
|
December 31, 2009
|
|
|
13,059,124
|
|
|
|
$
|
1,305,913
|
|
|
|
$
|
767,808,572
|
|
|
$
|
803,209
|
|
|
98,620
|
|
|
$
|
(1,278,004)
|
|
|
$
|
(680,370,937)
|
|
|
$
|
88,268,753
|
|
|
|
Net loss
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(46,958,921)
|
|
|
(46,958,921)
|
|
|
(46,958,921)
|
Foreign currency translation gain
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
276,959
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
276,959
|
|
|
276,959
|
Unrealized loss on available-for-sale securities, net of reclassification
adjustments for realized net losses and gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(114,300)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(114,300)
|
|
|
(114,300)
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(46,796,262)
|
Stock based compensation
|
|
|
310,800
|
|
|
|
31,079
|
|
|
|
1,851,299
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,882,378
|
|
|
|
Reclassification adjustment - stock split
|
|
|
|
-
|
|
|
|
(1,203,293)
|
|
|
1,203,293
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
Purchase of treasury stock
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
81,829
|
|
|
(441,506)
|
|
|
-
|
|
|
(441,506)
|
|
|
|
December 31, 2010
|
|
|
13,369,924
|
|
|
|
$
|
133,699
|
|
|
|
$
|
770,863,164
|
|
|
$
|
965,868
|
|
|
180,449
|
|
|
$
|
(1,719,510)
|
|
|
$
|
(727,329,858)
|
|
|
$
|
42,913,363
|
|
|
|
Net loss
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(27,453,954)
|
|
|
(27,453,954)
|
|
|
(27,453,954)
|
Foreign currency translation loss
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(55,626)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(55,626)
|
|
|
(55,626)
|
Unrealized loss on available-for-sale securities, net of reclassification
adjustments for realized net losses and gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
18,502
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
18,502
|
|
|
18,502
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(27,491,078)
|
Stock based compensation
|
|
|
221,737
|
|
|
|
2,217
|
|
|
|
1,848,330
|
|
|
-
|
|
|
833
|
|
|
(3,030)
|
|
|
-
|
|
|
1,847,517
|
|
|
|
Public offering common stock, net
|
|
|
9,332,750
|
|
|
|
93,328
|
|
|
|
11,831,027
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
11,924,355
|
|
|
|
Issuance of treasury shares
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(328,650)
|
|
|
-
|
|
|
(35,000)
|
|
|
328,650
|
|
|
-
|
|
|
-
|
|
|
|
Purchase of treasury shares
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
19,624
|
|
|
(158,492)
|
|
|
-
|
|
|
(158,492)
|
|
|
|
December 31, 2011
|
|
|
22,924,411
|
|
|
|
$
|
229,244
|
|
|
|
$
|
784,213,871
|
|
|
$
|
928,744
|
|
|
165,906
|
|
|
$
|
(1,552,382)
|
|
|
$
|
(754,783,812)
|
|
|
$
|
29,035,665
|
|
|
|
Note Share and per share information for the prior
periods has been retroactively adjusted to reflect the May 19, 2011 one-for-ten
reverse stock split of the Companys common stock.
See accompanying notes to consolidated financial
statements.
F-5
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations
Description of
Business
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 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.
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.
Effective April 1, 2010, the Company was no longer
considered a development stage enterprise since its principal operations began
to provide more than insignificant revenues as the Company received orders from
repeat customers, increased its customer base and had a significant backlog. Prior to April 1, 2010, the Company was considered a development stage
enterprise because substantially all of our resources and efforts were aimed at
the discovery of new knowledge that could lead to significant improvement in
fuel cell reliability and durability, and the establishment, expansion and
stability of markets for our products.
Unless the context indicates otherwise, the terms
Company, Plug Power, we, our or us as used herein refers to Plug
Power Inc. and its subsidiaries.
Liquidity
We have experienced recurring operating losses and as
of December 31, 2011, we had an accumulated deficit of approximately $754.8
million. Substantially all of our losses resulted from costs incurred in
connection with our manufacturing operations, 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. Our May 2010
restructuring plan, which involved focusing on our GenDrive business and
consolidating our operations into our Latham, New York facility, was expected
to reduce these losses going forward. This restructuring significantly reduced
our operating expenses in 2011.
F-6
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
As of December 31, 2011, we had approximately $22.5 million of working capital,
which includes $13.9 million of cash and cash equivalents to fund our future
operations. Additionally, on August 9, 2011, we entered into a revolving credit
facility arrangement with Silicon Valley Bank (SVB) providing availability to
an additional $7 million to support working capital needs. The Loan Agreement
will expire on August 8, 2012. See Note 8, Loan and Security Agreement, for
additional information regarding the revolving credit facility. On March 28,
2012 and March 29, 2012, the Company completed a public offering of common
stock, with net proceeds totaling $15.7 million. See Note 22, Subsequent Events, for additional
information regarding the public offering. 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 through the end of 2012. This
projection is based on our current expectations regarding product sales, cost
structure, 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 2012 without additional external financing. We
continue to evaluate opportunities to raise additional capital to fund our
business beyond 2012. Alternatives the Company would consider include equity or
debt financings, strategic alliances or joint ventures. If we are unable to
obtain additional capital prior to the end of 2012, we may not be able to
sustain our future operations beyond the first quarter of 2013 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 to 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 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.
Public Offering
Refer
to Note 12, Stockholders Equity, for information regarding our 2011 public
offering.
F-7
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
2. Summary of
Significant Accounting Policies
Principles of
Consolidation
The consolidated financial statements include the
financial statements of Plug Power Inc. and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation. It is the Companys policy to reclassify prior year consolidated
financial statements to conform to current year presentation.
Cash Equivalents
Cash equivalents consist of money market accounts and
overnight repurchase agreements with an initial term of less than three months.
For purposes of the consolidated statements of cash flows, the Company
considers all highly-liquid debt instruments with original maturities of three
months or less to be cash equivalents.
Investment Securities
Investment securities as of December 31, 2010
consisted of U.S. Treasury securities. The Company classified these
securities as available-for-sale.
Available-for-sale
securities are recorded at fair value. Unrealized holding gains and losses, net
of the related tax effect, on available-for-sale securities are
excluded from earnings and are reported as a separate component of accumulated
other comprehensive income until realized. Realized gains and losses from the
sale of available‑for‑sale securities are determined on a specific‑identification
basis.
Accounts
Receivable
Accounts receivable related to product and service
arrangements are recorded when products are shipped or delivered to customers,
as appropriate. Accounts receivable related to contract research and
development arrangements are recorded when work is completed under the
applicable contract. Accounts receivable are stated at the amount billed to
customers. Accounts receivable are ordinarily due between 30 and 60 days after
the issuance of the invoice. Accounts are considered delinquent when more than
90 days past due, and no extended payment agreements have been granted.
Delinquent receivables are reserved or written off based on individual credit
evaluation and specific circumstances of the customer. The allowance for
doubtful accounts and related receivable are reduced when the amount is deemed
uncollectible.
Inventory
Inventory is stated at the lower of cost or market
value and consists primarily of raw materials. In the case of our limited
consignment arrangements, we do not relieve inventory until the customer has
accepted the product, at which time the risks and rewards of ownership have
transferred. At December 31, 2011 and 2010, inventory on consignment was
valued at approximately $178,000 and $725,000, respectively.
Intangible
Assets
Intangible assets with estimable useful lives
are amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment when certain triggering events
occur. Intangible assets consisting of acquired technology and customer
relationships related to Cellex and General Hydrogen are amortized using a
straight-line method over their useful lives of 8 years.
Product and Service
Revenue
Effective April 1, 2010, the Company adopted
Accounting Standards Update (ASU) ASU No. 2009-13 on Topic 605, Revenue
Recognition Multiple Deliverable Revenue Arrangements retroactive to January
1, 2010
.
The objective of this ASU is to address the accounting for
multiple-deliverable arrangements to enable vendors to account for products or
services (deliverables) separately rather than as a combined unit. Vendors
often provide multiple products or services to their customers. Those
deliverables often are provided at different points in time or over different
time periods. This ASU provides amendments to the criteria in Subtopic 605-25
for separating consideration in multiple-deliverable arrangements. The
amendments in this ASU establish a selling price hierarchy for determining the
selling price of a deliverable. The selling price used for each deliverable
will be based on vendor-specific objective evidence (VSOE) if available,
third-party evidence (TPE) if VSOE is not available, or estimated selling price
(ESP) if neither VSOE nor TPE is available. The amendments in this ASU also
replace the term fair value in the revenue allocation guidance with selling
price to clarify that the allocation of revenue is based on entity-specific assumptions
rather than assumptions of a marketplace participant and expands the disclosure
requirements related to a vendors multiple-deliverable revenue arrangements.
F-8
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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
Company was previously prohibited from separating these multiple deliverables
into individual units of accounting without VSOE of fair value or other TPE of
fair value. This evidence was not available due to our limited experience and
lack of evidence of fair value of the undelivered components of the sale.
Without this level of evidence, the Company had to treat each sale as a single unit
of accounting and defer the revenue recognition of each sale, recognizing
revenue over a straight-line basis as the continued service, maintenance and
other support obligations expired. Under ASU No. 2009-13, the requirement to
have VSOE or TPE in order to recognize revenue has been modified, and it now
allows the vendor to make its best estimate of the standalone selling price of
deliverables when more objective evidence of selling price is not available.
Prior to the adoption of ASU No. 2009-13, the Company
applied the guidance within FASB ASC No. 605-10-S99, Revenue Recognition
Overall SEC Materials, in the evaluation of its contracts to determine when
to properly recognize revenue. Under FASB ASC No. 605-10-S99 revenue is
recognized when title and risk of loss have passed to the customer, there is
persuasive evidence of an arrangement, delivery has occurred or services have
been rendered, the sales price is determinable, and collectability is
reasonably assured.
The Companys initial sales of products were
contract-specific arrangements containing multiple obligations that may include
a combination of fuel cell systems, continued service, maintenance, a supply of
hydrogen and other support. While contract terms generally stipulated that
title and risk of ownership pass and require payment upon shipment or delivery
of the fuel cell system, or acceptance in the case of certain consignment
sales, and also stipulated that payment is not contingent on the achievement of
specific milestones or other substantive performance, the multiple obligations
within the Companys contractual arrangements were not accounted for separately
based on the Companys limited commercial experience and lack of evidence of
fair value of the separate elements. As a result, the Company deferred
recognition of product and service revenue and recognized revenue on a
straight-line basis over the stated contractual terms, as the continued
service, maintenance and other support obligations expired, which were
generally for periods of twelve (12) to thirty (30) months or which may have
extended over multiple years.
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.
See Note 18, Multiple-Deliverable Revenue Arrangements
for further discussion of our multiple-deliverable revenue arrangements.
The product and service revenue contracts entered into
since January 1, 2010 generally provide a one to two year product warranty to
customers from date of installation. We currently estimate the costs of
satisfying warranty claims based on an analysis of past experience and provide
for future claims in the period the revenue is recognized. The Company
carefully monitors the warranty work requested by its customers and management
believes that its current warranty reserve appears adequate as of December 31,
2011. The Companys product and service warranty as of December 31, 2011 is
approximately $1,211,000 and is included in product warranty reserve in the
consolidated balance sheets.
F-9
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The Company has also sold products with extended
warranties that generally provide for a five to ten year warranty from the date
of installation. These types of contacts are accounted for as a deliverable
in accordance with ASU No. 2009-13, and accordingly, revenue generated from
these transactions is deferred and recognized in income over the warranty
period.
In the case of the Companys limited consignment
sales, the Company does not begin recognizing revenue until the customer has
accepted the product, at which time the risks and rewards of ownership have
transferred, the price is fixed and the Company has a reasonable expectation of
collection upon billing. The costs associated with the product, service and other
obligations are generally expensed as they are incurred. At December 31, 2011
and 2010, the Company had unbilled amounts from product and service revenue in
the amount of approximately $0 and $107,000, respectively and is included in
other current assets in the consolidated balance sheets. At December 31,
2011 and 2010, the Company had customer deposits from product and service
revenue, representing deposits in advance of performance of the allowable work,
in the amount of approximately $0 and $576,000, respectively and is included in
other current liabilities in the consolidated balance sheets. At
December 31, 2011 and 2010, the Company had deferred product and service
revenue in the amount of $5.5 million and $4.3 million, respectively and is included
in deferred revenue in the consolidated balance sheets.
Research and
Development Contract Revenue
Research and development contract revenue primarily relates to cost
reimbursement research and development contracts associated with the
development of PEM fuel cell technology. The Company generally shares in the
cost of these programs with cost sharing percentages generally ranging from 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. All allowable work performed through the end
of each calendar quarter is billed, subject to limitations in the respective
contracts. We expect to continue research and development contract work that is
directly related to our current product development efforts. At December 31,
2011 and 2010, the Company had unbilled amounts from research and development
contract revenue in the amount of approximately $252,000 and $457,000, respectively
and is included in other current assets in the consolidated balance sheets. Unbilled
amounts at December 31, 2011 are expected to be billed during the first quarter
of 2012. At December 31, 2011 and 2010, the Company had customer deposits
from research and development contract revenue, representing deposits in
advance of performance of the allowable work, in the amount of approximately $0
and $297,000, respectively and is included in other current liabilities in the
consolidated balance sheets.
Property, Plant and
Equipment
Property, plant and equipment are originally recorded
at cost. Maintenance and repairs are expensed as costs are incurred.
Depreciation on plant and equipment is calculated on the straight-line method
over the estimated useful lives of the assets. The Company records depreciation
and amortization over the following estimated useful lives:
Buildings
|
|
20 years
|
Building improvements
|
|
520 years
|
Software, machinery and equipment
|
|
115 years
|
Impairment of
Long-Lived Assets
Long-lived
assets, such as property, plant, and equipment, and purchased intangibles
subject to amortization, are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated undiscounted future cash flows, an impairment
charge is recognized by the amount by which the carrying amount of the asset exceeds
the fair value of the asset. Fair value is determined through various valuation
techniques, including discounted cash flow models, quoted market values and
third party independent appraisals, as considered necessary. Assets to be
disposed of would be separately presented in the balance sheet and reported at
the lower of the carrying amount or fair value less costs to sell, and are no
longer depreciated. The assets and liabilities of a disposal group classified
as held for sale would be presented separately in the appropriate asset and
liability sections of the balance sheet.
F-10
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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 12, Stockholders Equity,
for more detail.
Common Stock
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 fair value 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) and December 31, 2011 were .75% and .33%,
respectively. The volatility of the market price of the Companys common stock
for May 31, 2011 (issuance date) and December 31, 2011 were 94.4% and 78.6%,
respectively. The expected average term of the warrant used for both 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.
Changes in the fair value of the warrants are reflected in the consolidated
statement of operations as change in fair value of common stock warrant
liability.
Income
Taxes
Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the period that includes
the enactment date. A valuation allowance is recorded to reduce the carrying
amounts of deferred tax assets if it is more likely than not that such assets
will not be realized. We did not report a benefit for federal and state income
taxes in the consolidated financial statements as the deferred tax asset
generated from our net operating loss has been offset by a full valuation
allowance because it is more likely than not that the tax benefits of the net
operating loss carryforward will not be realized.
The
Company accounts for uncertain tax positions in accordance with FASB ASC No.
740-10-25, Income Taxes Overall Recognition. The Company must recognize in
its financial statements the impact of a tax position, if that position is more
likely than not to be sustained on audit, based on the technical merits of the
position.
Foreign
Currency Translation
Foreign
currency translation adjustments arise from conversion of the Companys foreign
subsidiarys financial statements to US dollars for reporting purposes, and are
included in accumulated other comprehensive income (loss) in stockholders
equity on the accompanying consolidated balance sheets. Realized foreign
currency transaction gains and losses are included in interest and other
expense in the accompanying consolidated statements of operations.
F-11
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Research and
Development
Costs incurred in
research and development by the Company are expensed as incurred.
Stock-Based
Compensation
The
Company maintains employee stock-based compensation plans, which are described
more fully in Note 13, Employee Benefit Plans.
Stock-based
compensation represents the cost related to stock-based awards granted to
employees and directors. The Company measures stock-based compensation cost at
grant date, based on the fair value of the award, and recognizes the cost as
expense on a straight-line basis (net of estimated forfeitures) over the
options requisite service period.
The
Company estimates the fair value of stock-based awards using a Black-Scholes
valuation model. Stock-based compensation expense is recorded in Cost of
product and service revenue, Research and development expense and Selling,
general and administrative expense in the consolidated statements of
operations based on the employees respective function.
The
Company records deferred tax assets for awards that result in deductions on the
Companys income tax returns, based upon the amount of compensation cost
recognized and the Company's statutory tax rate. Differences between the
deferred tax assets recognized for financial reporting purposes and the actual
tax deduction reported on the Company's income tax return are recorded in
additional paid-in capital if the tax deduction exceeds the deferred tax asset
or in the consolidated statements of operations if the deferred tax asset
exceeds the tax deduction and no additional paid-in capital exists from previous
awards. Excess tax benefits are recognized in the period in which the tax
deduction is realized through a reduction of taxes payable. No tax benefit or
expense for stock-based compensation has been recorded during the years ended
December 31, 2011, 2010 and 2009 since the Company remains in a NOL position.
Per Share Amounts
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 convertible preferred stock, stock options, unvested restricted
stock, and common stock warrants) were exercised or converted into common stock
or resulted in the issuance of common stock (net of any assumed repurchases)
that then shared in the earnings of the Company, if any. This is computed by
dividing net earnings by the combination of dilutive common share equivalents,
which is comprised of shares issuable under outstanding warrants, the Companys
share-based compensation plans, and the weighted average number of common
shares outstanding during the reporting period. Since the Company is in a net
loss position, all common stock equivalents would be considered to be
anti-dilutive and are, therefore, not included in the determination of diluted
earnings per share. Accordingly, basic and diluted loss per share are the
same. All share information for the prior periods has 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:
|
|
Year Ended December 31,
|
|
|
2011
|
|
2010
|
|
2009
|
Numerator:
|
|
|
|
|
|
|
Net loss
|
$
|
(27,453,954)
|
|
$
|
(46,958,921)
|
|
$
|
(40,708,552)
|
Denominator:
|
|
|
|
|
|
|
Weighted average number of common shares
|
|
|
|
|
|
|
outstanding
|
18,778,066
|
|
13,123,162
|
|
12,911,066
|
F-12
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The dilutive potential common shares are summarized as
follows:
|
|
|
|
At December 31,
|
|
|
|
2011
|
|
2010
|
|
2009
|
Stock options outstanding
|
|
1,948,997
|
|
432,846
|
|
598,129
|
Unvested restricted stock
|
|
280,771
|
|
437,958
|
|
868,267
|
Common stock warrants
|
|
7,128,563
|
|
57,143
|
|
57,143
|
Number of dilutive potential common shares
|
|
9,358,331
|
|
927,947
|
|
1,523,539
|
Use of
Estimates
The consolidated financial statements of the Company
have been prepared in conformity with U.S. generally accepted accounting
principles, which require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Subsequent
Events
See Note 22, Subsequent Events, of the Consolidated
Financial Statements for an evaluation of subsequent events and transactions
through the date of this filing.
Recent
Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value
Measurement (Topic 820), which provides common fair value measurement and
disclosure requirements in accordance with GAAP and International Financial
Reporting Standards (IFRS). The amendments explain how to measure fair value
and will improve the comparability of fair value measurement presented and
disclosed in financial statements prepared in accordance with GAAP and IFRS.
This authoritative guidance is to be applied prospectively and is effective
during interim and annual periods beginning after December 15, 2011. The
Company is currently evaluating the impact, if any, of this new accounting update
and plans to adopt this new standard on January 1, 2012 and does not believe
adoption of this new standard will have a material effect on its consolidated
financial position, consolidated results of operations, and liquidity.
In June and December 2011, the FASB issued ASU No.
2011-05 and ASU No. 2011-12, Comprehensive Income(Topic 220), requiring
entities to present net income and other comprehensive income in either a
single continuous statement or in two separate, but consecutive, statements of
net income and other comprehensive income. This authoritative guidance
eliminates the option to present the components of other comprehensive income
as part of the statement of changes in stockholders equity. This authoritative
guidance is to be applied retrospectively and is effective for fiscal years,
and interim periods within those years, beginning after December 15, 2011. The
Company does not believe the adoption of this new standard will have a material
effect on its consolidated financial position, consolidated results of
operations, and liquidity.
Correction of Immaterial
Error
Subsequent to the original
issuance of these consolidated financial statements, the Company identified an
immaterial error related to the presentation of deferred revenue within the
consolidated balance sheets as of December 31, 2011 and 2010. Such error
has been corrected in the accompanying consolidated balance sheets through a
reduction to deferred revenue within current liabilities and a corresponding
increase to deferred revenue within non-current liabilities in the amounts of
$3,036,829 and $1,896,910 as of December 31, 2011 and 2010, respectively.
This correction does not affect previously reported total liabilities in the
accompanying consolidated balance sheets, and had no effect on the previously
reported consolidated statements of operations, stockholders equity and
comprehensive loss, or cash flows for any period.
3. Fair Value
Measurements
The
Company complies with the provisions of FASB ASC No. 820, Fair Value
Measurements and Disclosures (ASC 820), in measuring fair value and in
disclosing fair value measurements. ASC 820 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements required under other accounting pronouncements. FASB ASC No.
820-10-35, Fair Value Measurements and Disclosures- Subsequent Measurement (ASC
820-10-35), clarifies that fair value is an exit price, representing the amount
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. ASC 820-10-35-3 also requires
that a fair value measurement reflect the assumptions market participants would
use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique
(such as a pricing model) and/or the risks inherent in the inputs to the model.
F-13
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
ASC
820-10-35 discusses valuation techniques, such as the market approach
(comparable market prices), the income approach (present value of future income
or cash flow), and the cost approach (cost to replace the service capacity of
an asset or replacement cost). The statement utilizes a fair value hierarchy
that prioritizes the inputs to valuation techniques used to measure fair value
into three broad levels. The following is a brief description of those three
levels:
Level 1 Inputs Level 1 inputs are unadjusted quoted
prices in active markets for assets or liabilities identical to those to be
reported at fair value. An active market is a market in which transactions
occur for the item to be fair valued with sufficient frequency and volume to
provide pricing information on an ongoing basis.
Level
2 Inputs Level 2 inputs are inputs other than quoted prices included within
Level 1. Level 2 inputs are observable either directly or indirectly. These
inputs include: (a) Quoted prices for similar assets or liabilities in
active markets; (b) Quoted prices for identical or similar assets or
liabilities in markets that are not active, such as when there are few
transactions for the asset or liability, the prices are not current, price
quotations vary substantially over time or in which little information is
released publicly; (c) Inputs other than quoted prices that are observable
for the asset or liability; and (d) Inputs that are derived principally from
or corroborated by observable market data by correlation or other means.
Level
3 Inputs Level 3 inputs are unobservable inputs for an asset or liability.
These inputs should be used to determine fair value only when observable inputs
are not available. Unobservable inputs should be developed based on the best
information available in the circumstances, which might include internally
generated data and assumptions being used to price the asset or liability.
When determining the fair value measurements for
assets or liabilities required or permitted to be recorded at and/or marked to
fair value, the Company considers the principal or most advantageous market in
which it would transact and considers assumptions that market participants
would use when pricing the asset or liability. When possible, the Company looks
to active and observable markets to price identical assets. When identical
assets are not traded in active markets, the Company looks to market observable
data for similar assets. Nevertheless, certain assets are not actively traded
in observable markets and the Company must use alternative valuation techniques
to derive a fair value measurement.
As of December 31, 2011, the Company no longer held
any trading securities - auction rate debt securities since they were
repurchased in July, 2010 at par by the third-party lender holding the
collateral under the Repurchase Agreement which resulted in a corresponding
reduction in amounts outstanding and the extinguishment of the Credit Line
Agreement.
F-14
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The
following tables summarize the basis used to measure certain financial assets
at fair value on a recurring basis in the 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 December 31, 2011
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
Common stock warrant liability
|
|
$
|
5,320,990
|
|
$
|
-
|
|
$
|
-
|
|
$
|
5,320,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in Active
|
|
|
Significant
|
|
|
Significant
|
|
|
|
Markets for Identical
|
|
|
Other Observable
|
|
|
Unobservable
|
|
|
|
Items
|
|
|
Inputs
|
|
|
Inputs
|
Balance at December 31, 2010
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
Available-for-sale securities -
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury securities
|
|
$
|
10,403,315
|
|
$
|
10,403,315
|
|
$
|
-
|
|
$
|
-
|
The
following tables show reconciliations of the beginning and ending balances for
assets measured at fair value on a recurring basis using significant
unobservable inputs (i.e. Level 3):
|
|
Fair Value
|
|
|
Measurement Using
|
|
|
Significant
|
Common stock warrant liability
|
|
Unobservable Inputs
|
Beginning of period - January 1, 2011
|
|
$
|
-
|
Issuance of common stock warrants
|
|
8,768,143
|
Change in fair value of common stock warrants
|
|
(3,447,153)
|
Fair value of common stock warrant liability at December 31, 2011
|
$
|
5,320,990
|
|
|
Fair Value
|
|
|
Measurement Using
|
|
|
Significant
|
Trading securities - auction rate debt securities
|
|
Unobservable Inputs
|
Beginning of period - January 1, 2010
|
|
$
|
53,397,179
|
Sale of trading securities for the year ended December 31, 2010
|
(59,375,001)
|
Net trading gain for the year ended December 31, 2010
|
5,977,822
|
Fair value of trading securities - auction rate debt securities at December 31, 2010
|
$
|
-
|
|
|
Fair Value
|
|
|
Measurement Using
|
|
|
Significant
|
Auction rate debt securities repurchase agreement
|
|
Unobservable Inputs
|
Beginning of period - January 1, 2010
|
|
$
|
5,977,822
|
Change in fair value of auction rate debt securities repurchase agreement for the year ended December 31, 2010
|
(5,977,822)
|
Fair value of auction rate debt securities repurchase agreement at December 31, 2010
|
$
|
-
|
F-15
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The
following summarizes the valuation technique for assets measured and recorded
at fair value:
Available-for-sale securities (Level 1):
Available-for-sale securities represent U.S. treasury securities, where fair
value is based on quoted market prices.
Common stock warrant liability (Level 3): For our
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.
Trading securities auction rate debt securities and
auction rate debt securities repurchase agreement (Level 3): The valuation of
these auction rate debt securities and auction rate debt securities repurchase agreement
is an estimate based upon factors specific to these securities, including
duration, tax status (taxable or tax-exempt), credit quality, the existence of
insurance wraps, and the composition of the underlying student loans (Federal
Family Education Loan Program or private loans). Assumptions were made about
future cash flows based upon interest rate formulas as described above. Also,
the valuation included estimates of market data including yields or spreads of
similar trading instruments, when available, or assumptions believed to be
reasonable for non-observable inputs such as likelihood of redemption.
These securities were redeemed at par in July 2010.
4. Available-for-Sale
Securities
There
were no available-for-sale securities as of December 31, 2011. The amortized
cost and fair value of the Companys available-for-sale securities as of
December 31, 2010 were as follows:
|
|
|
Amortized
|
|
Gross Unrealized
|
|
Gross Unrealized
|
|
|
Balance at December 31, 2010
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Securities
|
|
$
|
10,421,817
|
|
$
|
-
|
|
$
|
18,502
|
|
$
|
10,403,315
|
The above table includes two securities where the
current fair value was less than the related amortized cost at
December 31, 2010. These unrealized losses did not reflect any
deterioration of the credit worthiness of the issuers of the securities. All
securities were investment grade. The unrealized losses on these temporarily
impaired securities was a result of changes in interest rates for fixed-rate
securities where the interest rate received was less than the current rate
available for new offerings of similar securities and changes in market spreads
as a result of shifts in supply and demand. There were no unrealized losses in
the available-for-sale securities portfolio at December 31, 2009. The
contractual maturities of available-for-sale securities were all in the year
ended December 31, 2011 for balances as of December 31, 2010, and December 31,
2010 for balances as of December 31, 2009.
The Company recognized gross gains, gross losses and
proceeds on available-for-sale securities for each of the years ended
December 31 as follows:
|
2011
|
2010
|
2009
|
Proceeds on sales
|
$
|
-
|
$
|
14,975,693
|
$
|
3,699,149
|
Proceeds on maturities
|
-
|
64,778,346
|
133,856,781
|
Gross realized gains
|
-
|
-
|
-
|
Gross realized losses
|
-
|
-
|
-
|
F-16
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
5.
Property, Plant and Equipment
Property,
plant and equipment at December 31, 2011 and 2010 consist of the
following:
|
December 31,
|
|
December 31,
|
|
|
|
|
Land
|
$
|
90,000
|
|
$
|
90,000
|
Buildings
|
15,332,232
|
|
14,557,080
|
Building improvements
|
4,939,283
|
|
6,843,954
|
Software, machinery and equipment
|
13,941,438
|
|
13,608,624
|
|
34,302,953
|
|
35,099,658
|
Less accumulated depreciation
|
(25,616,113)
|
|
(25,261,027)
|
Property, plant, and equipment, net
|
$
|
8,686,840
|
|
$
|
9,838,631
|
Depreciation
expense was $2.1million, $5.0 million and $3.6 million for the years ended
December 31, 2011, 2010 and 2009, respectively.
In the fourth quarter of 2010, we abandoned our
facility in Richmond, B.C. As a result, in accordance with ASC No.
360-10-35-47, Long-Lived Assets to Be Abandoned, we recorded depreciation
expense in the amount of $2.1 million.
6. Intangible Assets
Intangible assets, consisting of acquired technology
and customer relationships related to the Cellex and General Hydrogen
acquisitions during the year ended December 31, 2007 are amortized using a
straight-line method over their useful lives of eight years. On January 1,
2008, General Hydrogen (Canada) Corporation, Plug Power Canada Inc. and Cellex
Power Products, Inc. amalgamated as Plug Power Canada Inc.
The gross carrying amount and accumulated amortization
of the Companys acquired identifiable intangible assets as of
December 31, 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
|
The
gross carrying amount and accumulated amortization of the Companys acquired
identifiable intangible assets as of December 31, 2010 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
|
|
$
|
(7,776,713)
|
|
$
|
1,206,411
|
|
$
|
9,329,698
|
Customer Relationships
|
8 years
|
|
|
1,000,000
|
|
(458,304)
|
|
-
|
|
541,696
|
|
|
|
|
|
$
|
16,900,000
|
|
$
|
(8,235,017)
|
|
$
|
1,206,411
|
|
$
|
9,871,394
|
F-17
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Amortization expense for acquired identifiable
intangible assets for the years ended December 31, 2011, 2010, and 2009
was $2.3 million, $2.3 million, and $2.1 million, respectively. Estimated
amortization expense for subsequent years is as follows:
2012
|
$
|
2,277,773
|
2013
|
2,277,773
|
2014
|
2,277,773
|
2015
|
641,317
|
Total
|
$
|
7,474,636
|
7. Credit Line
Agreement and Auction Rate Debt Securities Repurchase Agreement
In December 2008, the Company entered into a Credit
Line Agreement with a third-party lender with a maximum availability of $62.9
million. The Companys auction rate debt securities included in trading
securities on the consolidated balance sheet at December 31, 2009 was pledged
as collateral for the Credit Line Agreement. As of December 31, 2008, the
Company had drawn down $62.9 million on this line of credit. During the years
ended December 31, 2010 and 2009, $59.4 million and $3.5 million, respectively
of auction rate debt securities were sold by the third-party lender holding the
collateral which resulted in a corresponding reduction in amounts outstanding
under the Credit Line Agreement. The Credit Line Agreement had interest at a
variable rate equal to the average rate of interest earned by the Company on
the auction rate debt securities pledged as collateral for the Credit Line
Agreement. The interest rate on the line of credit advances was 1.2% at
December 31, 2009. Interest expense on the advances on the Credit Line
Agreement was approximately $305,000 and $915,000 for the years ended December
31, 2010 and 2009, respectively.
The advances on the Credit Line Agreement were
repayable on demand by the third-party lender. If the third-party lender had
exercised its right to demand repayment of the advances under the Credit Line
Agreement prior to June 30, 2010 (the date upon which the Company could first
exercise its rights under the Repurchase Agreement discussed below), the
third-party lender was required to arrange alternative financing on terms
substantially the same as the Credit Line Agreement or the third party lender
must repurchase the auction rate debt securities pledged as collateral for the
Credit Line Agreement at their par value, which was $59.4 million at December
31, 2009.
In
December 2008, the Company also entered into a Repurchase Agreement with the
third-party lender such that the Company may require the third-party lender to
repurchase the auction rate debt securities pledged as collateral for the
Credit Line Agreement, at their par value, from June 30, 2010 through July 2,
2012 as full settlement for the advances on the Credit Line Agreement.
The Company elected to record this item at its fair value in accordance with
ASC No. 825-10-25 to allow consistent treatment of this repurchase agreement
and the underlying collateral. At December 31, 2009, the fair value of
this item was approximately $6.0 million and was recorded as an asset on the
consolidated balance sheets. The change in the fair value of the Repurchase
Agreement for the years ended December 31, 2010 and 2009 was $6.0 million and
$4.2 million, respectively, and is recorded as a realized loss on the
consolidated statements of operations.
Effective
July 1, 2010, all auction rate debt securities were repurchased at par by the
third-party lender holding the collateral under the Repurchase Agreement which
resulted in a corresponding reduction in amounts outstanding and the
extinguishment of the Credit Line Agreement.
8. Loan and
Security Agreement
On August 9, 2011, the Company entered into a loan and
security agreement, as amended on September 28, 2011, (the Loan Agreement) with
Silicon Valley Bank (SVB) providing that in return for paying an up-front fee
of $52,250 the Company has access to up to $7 million 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) $2 million and (b) 30% of all outstanding advances),
subject to certain reserves established by SVB and other adjustments.
F-18
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Interest on advances of credit under the Loan
Agreement for: (i) financed accounts receivables is 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 $4,000 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 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 December 31, 2011, 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.
As of December 31, 2011, the Company is in compliance with all debt covenants.
The Loan Agreement will expire on August 8, 2012. The
Loan Agreement may be terminated prior to August 8, 2012; however, the Company
would be required to pay a $70,000 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.
As of December 31, 2011 $5,405,110 was outstanding
under the loan agreement and was recorded as borrowings under line of credit on
the consolidated balance sheets.
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 Chemicals, Inc. (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.
F-19
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
9. Accrued
Expenses
Accrued
expenses at December 31, 2011 and 2010 consist of:
|
2011
|
|
2010
|
Accrued payroll and compensation related costs
|
$
|
1,687,965
|
|
$
|
869,545
|
Accrued restructuring costs
|
109,978
|
|
1,392,568
|
Accrued dealer commissions and customer rebates
|
132,850
|
|
492,700
|
Accrued software costs
|
-
|
|
542,500
|
Other accrued liabilities
|
1,242,205
|
|
1,038,916
|
Total
|
$
|
3,172,998
|
|
$
|
4,336,229
|
10. Restructuring
Charges
On May 25, 2010, the Company adopted a restructuring
plan to focus and align the Company on its GenDrive business. As part of this
plan, the Company has consolidated all operations to its Latham, New York
headquarters. The Company recorded restructuring charges and revisions to
previous estimates in the amount of $452,054 and $8,096,868 within selling,
general and administrative expenses in the consolidated statement of operations
for the years ended December 31, 2011 and December 31, 2010, respectively.
The
accrued restructuring charges relating to the May 2010 restructuring are
comprised of the following at December 31, 2011:
|
Accrued
|
|
Adjustments to,
|
|
|
|
Accrued
|
|
restructuring
|
|
additional accrued
|
|
|
|
restructuring
|
|
charges at
|
|
restructuring charges,
|
|
|
|
charges at
|
|
January 1, 2011
|
|
or non-cash charges
|
|
Cash payments
|
|
December 31, 2011
|
Net lease obligations
|
$
|
687,696
|
|
$
|
452,054
|
|
$
|
(1,139,750)
|
|
$
|
-
|
Total
|
$
|
687,696
|
|
$
|
452,054
|
|
$
|
(1,139,750)
|
|
$
|
-
|
During 2008, the Company adopted two
restructuring plans to focus the Company on becoming a market and sales driven
organization, to drive revenue growth, improve organizational efficiency and to
position the Company for long-term profitability. As part of the plans, the
Company implemented reductions in workforce, terminated purchase commitments,
charged off inventory related to lapsed product lines, cut back discretionary
spending, and deferred non-strategic projects. The Company recorded
restructuring charges and revisions to previous estimates in the amount of
($220,000), ($504,847) and $210,038 within selling, general and administrative
expenses in the consolidated statement of operations for the years ended
December 31, 2011, December 31, 2010 and December 31, 2009,
respectively. At December 31, 2011, $109,978 remains in accrued
expenses on the consolidated balance sheets.
The accrued restructuring charges relating to the two
2008 restructurings are comprised of the following at December 31, 2011:
|
Restructuring
|
|
Additional accrued
|
|
|
|
Restructuring
|
|
charges at
|
|
restructuring charges,
|
|
|
|
charges at
|
|
January 1, 2011
|
|
or non-cash charges
|
|
Cash payments
|
|
December 31, 2011
|
Contract cancellations
|
$
|
547,356
|
|
$
|
(220,000)
|
|
$
|
(217,378)
|
|
$
|
109,978
|
Net lease obligations
|
157,516
|
|
-
|
|
(157,516)
|
|
-
|
Total
|
$
|
704,872
|
|
$
|
(220,000)
|
|
$
|
(374,894)
|
|
$
|
109,978
|
F-20
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
11.
Income Taxes
The components of (loss) before income taxes and the
provision for income taxes for the years ended December 31, 2011, 2010 and 2009
are as follows:
Loss before income taxes:
|
|
2011
|
|
2010
|
|
2009
|
United States
|
|
$
|
(25,483,000)
|
|
$
|
(38,567,000)
|
|
$
|
(39,363,000)
|
Foreign
|
|
(1,971,000)
|
|
(8,392,000)
|
|
(1,346,000)
|
|
|
$
|
(27,454,000)
|
|
$
|
(46,959,000)
|
|
$
|
(40,709,000)
|
There was no current income tax expense for the years
ended December 31, 2011, 2010 and 2009. The Company was a Limited Liability
Company (LLC) until its merger into Plug Power Inc. effective November 3, 1999.
From inception through November 3, 1999, the Company was treated as a
partnership for federal and state income tax purposes and accordingly the
Companys income taxes or credits resulting from earnings or losses were
payable by, or accrued to its members. Therefore, no provision for income taxes
has been made prior to November 3, 1999.
Effective November 3, 1999, the Company is taxed as a
corporation for Federal and State income tax purposes and the effect of
deferred taxes recognized as a result of the change in tax status of the
Company have been included in operations. Deferred tax assets and liabilities
are determined based on the temporary differences between the financial
statement and tax bases of assets and liabilities as measured by the enacted
tax rates.
The significant components of U.S. deferred income tax
expense (benefit) for the years ended December 31, 2011, 2010 and 2009 are as
follows:
|
2011
|
|
2010
|
|
2009
|
Deferred tax expense (benefit)
|
$
|
17,774,374
|
|
$
|
(652,367)
|
|
$
|
(1,679,144)
|
Net operating loss carryforward expired
(generated)
|
187,596,630
|
|
(14,168,304)
|
|
(14,972,768)
|
Valuation allowance (decrease) increase
|
(205,371,004)
|
|
14,820,671
|
|
16,651,912
|
Provision for Income taxes
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
The significant components of Foreign deferred income
tax expense (benefit) for the years ended December 31, 2011, 2010 and 2009 are as
follows:
|
2011
|
|
2010
|
|
2009
|
Deferred tax benefit
|
$
|
(1,268,116)
|
|
$
|
(822,713)
|
|
$
|
(1,633,336)
|
Net operating loss carryforward expired
(generated)
|
496,400
|
|
(1,080,779)
|
|
147,019
|
Valuation allowance increase
|
771,716
|
|
1,903,492
|
|
1,486,317
|
Provision for Income taxes
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
F-21
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The Companys effective income tax rate differed from
the Federal statutory rate as follows:
|
2011
|
|
2010
|
|
2009
|
U.S. Federal statutory tax rate
|
|
(35.0%)
|
|
(35.0%)
|
|
(35.0%)
|
Deferred state taxes, net of federal benefit
|
|
(3.1%)
|
|
(2.4%)
|
|
(2.9%)
|
Common stock warrant liability
|
|
(4.4%)
|
|
0.0%
|
|
0.0%
|
Other, net
|
|
0.6%
|
|
(2.7%)
|
|
(0.8%)
|
Change to uncertain tax positions
|
|
(57.5%)
|
|
1.6%
|
|
0.0%
|
Foreign tax rate differential
|
|
0.8%
|
|
2.2%
|
|
0.2%
|
Expiring attribute carryforward
|
|
5.4%
|
|
1.2%
|
|
0.0%
|
Adjustments to open deferred tax balance
|
|
(1.7%)
|
|
0.3%
|
|
(4.3%)
|
Writeoff of tax attributes due to imposition of
|
|
|
|
|
|
|
Section 382 limitation
|
|
840.9%
|
|
0.0%
|
|
0.0%
|
Tax credits
|
|
(0.3%)
|
|
(0.6%)
|
|
0.7%
|
Change in valuation allowance
|
|
(745.7%)
|
|
35.4%
|
|
42.1%
|
|
|
0.0%
|
|
0.0%
|
|
0.0%
|
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of certain assets and
liabilities for financial reporting and the amounts used for income tax expense
purposes. Significant components of the Companys deferred tax assets and
liabilities as of December 31, 2011 and 2010 are as follows:
|
U.S.
|
|
Foreign
|
|
Years ended December 31,
|
|
Years ended December 31,
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
Intangible assets
|
$
|
199,980
|
|
$
|
270,278
|
|
$
|
324,654
|
|
$
|
(28,763)
|
Non-employee stock based compensation
|
(1,555,822)
|
|
(1,792,727)
|
|
-
|
|
-
|
Gain on auction rate debt securities repurchase agreement
|
-
|
|
(2,271,572)
|
|
-
|
|
-
|
Impairment loss on available-for-sale securities
|
-
|
|
2,271,572
|
|
-
|
|
-
|
Deferred revenue
|
2,105,962
|
|
1,652,905
|
|
-
|
|
-
|
Other reserves and accruals
|
1,120,831
|
|
669,061
|
|
-
|
|
206,184
|
Capital loss carryforwards
|
-
|
|
5,883,890
|
|
-
|
|
-
|
Research and development tax credit carryforwards
|
73,722
|
|
9,833,063
|
|
1,533,281
|
|
1,512,346
|
Property, plant and equipment
|
1,126,531
|
|
753,930
|
|
528,596
|
|
521,379
|
Amortization of stock-based compensation
|
7,900,080
|
|
7,490,246
|
|
-
|
|
-
|
Capitalized research & development expenditures
|
15,162,000
|
|
17,328,000
|
|
4,759,800
|
|
3,667,068
|
Section 382 recognized built in loss
|
(1,819,014)
|
|
-
|
|
-
|
|
-
|
Net operating loss carryforwards
|
30,271,381
|
|
217,868,010
|
|
3,462,252
|
|
3,958,652
|
Total deferred tax asset
|
54,585,651
|
|
259,956,656
|
|
10,608,583
|
|
9,836,866
|
Valuation allowance
|
(54,585,651)
|
|
(259,956,656)
|
|
(10,608,583)
|
|
(9,836,866)
|
Net deferred tax assets
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
The Company has recorded a valuation allowance, as a
result of uncertainties related to the realization of its net deferred tax
asset, at December 31, 2011 and 2010 of approximately $65.2 million and $269.8
million, respectively. A reconciliation of the current year change in valuation
allowance is as follows:
|
Total
|
|
U.S.
|
|
Foreign
|
Increase in valuation allowance for current year increase in net operating losses:
|
$
|
8,982,432
|
|
$
|
8,799,089
|
|
$
|
183,343
|
Decrease in valuation allowance for 382 limitations on tax attributes:
|
(212,112,671)
|
|
(212,112,671)
|
|
-
|
Decrease in valuation allowance for current year net decrease in deferred tax
|
|
|
|
|
|
assets other than net operating losses:
|
(2,279,655)
|
|
(2,057,422)
|
|
(222,233)
|
Increase in valuation allowance as a result of foreign currency fluctuation
|
136,168
|
|
-
|
|
136,168
|
Increase in valuation allowance due to current year change of deferred tax assets
|
|
|
|
|
|
as the result of uncertain tax positions.
|
674,438
|
|
-
|
|
674,438
|
Net (decrease) increase in valuation allowance
|
$
|
(204,599,288)
|
|
$
|
(205,371,004)
|
|
$
|
771,716
|
F-22
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The deferred tax assets have been offset by a full
valuation allowance because it is more likely than not that the tax benefits of
the net operating loss carryforwards and other deferred tax assets may not be
realized. Included in the valuation allowance as of December 31, 2011 and
December 31, 2010 are $1.9 million and $14.3 million, respectively of deferred
tax assets resulting from the exercise of employee stock options, which upon
subsequent realization of the tax benefits, will be allocated directly to
paid-in capital.
Before the imposition of IRC Section 382 limitations
described below, at December 31, 2011, the Company has unused Federal and State
net operating loss carryforwards of approximately $703 million, of which $70.3
million was generated from the operations of H Power during the period May 31,
1989, through the date of the H Power acquisition, $2.7 million was generated
by Cellex through the date of the Cellex acquisition, $44.1 million was
generated by General Hydrogen through the date of the General Hydrogen acquisition,
and $585.9 million was generated by the Company during the period October 1,
1999 through December 31, 2011. The net operating loss carryforwards if unused
will expire at various dates from 2012 through 2031. In 2011, net operating
loss carryforwards of $3.9 million acquired as part of the H Power transaction
expired.
Under Internal Revenue Code (IRC) Section 382, the use
of loss carryforwards may be limited if a change in ownership of a company
occurs. If it is determined that due to transactions involving the Companys
shares owned by its 5 percent or greater shareholders a change of ownership has
occurred under the provisions of IRC Section 382, the Company's Federal and
state net operating loss carryforwards could be subject to significant IRC
Section 382 limitations.
Based upon an IRC Section 382 study, a Section 382
ownership change occurred in 2011 that resulted in approximately $675 million
of Federal and state net operating loss carryforwards being subject to IRC
Section 382 limitations and as a result of IRC Section 382 limitations,
approximately $618 million of the net operating loss carryforwards will expire
prior to utilization. As a result of the IRC Section 382 limitations, these net
operating loss carryforwards that will expire unutilized are 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
has no impact on the Company's current financial position, results of
operations, or cash flows because of the full valuation allowance.
IRC Section 382 also limits the ability for a Company
to utilize capital loss and research credit carryforwards. Approximately $15.5
million of Federal capital loss carryforwards are subject to IRC Section 382
limitations and as a result of the IRC Section 382 limitations, the entire
$15.5 million will expire prior to utilization. Approximately $15.5 million of
Research Credit are subject to IRC Section 382 limitations and as a result of
the IRC Section 382 limitations, the entire $15.5 million will expire prior to
utilization. At December 31, 2011 the Company has US Federal Research and
Experimentation credit carryforwards of approximately $0.1 million that were
generated after the IRC Section 382 ownership change and will be available to
offset future income tax that will expire in 2031.
At December 31, 2011, the Company has unused foreign
net operating loss carryforwards of approximately $17.4 million. The net
operating loss carryforwards if unused will expire at various dates from 2014
through 2031. At December 31, 2011 the company has Scientific Research and
Experimental Development expenditures of $21.8 million available to offset
future taxable income. These expenditures have no expiry date. At December
31, 2011 the company has Canadian ITC credit carryforwards of $2.4 million
available to offset future income tax. These credit carryforwards if unused
will expire at various dates from 2012 through 2027. Approximately $3.6
million of the foreign net operating loss carryforwards, approximately $2.8
million of the Scientific Research and Experimental Development expenditures
and $0.8 million of the Canadian ITC credit carryforwards represent
unrecognized tax benefits and are therefore, not reflected in the Company's
deferred tax asset as of December 31, 2011.
The Company intends to reinvest indefinitely any
unrepatriated foreign earnings. As of December 31, 2011, the Company has no
unrepatriated foreign earnings.
F-23
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows:
|
2011
|
|
2010
|
|
2009
|
Unrecognized tax benefits balance at beginning of year
|
$
|
17,893,011
|
|
$
|
18,570,177
|
|
$
|
18,149,125
|
Additions for tax positions of prior years
|
-
|
|
-
|
|
-
|
Reductions based on tax positions related to the current year
|
-
|
|
-
|
|
-
|
Reductions for tax positions of prior years
|
(15,874,599)
|
|
(716,419)
|
|
(55,884)
|
Settlements
|
-
|
|
-
|
|
-
|
Currency Translation
|
27,940
|
|
39,253
|
|
476,936
|
Unrecognized tax benefits balance at end of year
|
$
|
2,046,352
|
|
$
|
17,893,011
|
|
$
|
18,570,177
|
The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as a component of income tax expense.
During the year ended December 31, 2011, the Company recognized $0 in interest
and penalties. The Company had $1.2 million in interest and penalties accrued
at December 31, 2011.
The Company files income tax returns in the U.S.
federal jurisdiction and various state and foreign jurisdictions. In the normal
course of business the Company is subject to examination by taxing authorities.
Open tax years in the U.S. range from 2008 to 2011. Open tax years in the
foreign jurisdictions range from 2004 to 2011. However, upon examination in
subsequent years, if net operating loss carryforwards and tax credit
carryforwards are utilized, the U.S. and foreign jurisdictions can reduce net
operating loss carryforwards and tax credit carryforwards utilized in the year
being examined if they do not agree with the carryforward amount. As of
December 31, 2011, the Company was not under audit in the U.S. or non-U.S.
taxing jurisdictions. No significant changes to the amount of unrecognized tax
benefits are anticipated within the next twelve months.
12.
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). 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. 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 warrants are exercisable upon
issuance and will expire on May 31, 2016. The exercise price of the warrants is
$3.00 per share of common stock. The warrants include weighted-average
anti-dilution protection and, 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.
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.
F-24
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Preferred Stock
The Company has authorized 5.0 million shares of
preferred stock, par value $.01 per share. The Companys certificate of
incorporation provides that shares of preferred stock may be issued from time
to time in one or more series. The Companys Board of Directors is authorized
to fix the voting rights, if any, designations, powers, preferences,
qualifications, limitations and restrictions thereof, applicable to the shares
of each series. As of December 31, 2011 and 2010, there were no shares of
preferred stock issued and outstanding.
The Company has registered Series A Junior
Participating Cumulative Preferred Stock, par value $.01 per share. As of
December 31, 2011 and 2010, there were no shares of Series A Junior
Participating Cumulative Preferred Stock issued and outstanding.
Common Stock
The Company has one class of common stock, par value $.01
per share. Each share of the Companys common stock is entitled to one vote on
all matters submitted to stockholders. As of December 31, 2011 and 2010
there were 22,758,505 and 13,189,475, respectively shares of common stock
issued and outstanding.
13. Employee Benefit
Plans
1999 Employee Stock Purchase Plan
In 1999, the Company adopted the 1999 Employee Stock
Purchase Plan (the Plan) under which employees were eligible to purchase shares
of the Companys common stock at a discount through periodic payroll
deductions. The Plan was intended to meet the requirements of Section 423
of the Internal Revenue Code. Purchases occurred at the end of six month
offering periods at a purchase price equal to 85% of the market value of the
Companys common stock at either the beginning of the offering period or the
end of the offering period, which ever was lower. Participants could elect to
have up to 10% of their pay withheld for purchase of common stock at the end of
the offering period, up to a maximum of $12,500 within any offering period. The
Company reserved 1,000,000 shares of common stock for issuance under the Plan.
The Company issued 0, 0 and 208,240 shares of stock under the Plan during 2011,
2010 and 2009, respectively.
Under FASB ASC No. 718, Compensation Stock
Compensation, the 15% discount and the look-back feature are considered
compensatory items for which expense must be recognized. The Company valued
Plan shares as a combination position consisting of 15% of a share of
non-vested stock and 85% of a six-month stock option. The value of the
non-vested stock was estimated based on the trading value of the Companys
common stock at the beginning of the offering period, and an expected life of
six months. The resulting per-share value was multiplied by the shares
estimated to be purchased during the offering period based on historical
experience to arrive at a total estimated compensation cost for the offering
period. The estimated compensation cost was recognized on a straight-line basis
over the offering period.
Effective July 1, 2009, the Company suspended this
plan. Factors taken into consideration were the expense of administering the
plan, participation rate and the introduction of the Company-wide stock option
grant as an alternative means of promoting employee stock ownership.
Stock Option
Plan
2011 Stock Option and Incentive
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 than by exercise). The shares may be issued pursuant
to stock options, stock appreciation rights, restricted stock awards and
certain other equity-based awards granted to employees, directors and
consultants of the Company. No grants may be made under the 2011 Plan after May
12, 2021. Equity awards granted prior to May 12, 2011, were made under the
1999 Stock Option and Incentive Plan.
F-25
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
At December 31, 2011 there were approximately
1.9 million options granted and outstanding and 219,000 options available
to be issued under the 2011 Stock Option Plan. The 2011 Stock Option Plan
permits the Company to: grant incentive stock options; grant non-qualified
stock options; grant stock appreciation rights; issue or sell common stock with
vesting or other restrictions, or without restrictions; grant rights to receive
common stock in the future with or without vesting; grant common stock upon the
attainment of specified performance goals; and grant dividend rights in respect
of common stock. Options for employees issued under this plan generally vest in
equal annual installments over three years and expire ten years after issuance.
Options granted to members of the Board generally vest one year after issuance.
To date, options granted under the 2011 Stock Option Plan have vesting
provisions ranging from immediate vesting to three years in duration and expire
ten years after issuance.
Compensation cost associated with employee stock
options represented approximately $952,000 of the total share-based payment
expense recorded for the year ended December 31, 2011. The Company
estimates the fair value of stock options and shares issued under the employee
stock purchase plan using a Black-Scholes valuation model, and the resulting
fair value is recorded as compensation cost on a straight-line basis over the
option vesting period. Key inputs and assumptions used to estimate the fair
value of stock options include the grant price of the award, the expected
option term, volatility of the Companys stock, an appropriate risk-free rate,
and the Companys dividend yield. Estimates of fair value are not intended to
predict actual future events or the value ultimately realized by employees who
receive equity awards, and subsequent events are not indicative of the
reasonableness of the original estimates of fair value made by the Company. The
assumptions made for purposes of estimating fair value under the Black-Scholes
model for the 1,618,400, 150,000 and 1,375,500 options granted during the years
ended December 31, 2011, 2010 and 2009, respectively were as follows:
|
|
2011
|
|
2010
|
|
2009
|
Dividend yield:
|
|
0%
|
|
0%
|
|
0%
|
Expected term of options (years):
|
|
6
|
|
6
|
|
6
|
Risk free interest rate:
|
|
1.16%-2.61%
|
|
1.52%-2.93%
|
|
1.79%-2.80%
|
Volatility:
|
|
74%-79%
|
|
94%-95%
|
|
85%-89%
|
The Companys estimate of an expected option term was
calculated in accordance with the simplified method for calculating the
expected term assumption. The estimated stock price volatility was derived from
the Companys actual historic stock prices over the past six years, which
represents the Companys best estimate of expected volatility.
A summary of stock option activity for the year
December 31, 2011 is as follows:
|
|
|
|
Weighted
|
|
Weighted Average
|
|
Aggregate
|
|
|
|
|
Average Exercise
|
|
Remaining
|
|
Instrinsic
|
|
Shares
|
|
Price
|
|
Contractual Terms
|
|
Value
|
Options outstanding at December 31, 2010
|
|
432,846
|
|
$
|
43.16
|
|
5.3
|
|
$
|
-
|
Granted
|
|
1,618,400
|
|
3.71
|
|
10.0
|
|
-
|
Exercised
|
|
-
|
|
-
|
|
-
|
|
-
|
Forfeited
|
|
(39,578)
|
|
-
|
|
-
|
|
-
|
Expired
|
|
(62,671)
|
|
-
|
|
-
|
|
-
|
Options outstanding at December 31, 2011
|
|
1,948,997
|
|
$
|
9.84
|
|
8.8
|
|
-
|
Options exercisable at December 31, 2011
|
|
339,536
|
|
38.72
|
|
5.0
|
|
-
|
Options unvested at December 31, 2011
|
|
1,609,461
|
|
3.74
|
|
9.6
|
|
-
|
F-26
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The weighted average grant date fair value of options
granted during the years ended December 31, 2011, 2010 and 2009 was $3.58,
$3.80 and $6.60, respectively. There were no stock options exercised during the
year ended December 31, 2011. As of December 31, 2011, there was
approximately $3,384,000 of unrecognized compensation cost related to stock
option awards to be recognized over the next three years. The total fair value
of stock options that vested during the years ended December 31, 2011 and
2010 was approximately $952,000 and $247,000, respectively.
Restricted stock awards vest in equal installments
over a period of one to three years. Restricted stock awards were valued based
on the closing price of the Companys common stock on the date of grant, and
compensation cost is recorded on a straight-line basis over the share vesting
period. The Company recorded expense of approximately $10,000 associated with
its restricted stock awards in 2011. As of December 31, 2011, there was no
unrecognized compensation cost related to restricted stock awards to be
recognized over the next three years.
A summary of restricted stock activity for the year
ended December 31, 2011 is as follows:
|
|
|
|
Aggregate Intrinsic
|
|
Shares
|
|
Value
|
Unvested restricted stock at December 31, 2010
|
|
437,958
|
|
$
|
893,434
|
Granted
|
|
50,942
|
|
103,922
|
Forfeited
|
|
(157,187)
|
|
(320,661)
|
Vested
|
|
(50,942)
|
|
(103,922)
|
Unvested restricted stock at December 31, 2011
|
|
280,771
|
|
$
|
572,773
|
For the years ended December 31, 2011, 2010, and
2009, the Company recorded expense of approximately $1.5 million, $1.2 million,
and $1.9 million respectively, in connection with its share based payment
awards.
401(k) Savings &
Retirement Plan
The Company offers a 401(k) Savings &
Retirement Plan to eligible employees meeting certain age and service
requirements. This plan permits participants to contribute 100% of their
salary, up to the maximum allowable by the Internal Revenue Service
regulations. Participants are immediately vested in their voluntary
contributions plus actual earnings or less actual losses thereon. Participants
are vested in the Companys matching contribution based on years of service
completed. Participants are fully vested upon completion of three years of
service. During 2002, the Company began funding its matching contribution in
common stock. Accordingly, the Company has issued 133,748, 90,166 and 60,755
shares of common stock to the Plug Power Inc. 401(k) Savings &
Retirement Plan during 2011, 2010 and 2009, respectively. These shares have
been adjusted to reflect the May 19, 2011 one-for-ten stock split of the Companys
common stock.
The Companys expense for this plan, including the
issuance of shares, was approximately $374,000, $441,000 and $534,000 for years
ended December 31, 2011, 2010 and 2009, respectively.
Long Term
Incentive Plan
On October 28, 2009, the Compensation Committee
recommended and the Board of Directors approved a Long Term Incentive (LTI)
Plan pursuant to the terms of the Companys 1999 Stock Option and Incentive
Plan. Designed as an incentive vehicle to support employee efforts, the LTI
Plan seeks to increase shareholder value by encouraging Plug Power employees to
continue to work diligently to further the Companys long term goals.
Under the LTI Plan, a select group of critical
employees received a Restricted Stock Unit Award Agreement (Agreement) awarding
a one-time grant of restricted stock units (RSUs) calculated using a multiple
of the selected employees base salary. According to the Agreement, the
restrictions on each participants RSU allocation will lapse over a three year
period upon successful completion of weighted performance-based metrics. Specifically, restrictions on 25% of RSUs are tied to the Companys achievement
of revenue targets, while the restrictions on 75% of RSUs are tied to the
Companys achievement of earnings before interest expense, taxes, depreciation,
amortization and non-cash charges for equity compensation (measurement referred
to in the Agreement as EBITDAS) targets. Intended to supplement the annual
employee incentive plan payout, the total number of RSUs lapsing each year will
vary depending on the Companys progress achieving the corresponding threshold,
target or stretch goals.
F-27
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
In the event stretch revenue and EBITDAS metrics are
reached during the next year of the grant period ending December 31, 2012, the
Company could issue a maximum of 280,771 shares to LTI Plan participants,
currently representing approximately 1.2% of total outstanding shares.
Restrictions on these shares only lapse in the event the Company performs at
the articulated performance metrics.
In 2011 and 2010, no threshold, target or stretch
revenue and EBITDAS performance-based metrics were reached. Accordingly, no
restrictions have lapsed, and 20% and 25% of the total awarded RSUs were
forfeited for the 2011 and 2010 fiscal years, respectively. Therefore, no
expense was recorded during the years ended December 31, 2011 and December 31,
2010, respectively, associated with these awards.
14. Other Related
Party Transactions
Pursuant to the Second Amendment to the Amended and
Restated Distribution Agreement dated May 13, 2005, the Company currently
has a non-exclusive distribution agreement with DTE Energy Technologies, Inc.
(DTE), an affiliate of Edison Development Company and DTE Energy Corporation,
for the states of Michigan, Ohio, Illinois, and Indiana. According to the most
recent amendments to the agreement, the Company may sell directly or negotiate
non-exclusive distribution rights with third parties for the GenCore, GenSite
and GenSys2T products in these four states. For every product sold directly by
the Company or by a third party within Michigan, Ohio, Illinois and Indiana the
Company has agreed to pay a 5% commission to DTE based on sales price of units
shipped to the above noted states. The distribution agreement expires on
December 31, 2014.
As of December 31, 2011 and 2010, the Company had
no payables due to DTE under this commission provision and no outstanding
receivables from DTE.
15. Fair Value of
Financial Instruments
The following disclosure of the estimated fair value
of financial instruments is made in accordance with the provision of ASC No.
825-10-65, Financial Instruments Transition and Open Effective Date
Information (ASC 825-10-65). 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 consolidated balance sheets approximate fair value because of
the short maturities of these instruments.
F-28
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
16. Supplemental
Disclosures of Cash Flows Information
The
following represents required supplemental disclosures of cash flows
information and non-cash financing and investing activities which occurred
during the years ended December 31, 2011, 2010 and 2009:
|
2011
|
|
2010
|
|
2009
|
|
|
|
|
|
|
Stock-based compensation accrual impact, net
|
$
|
395,257
|
|
$
|
707,802
|
|
$
|
480,145
|
Change in unrealized loss/gain on available for sale securities
|
18,502
|
|
(114,300)
|
|
(131,308)
|
Cash paid for interest
|
12,634
|
|
471,386
|
|
999,665
|
Transfer of property, plant and equipment to assets held for sale
|
-
|
|
768,779
|
|
-
|
Transfer of investment in leased property to inventory
|
253,786
|
|
-
|
|
-
|
17. Commitments and
Contingencies
Alliances and
development agreements
General Electric Company (GE) Entities:
On February 27, 2006, the Company, GE MicroGen,
Inc., and GE restructured their service and equity relationships by terminating
the joint venture and the associated distributor and other agreements, and
entering into a new development collaboration agreement. Under this agreement,
the Company and GE (through its Global Research unit) agreed to collaborate on
programs including, but not limited to, development of tools, materials and
components that can be applied to various types of fuel cell products. The
Company and GE mutually agreed to extend the terms of the development collaboration
agreement such that the Company was obligated to purchase $1 million of
services from GE in connection with this collaboration prior to
December 31, 2009. As of December 31, 2009, the approximately
$363,000 obligation remaining under the extended development collaboration
agreement became due and payable; however, the Company and GE d/b/a GE
Global Research entered into a Lease Agreement dated October 6, 2009 for space
in the Companys Latham, New York facility whereby the parties mutually agreed
that pursuant to section 4 of the Lease Agreement the amount owed by the
Company to GE under the development collaboration agreement would be offset by
the rent owed by GE to the Company each month. The development collaboration
agreement is scheduled to terminate on the earlier of
(i) December 31, 2014 or (ii) upon the completion of a certain
level of program activity. As of December 31, 2011 and 2010, approximately
$110,000 and $209,000, respectively, have been recorded as accrued expenses in
the consolidated balance sheets related to the development collaboration
agreement.
NYSERDA
: The
Company has an obligation to repay the New York State Environmental Research
and Development Authority (NYSERDA) according to royalty payment provisions in
each of the Companys past and present NYSERDA agreements. For sales made by a
New York State manufacturer, the Company must pay a royalty to NYSERDA at a
rate of 0.5% of net sales of products developed under the NYSERDA programs; or,
for a non-new York State manufacturer, the Company must pay a royalty to
NYSERDA at a rate of 3% of net sales. The royalty payments are currently
calculated at 0.5% of net sales of our GenCore and GenSys products because we
are a New York State manufacturer and both of these products were developed
using some percentage of NYSERDA monies. The Companys maximum liability under
the NYSERDA royalty provisions is one times the aggregate total amount of
monies received from NYSERDA. If the total amount received from NYSERDA under
an individual agreement is not paid back in royalties to NYSERDA within fifteen
(15) years from the date of that individual agreement, then that amount is
deducted from the aggregate total amount due under the royalty provisions. For
the years ended December 31, 2011 and December 31, 2010, amounts payable
under this agreement were approximately $5,000 and $4,000, respectively.
F-29
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Leases
As of December 31, 2011 and 2010, the Company has
no capital leases outstanding. The Company has several non-cancelable operating
leases, primarily for hydrogen infrastructure and fork lift trucks that expire
over the next five years. Portions of certain properties are subleased for
periods expiring in various years through 2011.
Future minimum lease payments under non-cancelable
operating leases (with initial or remaining lease terms in excess of one year)
as of December 31, 2011 are:
Year ending December 31,
|
Operating leases
|
2012
|
$
|
730,531
|
2013
|
522,557
|
2014
|
327,740
|
2015
|
316,823
|
2016 and thereafter
|
1,016,317
|
Total future minimum lease payments
|
$
|
2,913,968
|
Minimum future rental income receivable under
subleases from non-cancelable operating leases were $0 and $153,932 as of
December 31, 2011 and 2010, respectively.
Rental expense for all operating leases for the years
ended December 31, 2011, 2010 and 2009 were as follows:
|
|
2011
|
|
2010
|
|
2009
|
Minimum rentals
|
|
$
|
887,000
|
|
$
|
2,153,000
|
|
$
|
1,819,000
|
Sublease rental income
|
|
(161,000)
|
|
(269,000)
|
|
(5,000)
|
|
|
$
|
726,000
|
|
$
|
1,884,000
|
|
$
|
1,814,000
|
Concentrations
of credit risk
Concentrations of credit risk with respect to
receivables exist due to the limited number of select customers that the
Company has initial commercial sales arrangements with and government agencies.
To mitigate credit risk, the Company performs appropriate evaluation of a
prospective customers financial condition.
At December 31, 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. At December 31, 2010, five
customers comprise approximately 83.6% of the total accounts receivable
balance, with each customer individually representing 33.7%, 33.5%, 6.7%, 6.0%
and 3.6% of total accounts receivable, respectively.
For the year ended December 31, 2011, contracts with
three customers comprise approximately 39.0% of total consolidated revenues,
with each customer individually representing 14.5%, 14.0% and 10.5%, of total
consolidated revenues, respectively. For the year ended December 31, 2010,
contracts with two customers and one federal government agency comprised 42.0%
of total consolidated revenues, with each customer individually representing 18.7%,
10.0% and 13.3% of total consolidated revenues, respectively.
The Company has cash deposits in excess of federally
insured limits. The amount of such deposits is essentially all cash at
December 31, 2011.
F-30
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Employment Agreements
The
Company is party to employment agreements with certain executives which provide
for compensation and certain other benefits. The agreements also provide for
severance payments under certain circumstances.
Early
Commercial Purchase Agreement
On October 15, 2007, the Company and Wal-Mart
Stores East, LP (Wal-Mart) signed an Early Commercial Purchase Agreement for
GenDrive units. Under this agreement, the Company has certain commitments to
provide for the maintenance/service of the units sold as well as supply of
hydrogen to Wal-Mart for up to seven years from the date of commissioning. The
Company also provides certain indemnifications related to this agreement to
Walmart.
Hydrogen
Payment Agreement
Pursuant to the agreement negotiated between Air
Products and the Company to supply hydrogen infrastructure and hydrogen to
Central Grocers at their distribution center, the Company has an obligation to
purchase hydrogen from and pay a monthly service charge of $23,300 for hydrogen
infrastructure to Air Products for the full term of the contract. Amendment No.
1 to the Hydrogen Payment Agreement became effective April 1, 2010 and
increased the monthly service charge to $25,971 to accommodate for the addition
of two dispensers and associated piping.
18. 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. The majority of the Companys multiple-deliverable
revenue arrangements ship complete within the same quarter.
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.
F-31
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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 the sale consideration
to each element of the arrangement. 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.
19.
Licensing Agreement
On October 26, 2010, the Company licensed the
intellectual property relating to its stationary power products, GenCore and
GenSys, to IdaTech plc on a non-exclusive basis. Plug Power maintains
ownership of, and the right to use, the patents and other intellectual property
licensed to IdaTech. As part of the transaction, Plug Power also sold
inventory, equipment and certain other assets related to its stationary power
business. Total consideration for the licensing and assets was $5 million
and was received during October 2010. The consideration was subject to
reduction by a maximum of $1 million in the event that the Company did not
deliver certain of the assets sold. As of December 31, 2010, $1.0 million
was included in assets held for sale and $1.0 million was included in other
current liabilities in the consolidated balance sheets. Upon delivery of those
certain assets in the quarter ended June 30, 2011 the $1.0 million in
consideration was released.
20.
Geographic Information
The following is a summary of revenue for the years
ended December 31, 2011, 2010 and 2009, based on physical location of the
subsidiary making the sale:
F-32
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
|
2011
|
|
2010
|
|
2009
|
|
Product and
|
|
|
|
Product and
|
|
|
|
|
|
|
|
service and licensed
|
|
Research and
|
|
service and licensed
|
|
Research and
|
|
Product and
|
|
Research and
|
|
technology
|
|
development
|
|
technology
|
|
development
|
|
service
|
|
development
|
|
revenue
|
|
contract revenue
|
|
revenue
|
|
contract revenue
|
|
revenue
|
|
contract revenue
|
United States
|
$
|
23,739,828
|
|
|
$
|
3,886,114
|
|
$
|
15,740,087
|
|
$
|
3,463,508
|
|
$
|
4,683,627
|
|
$
|
7,269,404
|
Canada
|
-
|
|
|
-
|
|
134,692
|
|
134,362
|
|
149,146
|
|
190,379
|
Total
|
$
|
23,739,828
|
|
|
$
|
3,886,114
|
|
$
|
15,874,779
|
|
$
|
3,597,870
|
|
$
|
4,832,773
|
|
$
|
7,459,783
|
Long-lived assets, representing the sum of net book
value of property, plant, and equipment plus intangible assets, goodwill and
other assets, based on physical location as of December 31, 2011 and 2010,
are as follows:
|
2011
|
|
2010
|
United States
|
$
|
11,561,840
|
|
$
|
13,839,370
|
Canada
|
4,599,636
|
|
6,133,894
|
Total
|
$
|
16,161,476
|
|
$
|
19,973,264
|
21. Unaudited
Quarterly Financial Data (in thousands, except per share data)
|
|
|
Quarters ended
|
|
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
2011
|
|
2011
|
|
2011
|
|
2011
|
Product and service revenue
|
$
|
4,993
|
|
$
|
2,621
|
|
$
|
4,313
|
|
$
|
11,296
|
Research and development contract revenue
|
785
|
|
1,563
|
|
994
|
|
544
|
Licensed technonlogy revenue
|
163
|
|
163
|
|
163
|
|
28
|
Net loss
|
(7,243)
|
|
(6,753)
|
|
(6,291)
|
|
(7,167)
|
Loss per share:
|
|
|
|
|
|
|
|
Basic and Diluted
|
(0.55)
|
|
(0.41)
|
|
(0.28)
|
|
(0.32)
|
|
|
|
Quarters ended
|
|
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
2010
|
|
2010
|
|
2010
|
|
2010
|
Product and service revenue
|
$
|
3,163
|
|
$
|
2,326
|
|
$
|
4,795
|
|
$
|
5,455
|
Research and development contract revenue
|
1,208
|
|
778
|
|
957
|
|
655
|
Licensed technonlogy revenue
|
-
|
|
-
|
|
-
|
|
136
|
Net loss
|
(10,558)
|
|
(18,516)
|
|
(9,292)
|
|
(8,593)
|
Loss per share:
|
|
|
|
|
|
|
|
Basic and Diluted
|
(0.81)
|
|
(1.41)
|
|
(0.71)
|
|
(0.65)
|
Note:
Per share information for the prior periods has been retroactively adjusted to
reflect the May 19, 2011 one-for-ten reverse stock split of the Companys
common stock.
22. 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 other subsequent events
requiring recognition or disclosure other than as stated below:
F-33
PLUG POWER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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
complete 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 has 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 recently
announced public offering, resulting in additional net proceeds to the Company
of $2,085,525.
F-34
PLUG POWER INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
|
|
|
Balance at
|
|
Additions
|
|
|
|
Balance at
|
|
|
Beginning of
|
|
Charged to Cost
|
|
Deductions
|
|
End of
|
|
|
Period
|
|
and Expenses
|
|
(Describe)
|
|
Period
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
Deducted from liability accounts:
|
|
|
|
|
|
|
|
|
Product warranty reserve
|
862,480
|
|
1,021,100
|
|
672,671
|
(a)
|
1,210,909
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
Deducted from liability accounts:
|
|
|
|
|
|
|
|
|
Product warranty reserve
|
-
|
|
1,004,822
|
|
142,342
|
(a)
|
862,480
|
(a)
|
Cost of warranty performed
|
|
|
|
|
|
|
|
F-35
Plug Power Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
|
September 30
|
|
December 31,
|
|
|
|
2012
|
|
2011
|
Assets
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
$
|
9,461,404
|
|
$
|
13,856,893
|
|
Accounts receivable, less allowance of $0 at September 30, 2012 and December 31, 2011
|
7,661,038
|
|
13,388,909
|
|
Inventory
|
13,005,120
|
|
10,354,707
|
|
Prepaid expenses and other current assets
|
1,552,429
|
|
1,894,014
|
|
|
Total current assets
|
31,679,991
|
|
39,494,523
|
Property, plant, and equipment (net of accumulated depreciation of $26,913,460
|
|
|
|
|
at September 30, 2012 and $25,616,113 at December 31, 2011)
|
7,404,490
|
|
8,686,840
|
Note Receivable
|
585,611
|
|
-
|
Intangible assets, net
|
5,896,909
|
|
7,474,636
|
|
|
Total assets
|
$
|
45,567,001
|
|
$
|
55,655,999
|
Liabilities and Stockholders' Equity
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
$
|
5,541,807
|
|
$
|
4,668,721
|
|
Accrued expenses
|
2,075,772
|
|
3,172,998
|
|
Product warranty reserve
|
2,968,613
|
|
1,210,909
|
|
Borrowings under line of credit
|
1,000,000
|
|
5,405,110
|
|
Deferred revenue
|
4,175,560
|
|
2,505,175
|
|
Other current liabilities
|
334,085
|
|
80,000
|
|
|
Total current liabilities
|
16,095,837
|
|
17,042,913
|
|
Common stock warrant liability
|
1,594,323
|
|
5,320,990
|
|
Deferred revenue
|
3,567,583
|
|
3,036,829
|
|
Other liabilities
|
1,264,621
|
|
1,219,602
|
|
|
Total liabilities
|
22,522,364
|
|
26,620,334
|
Stockholders' equity:
|
|
|
|
|
Common stock, $0.01 par value per share; 245,000,000 shares authorized;
|
|
|
|
|
Issued (including shares in treasury):
|
|
|
|
|
|
38,197,255 at September 30, 2012 and 22,924,411 at December 31, 2011
|
381,973
|
|
229,244
|
|
Additional paid-in capital
|
801,351,649
|
|
784,213,871
|
|
Accumulated other comprehensive income
|
1,035,329
|
|
928,744
|
|
Accumulated deficit
|
(778,171,932)
|
|
(754,783,812)
|
|
Less common stock in treasury:
|
|
|
|
|
165,906 shares at September 30, 2012 and December 31, 2011
|
(1,552,382)
|
|
(1,552,382)
|
|
|
Total stockholders' equity
|
23,044,637
|
|
29,035,665
|
|
|
Total liabilities and stockholders' equity
|
$
|
45,567,001
|
|
$
|
55,655,999
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
FF-1
Plug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
|
|
September 30
|
|
September 30
|
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
Product and service revenue
|
$
|
4,273,385
|
|
$
|
4,312,885
|
|
$
|
18,711,555
|
|
$
|
11,927,135
|
|
|
Research and development contract revenue
|
502,269
|
|
994,244
|
|
1,475,338
|
|
3,342,187
|
|
|
Licensed technology revenue
|
-
|
|
163,125
|
|
-
|
|
489,375
|
|
|
Total revenue
|
4,775,654
|
|
5,470,254
|
|
20,186,893
|
|
15,758,697
|
|
|
Cost of product and service revenue
|
10,848,860
|
|
7,565,994
|
|
28,552,076
|
|
19,187,617
|
|
|
Cost of research and development contract revenue
|
791,322
|
|
1,695,171
|
|
2,389,844
|
|
5,505,767
|
|
|
Research and development expense
|
1,284,975
|
|
1,478,847
|
|
4,089,509
|
|
3,647,821
|
|
|
Selling, general and administrative expenses
|
3,053,434
|
|
3,606,505
|
|
10,556,495
|
|
11,051,020
|
|
|
Gain on sale of leased assets
|
-
|
|
(673,358)
|
|
-
|
|
(673,358)
|
|
|
Amortization of intangible assets
|
578,090
|
|
584,606
|
|
1,726,854
|
|
1,754,568
|
|
|
|
Operating loss
|
(11,781,027)
|
|
(8,787,511)
|
|
(27,127,885)
|
|
(24,714,738)
|
|
|
Interest and other income and net realized losses
|
|
|
|
|
|
|
|
|
|
from available-for-sale securities
|
80,046
|
|
99,740
|
|
171,260
|
|
220,862
|
|
|
Change in fair value of common stock warrant liability
|
1,434,866
|
|
2,414,267
|
|
3,726,667
|
|
4,204,787
|
|
|
Interest and other expense and foreign currency gain (loss)
|
(59,349)
|
|
(17,042)
|
|
(158,162)
|
|
2,675
|
|
|
|
Net loss
|
$
|
(10,325,464)
|
|
$
|
(6,290,546)
|
|
$
|
(23,388,120)
|
|
$
|
(20,286,414)
|
|
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(0.27)
|
|
$
|
(0.28)
|
|
$
|
(0.71)
|
|
$
|
(1.16)
|
|
|
Weighted average number of common shares
|
|
|
|
|
|
|
|
|
|
outstanding
|
37,977,052
|
|
22,676,114
|
|
33,107,175
|
|
17,441,767
|
|
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
FF-2
Plug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive
Income (Loss)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Net Loss
|
$
|
(10,325,464)
|
|
$
|
(6,290,546)
|
|
$
|
(23,388,120)
|
|
$
|
(20,286,414)
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
110,625
|
|
(160,205)
|
|
106,585
|
|
(74,173)
|
|
Unrealized gain on available-for-sale securities
|
-
|
|
-
|
|
-
|
|
18,502
|
Comprehensive Loss
|
$
|
(10,214,839)
|
|
$
|
(6,450,751)
|
|
$
|
(23,281,535)
|
|
$
|
(20,342,085)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
FF-3
P
lug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
Nine months ended
|
|
|
|
|
September 30,
|
|
|
|
|
2012
|
|
2011
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
Net loss
|
|
$
|
(23,388,120)
|
|
$
|
(20,286,414)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
Depreciation of property, plant and equipment
|
1,459,159
|
|
1,600,143
|
|
|
Amortization of intangible assets
|
1,726,854
|
|
1,754,568
|
|
|
Stock-based compensation
|
1,500,352
|
|
1,602,097
|
|
|
Loss on disposal of property, plant and equipment
|
57,680
|
|
308,902
|
|
|
Gain on sale of leased assets
|
-
|
|
(673,358)
|
|
|
Realized loss on available for sale securities
|
-
|
|
22,421
|
|
|
Change in fair value of common stock warrant liability
|
(3,726,667)
|
|
(4,204,787)
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts receivable
|
5,728,228
|
|
(1,028,099)
|
|
|
Inventory
|
(2,650,413)
|
|
5,303,221
|
|
|
Prepaid expenses and other current assets
|
341,585
|
|
(180,390)
|
|
|
Issuance of note receivable
|
(585,611)
|
|
-
|
|
|
Accounts payable, accrued expenses, product warranty reserve and other liabilities
|
1,787,625
|
|
(2,914,462)
|
|
|
Deferred revenue
|
2,201,139
|
|
(456,295)
|
|
|
|
Net cash used in operating activities
|
(15,548,189)
|
|
(19,152,453)
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
Purchase of property, plant, and equipment
|
(292,389)
|
|
(1,156,163)
|
|
|
Restricted cash
|
-
|
|
525,000
|
|
|
Proceeds from sale of leased assets
|
-
|
|
673,358
|
|
|
Proceeds from disposal of property, plant and equipment
|
57,900
|
|
45,000
|
|
|
Proceeds from maturities and sales of available-for-sale securities
|
-
|
|
10,399,396
|
|
|
|
Net cash (used in) provided by investing activities
|
(234,489)
|
|
10,486,591
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
Purchase of treasury stock
|
-
|
|
(158,492)
|
|
|
Proceeds from issuance of common stock
|
17,192,500
|
|
22,583,877
|
|
|
Stock issuance costs
|
(1,402,230)
|
|
(1,891,378)
|
|
|
Repayments under line of credit, net
|
(4,405,110)
|
|
-
|
|
|
Principal payments on long-term debt
|
-
|
|
(9,956)
|
|
|
|
Net cash provided by financing activities
|
11,385,160
|
|
20,524,051
|
|
|
Effect of exchange rate changes on cash
|
2,029
|
|
(11,407)
|
|
|
(Decrease) increase in cash and cash equivalents
|
(4,395,489)
|
|
11,846,782
|
|
|
Cash and cash equivalents, beginning of period
|
13,856,893
|
|
10,955,403
|
|
|
Cash and cash equivalents, end of period
|
$
|
9,461,404
|
|
$
|
22,802,185
|
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
FF-4
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.
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.
Liquidity
As of September 30, 2012, we had approximately $15.6
million of working capital, which includes $9.5 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. Based
on the borrowing base calculation and our current outstanding loan balance, the
availability under this facility at September 30, 2012 was approximately $1.9
million (see Note
4, 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, cash burn rate and operating assumptions.
FF-5
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 without
additional external financing.
Alternatives we would consider for additional
funding include equity or debt financing, a sale-leaseback of our real estate,
or licensing of our technology. In addition to raising capital, we may
also consider strategic alternatives including business combinations, 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 operations 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 alternatives
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. Similarly, if our common stock is delisted from the NASDAQ Capital
Market, it may limit our ability to raise additional funds (see Note 14,
Subsequent Events). 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.
FF-6
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 September 30, 2012
and for the three and nine months ended September 30, 2012 and 2011.
Use of Management 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.
Significant Accounting Policies:
Warrant accounting
We account for common stock warrants in accordance
with applicable accounting guidance provided in Accounting Standards
Codification (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 September 30, 2012 were .75%, .33% and .30%, respectively.
The volatility of the market price of the Companys common stock for May 31, 2011,
December 31, 2011 and September 30, 2012 were 94.4%, 78.6%, and 76.2%,
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. Generally, as the market price of our common stock increases,
the fair value of the warrant increases, and conversely, as the market price of
our common stock decreases, the fair value of the warrant decreases. Also, 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.
Joint Venture
We account for investments in joint ventures in which
we have significant influence in accordance with applicable accounting guidance
in Subtopic 323-10,
Investments Equity Method and Joint Ventures Overall
.
On February 29, 2012 we completed the formation of our joint venture with
Axane, S.A., a subsidiary of Air Liquide, under the name HyPulsion (the
JV). The principal purpose of the JV is 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. We
contributed to the JV the right to use our technology, including design and
technology know-how on GenDrive systems, in exchange for 45% ownership of the
JV. Accordingly, we will share in 45% of the profits from the JV.
We have not contributed any cash to the JV and we are not obligated to
contribute any cash. We have an option in the future to contribute cash
and become a majority owner of the JV.
F-7
In accordance with the equity method of accounting,
the Company will increase its investment in the JV by its share of any
earnings, and decrease its investment in the JV by its share of any
losses. Losses in excess of the investment must be restored from future
profits before we can recognize our proportionate share of profits. As of
September 30, 2012, the Company had a zero basis for its investment in the JV.
Recent Accounting Pronouncements:
There are no recently issued accounting
standards with pending adoptions that the Companys management currently
anticipates will have any material impact upon its financial statements.
3. 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 Financial Accounting
Standards Board (FASB) Accounting Standards Update (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.
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.
FF-8
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. We recognized
revenue related to these transactions of approximately $51,000 and $152,000
during the three and nine months ended September 30, 2012, respectively.
At September 30, 2012, and December 31, 2011, there was approximately $758,000
and $910,000, respectively, included in deferred revenue in the condensed
consolidated balance sheets related to these transactions.
4. 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. At September 30, 2012 the Company was in compliance with all
covenants except the adjusted quick ratio covenant. Silicon Valley Bank has
waived our noncompliance with this covenant as of September 30, 2012.
FF-9
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. As of September 30,
2012, $1,000,000 was outstanding under the loan agreement and was recorded as
borrowings under line of credit on the condensed consolidated balance sheets.
Based on the borrowing base calculation and our current outstanding loan
balance, the availability under this facility at September 30, 2012 was
approximately $1.9 million.
5. Stockholders Equity
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 than by exercise). The shares may be issued pursuant to
stock options, stock appreciation rights, restricted stock awards and certain
other equity-based awards granted to employees, directors and consultants of
the Company. No grants may be made under the 2011 Plan after May 12,
2021. On May 16, 2012, the stockholders approved an amendment to the 2011
Plan, to increase the number of shares of the Companys common stock authorized
for issuance under the 2011 Plan from 1,000,000 to 6,500,000.
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.
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.
FF-10
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
$13,704,745.
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 nine months
ended September 30, 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
Comprehensive
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional Paid-in-
Capital
|
|
|
Treasury Stock
|
|
Accumulated
Deficit
|
|
Total
Stockholders'
Equity
|
|
|
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
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(23,388,120)
|
|
(23,388,120)
|
|
Foreign currency translation gain
|
|
|
-
|
|
-
|
|
-
|
|
106,585
|
|
-
|
|
-
|
|
-
|
|
106,585
|
|
Stock based compensation
|
|
322,844
|
|
3,229
|
|
1,497,008
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,500,237
|
|
Public offering common stock, net
|
|
14,950,000
|
|
149,500
|
|
15,640,770
|
|
-
|
|
-
|
|
-
|
|
-
|
|
15,790,270
|
|
September 30, 2012
|
|
38,197,255
|
|
$
|
381,973
|
|
$
|
801,351,649
|
|
$
|
1,035,329
|
|
165,906
|
|
$
|
(1,552,382)
|
|
$
|
(778,171,932)
|
|
$
|
23,044,637
|
6. 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 following table provides the components of the
calculations of basic and diluted earnings per share:
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(10,325,464)
|
|
$
|
(6,290,546)
|
|
$
|
(23,388,120)
|
|
$
|
(20,286,414)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
37,977,052
|
|
22,676,114
|
|
33,107,175
|
|
17,441,767
|
FF-11
The potential dilutive common shares are summarized as
follows:
|
At September 30,
|
|
2012
|
|
2011
|
Stock options outstanding
|
1,999,521
|
|
1,344,665
|
Unvested restricted stock
|
|
275,262
|
|
408,388
|
Common stock warrants
(1)
|
9,421,008
|
|
7,128,563
|
Number of dilutive potential common shares
|
11,695,791
|
|
8,881,616
|
(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 5, the
number of warrants increased to 9,421,008.
|
7. Inventory
Inventory as of September 30, 2012
and December 31, 2011 consisted of the following:
|
September 30, 2012
|
|
December 31, 2011
|
Raw materials and supplies
|
|
$
|
9,479,058
|
|
$
|
9,159,004
|
Work-in-process
|
|
18,584
|
|
462,832
|
Finished goods
|
|
3,507,478
|
|
732,871
|
|
|
$
|
13,005,120
|
|
$
|
10,354,707
|
Finished goods inventory at September 30, 2012
includes approximately $3 million related to 245 units shipped to a customer
site during the quarter in connection with a customer lease agreement that was
not yet complete.
8. Intangible Assets
The gross carrying amount and accumulated amortization
of the Companys acquired identifiable intangible assets related to Plug Power
Canada Inc. as of September 30, 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
|
|
$
|
(11,607,664)
|
|
$
|
1,281,656
|
|
$
|
5,573,992
|
|
Customer Relationships
|
8 years
|
|
|
1,000,000
|
|
(677,083)
|
|
-
|
|
322,917
|
|
|
|
|
|
|
|
$
|
16,900,000
|
|
$
|
(12,284,747)
|
|
$
|
1,281,656
|
|
$
|
5,896,909
|
FF-12
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
|
9. 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 $9.4 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
$3.6 million at the time of the ownership change and $2.6 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, a Section 382 ownership change occurred during March 2012
that resulted in all but approximately $14.9 million of the Companys Federal
and state net operating loss carry-forwards expiring prior to utilization,
which resulted in the Companys gross deferred tax asset and related valuation
allowance decreasing by approximately $24.6 million. The ownership 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 $36.5 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 $13.9 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.
10. Note Receivable
On May 25, 2012, we executed a $663,359 Promissory
Note with Forem Energy Group, maturing on May 25, 2022. This note is
unsecured and bears interest at an annual rate of 2.9%. Accordingly,
receivables relating to this agreement in the amount of $585,611 and $63,398
have been recorded as note receivable and current portion note receivable
(prepaid expenses and other current assets), respectively, in the condensed
consolidated balance sheets as of September 30, 2012.
FF-13
11. Fair Value
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.
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:
|
|
|
|
|
Quoted Prices in Active
|
|
Significant
|
|
Significant
|
|
|
|
|
|
Markets for Identical
|
|
Other Observable
|
|
Unobservable
|
|
|
|
|
|
Items
|
|
Inputs
|
|
Inputs
|
Balance at September 30, 2012
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
Common stock warrant liability
|
|
$
|
1,594,323
|
|
$
|
-
|
|
$
|
-
|
|
$
|
1,594,323
|
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 nine
months ended September 30, 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
|
(3,726,667)
|
Fair value of common stock warrant liability at September 30, 2012
|
$
|
1,594,323
|
FF-14
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.
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.
12. Commitments and Contingencies
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 an 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. There are no collateral requirements associated with this letter
of credit.
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 September 30, 2012, the Company had purchased 2,347 stacks, and has a
remaining commitment of approximately $2.2 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 September 30, 2012, four
customers comprise approximately 79.4% of the
total accounts receivable balance, with each customer individually representing
61.0%, 8.8%, 5.0%, and 4.6% 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.
For the nine months ended September 30, 2012,
contracts with three customers comprise approximately 55.5% of total
consolidated revenues, with each customer representing 25.8%, 19.4%, and 10.3%, respectively. For the nine months
ended September 30, 2011, contracts with two customers and two federal
government agencies comprised approximately 63.7% of total consolidated
revenues, with each customer representing 22.5%, 20.7%, 10.5%, and 10.0%,
respectively.
FF-15
The
product and service revenue contracts we entered into generally provide a one
to two-year product warranty to customers from date of installation. We
currently estimate the costs of satisfying warranty claims based on an analysis
of past experience and provide for future claims in the period the revenue is
recognized. Factors that affect our warranty liability include the number
of installed units, estimated material costs, estimated travel, and labor
costs. During the quarters ended September 30, 2012, and September 30, 2011, we
adjusted our reserve for additional warranty claims arising from GenDrive
component quality issues that were identified during the quarter. These are
isolated quality issues that were identified in GenDrive units that are
currently being used at customer sites. These units will be retro-fitted with
replacement components that will improve the reliability of our GenDrive products
for our customers.
The following table summarizes product warranty
activity recorded during the nine months ended September 30, 2012 and 2011:
|
September 30, 2012
|
|
September 30, 2011
|
Beginning balance - January 1
|
|
$
|
1,210,919
|
|
$
|
862,480
|
Additions for current year deliveries
|
|
399,623
|
|
569,452
|
Reductions for payments made
|
|
(1,915,253)
|
|
(398,966)
|
Reserve Adjustment
|
|
3,273,324
|
|
561,750
|
Ending balance - September 30
|
|
$
|
2,968,613
|
|
$
|
1,594,716
|
|
|
|
|
|
13. 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 nine months ended September 30, 2012 and
2011:
|
September 30, 2012
|
|
September 30, 2011
|
Stock-based compensation accrual impact, net
|
|
$
|
(115)
|
|
$
|
(211,614)
|
Change in unrealized gain on available-for-sale securities
|
|
-
|
|
18,502
|
Transfer of investment in leased property to inventory
|
|
-
|
|
263,239
|
Transfer of assets held for sale to inventory
|
|
-
|
|
1,000,000
|
14. 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 other subsequent events
requiring recognition or disclosure other than as stated below.
On October 12, 2012, the Company received a deficiency
notice from The Nasdaq Stock Market ("Nasdaq") stating that it no
longer complies with Nasdaq Marketplace Rule 5550(a)(2) because the bid price
of the Company's common stock closed below the required minimum $1.00 per share
for the previous 30 consecutive business days. The notice also indicated that,
in accordance with Marketplace Rule 5810(c)(3)(A), Plug Power has a period of
180 calendar days, until April 10, 2013, to regain compliance with Rule 5550(a)(2).
If at any time before April 10, 2013 the bid price of the Company's common
stock closes at $1.00 per share or more for a minimum of 10 consecutive
business days, Nasdaq will notify the Company that it has regained compliance
with Rule 5550(a)(2). In the event the Company does not regain compliance with
Rule 5550(a)(2) prior to the expiration of the 180-day period, Nasdaq will
notify the Company that its common stock is subject to delisting. The Company
may appeal the delisting determination to a Nasdaq hearing panel and the
delisting will be stayed pending until the panel's determination. At such
hearing, the Company would present a plan to regain compliance and Nasdaq would
then subsequently render a decision. The Company is currently evaluating its
alternatives to resolve the listing deficiency.
FF-16
Shares of
Common Stock
Warrants to Purchase Shares of Common Stock
, 2013
Roth Capital Partners
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated costs and
expenses, other than underwriting discounts and commissions, payable by the
registrant in connection with the offering of the securities being registered.
All the amounts shown are estimates, except for the SEC registration fee.
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SEC
registration fee
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$
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2,728
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FINRA
filing fee
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3,500
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Accounting
fees and expenses
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*
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Legal
fees and expenses
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*
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Transfer
Agent fees and expenses
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*
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Printing
and miscellaneous expenses
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*
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Total
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*
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$
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*
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*
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The
amount of securities and number of offerings are indeterminable and the
expenses cannot be estimated at this time.
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Item 14. Indemnification of Directors and Officers.
In accordance with Section 145 of the Delaware General
Corporation Law, Article VII of our amended and restated certificate of
incorporation provides that no director of Plug Power shall be personally
liable to Plug Power or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (1) for any breach of the
directors duty of loyalty to Plug Power or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) in respect of unlawful dividend payments or stock
redemptions or repurchases, or (4) for any transaction from which the director
derived an improper personal benefit. In addition, our amended and restated
certificate of incorporation provides that if the Delaware General Corporation
Law is amended to authorize the further elimination or limitation of the
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Article V of our amended and restated by-laws provides for
indemnification by Plug Power of its officers and certain non-officer employees
under certain circumstances against expenses, including attorneys fees,
judgments, fines and amounts paid in settlement, reasonably incurred in
connection with the defense or settlement of any threatened, pending or
completed legal proceeding in which any such person is involved by reason of
the fact that such person is or was an officer or employee of the registrant if
such person acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of Plug Power, and, with respect
to criminal actions or proceedings, if such person had no reasonable cause to
believe his or her conduct was unlawful.
In addition, we have entered into indemnification
agreements with each of our directors. The indemnification agreements require,
among other matters, that we indemnify our directors to the fullest extent
permitted by law and advance to the directors all related expenses, subject to
reimbursement if it is subsequently determined that indemnification is not
permitted. Under these agreements, we must also indemnify and advance all
expenses incurred by directors seeking to enforce their rights under the
indemnification agreements and may cover directors under directors and
officers liability insurance.
Item
15. Recent Sales of Unregistered Securities
In the three years preceding the filing of this
registration statement, we have issued the following securities that were not
registered under the Securities Act:
During the years ended December 31, 2010, 2011 and 2012,
we issued 90,166 shares, 133,748 shares and 403,579 shares, respectively, of
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.
II-1
Grants and Exercises of Stock Options; Awards of Restricted Stock; Awards
of Restricted Preferred Stock
Since December 31, 2008, we have granted stock options to
purchase an aggregate of 1,957,675 shares of our common stock, with exercise
prices ranging from $0.83 to $40.40 per share, to employees, directors and
consultants pursuant to our stock option plans. From December 31, 2008 to
December 31, 2012, we have issued and sold an
aggregate of 393 shares of our common stock upon exercise of stock options
granted pursuant to our stock plans for an aggregate consideration of $3,930.
Since December 31, 2008, we have issued an aggregate of 625,196 shares of our
common stock to employees, directors and consultants in connection with awards
of restricted stock pursuant to our option plans for no cash consideration. The
issuance of common stock upon exercise of the options and the issuance of
common stock in connection with awards of restricted stock were exempt either
pursuant to Rule 701, as a transaction pursuant to a compensatory benefit plan,
or pursuant to Section 4(2), as a transaction by an issuer not involving a
public offering. The common stock issued upon exercise of options are deemed
restricted securities for the purposes of the Securities Act.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits.
The exhibits to the registration statement are listed in
the Exhibit Index to this registration statement and are incorporated herein by
reference.
(b) Financial Statement Schedule.
The financial statement schedule can be found in the
consolidated financial statements section of this registration statement under
the heading Schedule II Valuation and Qualifying Accounts and is
incorporated herein by reference.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final adjudication of
such issue.
The Registrant hereby undertakes that:
(a) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the
Securities Act each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-1 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Latham, State of New
York, on the 15th day of January, 2013.
PLUG POWER INC.
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By: /
s/ Andrew
Marsh
Name: Andrew Marsh
Title: President, Chief Executive Officer and
Director
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below hereby severally constitutes and appoints Andrew Marsh
and Gerard A. Anderson, and each of them, as his true and lawful attorneys in
fact and agents, with full power of substitution and resubstitution, for him
and in his name, place, and stead, in any and all capacities, to sign any and
all amendments (including post effective amendments, exhibits thereto and other
documents in connection therewith) to this registration statement and any
subsequent registration statement filed by the registrant pursuant to
Rule 462(b) of the Securities Act of 1933, as amended, which relates
to this registration statement, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys in fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys in fact and agents, or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the
requirements of the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
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Andrew Marsh
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President,
Chief Executive Officer and Director
(Principal Executive Officer)
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January 15, 2013
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Gerald A. Anderson
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Chief
Financial Officer
(Principal
Financial Officer)
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January 15, 2013
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George C. McNamee
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Chairman
of the Board of Directors
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January 15, 2013
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Larry G. Garberding
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Director
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January 15, 2013
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Douglas T. Hickey
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Director
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January 15, 2013
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Gary K. Willis
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Director
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January 15, 2013
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Maureen O. Helmer
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Director
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January 15, 2013
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II-3
EXHIBIT INDEX
Exhibit
No.
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Description of the Document
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1.1*
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Form
of Underwriting Agreement.
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3.1
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Amended
and Restated Certificate of Incorporation of Plug Power Inc. (7)
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3.2
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Third
Amended and Restated By-laws of Plug Power Inc. (8)
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3.3
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Certificate
of Amendment to Amended and Restated Certificate of Incorporation of Plug
Power Inc. (7)
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3.4
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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. (9)
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3.5
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Second
Certificate of Amendment of Amended and Restated Certificate of Incorporation
of Plug Power Inc. (13)
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4.1
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Specimen
certificate for shares of common stock, $.01 par value, of Plug Power. (2)
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4.2
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Shareholder
Rights Agreement, dated as of June 23, 2009, between Plug Power Inc. and
Registrar and American Stock Transfer & Trust Company, LLC, as Rights
Agent. (9)
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4.3
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Amendment
No. 1 To Shareholder Rights Agreement. (11)
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4.4
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Amendment
No. 2 To Shareholder Rights Agreement. (17)
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4.5
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Amendment
No. 3 To Shareholder Rights Agreement. (19)
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4.6
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Form
of Common Stock Purchase Warrant issued by Plug Power Inc. in May 2011. (14)
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4.7*
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Form
of Common Stock Purchase Warrant.
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5.1*
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Opinion
of Goodwin Procter LLP.
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10.1
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Employee
Stock Purchase Plan. (2)
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10.2
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Severance
Agreement, dated as of July 12, 2007, by and between Plug Power Inc. and
Gerald A. Anderson. (4)
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10.3
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Executive
Severance Agreement, dated as of July 7, 2007, by and between Plug Power Inc.
and Gerald A. Anderson. (4)
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10.4
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Indemnification
Agreement, dated as of July 9, 2007, by and between Plug Power Inc. and
Gerald A. Anderson. (4)
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10.5
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Registration
Rights Agreement, dated as of June 29, 2006, by and between Plug Power Inc.
and Smart Hydrogen Inc. (1)
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10.6
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Form
of Indemnification Agreement entered into with each director. (1)
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10.7
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Plug
Power Executive Incentive Plan. (3)
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10.8
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Employment
Agreement, dated as of April 7, 2008, by and between Andrew Marsh and Plug
Power Inc. (5)
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10.9
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Executive
Employment Agreement, dated as of May 5, 2008, by and between Gerard L.
Conway, Jr. and Plug Power Inc. (6)
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10.10
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Executive
Employment Agreement, dated as of October 28, 2009, by and between Erik J.
Hansen and Plug Power Inc. (10)
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10.11
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Executive
Employment Agreement, dated as of February 9, 2010, by and between Adrian
Corless and Plug Power Inc. (10)
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10.12
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Standstill
and Support Agreement, dated as of May 6, 2011 among Plug Power Inc., OJSC
INTER RAO UES and OJSC Third Generation Company of the Wholesale
Electricity Market. (11)
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10.13
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Master
and Shareholders Agreement, dated as of January 24, 2012, by and between
Axane S.A. and Plug Power, Inc. (18)
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10.14
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License
Agreement dated as of February 29, 2012, by and between Hypulsion, S.A.S. and
Plug Power Inc. (18)
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10.15
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2011
Stock Option and Incentive Plan. (12)
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10.16
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Form
of Incentive Stock Option Agreement. (15)
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10.17
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Form
of Non-Qualified Stock Option Agreement for Employees. (15)
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10.18
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Form
of Non-Qualified Stock Option Agreement for Independent Directors. (15)
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10.19
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Form
of Restricted Stock Award Agreement. (15)
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10.20
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Loan
and Security Agreement, dated as of August 9, 2011, by and between Plug Power
Inc. and Silicon Valley Bank. (15)
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10.21
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First
Loan Modification Agreement, dated as of September 28, 2011, by and between
Plug Power Inc. and Silicon Valley Bank. (16)
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10.22
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Second
Loan Modification Agreement dated March 30, 2012, by and between Plug Power
Inc. and Silicon Valley Bank. (20)
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II-4
10.23
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Amendment
No. 1 to the 2011 Stock Option and Incentive Plan. (21)
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10.24
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Executive
Employment Agreement dated as of June 21, 2012, by and between Gerald A.
Anderson and Plug Power Inc. (22)
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10.25
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Joinder
and Release Agreement dated as of September 27, 2012 among Plug Power
Inc., OJSC INTER RAO UES, OJSC INTER RAO Capital and OJSC
Third Generation Company of the Wholesale Electricity Market. (23)
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10.26
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Third
Loan Modification Agreement dated November 29, 2012, by and between Plug
Power Inc. and Silicon Valley Bank. (24)
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23.1
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Consent
of KPMG LLP. (25)
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23.2
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Consent
of Goodwin Procter LLP (included in Exhibit 5.1).
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24.1
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Power
of Attorney (included on signature page).
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101.INS**
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XBRL
Instance Document
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101.SCH**
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XBRL
Taxonomy Extension Schema Document
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101.CAL**
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XBRL
Taxonomy Extension Calculation Linkbase Document
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101.DEF**
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XBRL
Taxonomy Extension Definition Linkbase Document
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101.LAB**
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XBRL
Taxonomy Extension Labels Linkbase Document
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101.PRE**
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XBRL
Taxonomy Extension Presentation Linkbase Document
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(1)
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Incorporated
by reference to our current Report on Form 8-K dated June 29, 2006.
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(2)
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Incorporated
by reference to our Registration Statement on Form S-1/A (File Number
333-86089).
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(3)
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Incorporated
by reference to our current Report on Form 8-K dated February 15, 2007.
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(4)
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Incorporated
by reference to our current Report on Form 8-K dated July 9, 2007.
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(5)
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Incorporated
by reference to our current Report on Form 8-K dated April 2, 2008.
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(6)
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Incorporated
by reference to our Form 10-Q for the period ended June 30, 2008.
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(7)
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Incorporated
by reference to our Form 10-K for the period ended December 31, 2008.
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(8)
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Incorporated
by reference to our current Report on Form 8-K dated October 28, 2009.
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(9)
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Incorporated
by reference to our Registration Statement on Form 8-A dated June 24, 2009.
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(10)
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Incorporated
by reference to our current Report on Form 8-K dated October 28, 2009.
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(11)
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Incorporated
by reference to our current Report on Form 8-K dated May 6, 2011.
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(12)
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Incorporated
by reference to our current Report on Form 8-K dated May 12, 2011.
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(13)
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Incorporated
by reference to our current Report on Form 8-K dated May 19, 2011.
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(14)
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Incorporated
by reference to our current Report on Form 8-K dated May 24, 2011.
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(15)
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Incorporated
by reference to our Form 10-Q for the period ended June 30, 2011.
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(16)
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Incorporated
by reference to our current Report on Form 8-K dated September 28, 2011.
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(17)
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Incorporated
by reference to our current Report on Form 8-K dated March 16, 2012.
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(18)
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Incorporated
by reference to our current Report on Form 8-K dated March 21, 2012.
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(19)
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Incorporated
by reference to our current Report on Form 8-K dated March 26, 2012.
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(20)
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Incorporated
by reference to our current Report on Form 8-K dated April 3, 2012.
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(21)
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Incorporated
by reference to our current Report on Form 8-K dated May 18, 2012.
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(22)
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Incorporated
by reference to our current Report on Form 8-K dated June 21, 2012.
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(23)
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Incorporated
by reference to our Schedule 13D dated November 19, 2012.
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(24)
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Incorporated
by reference to our current Report on Form 8-K dated November 29, 2012.
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(25)
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Filed
herewith.
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*
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To
be filed by amendment.
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**
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Furnished
herewith. XBRL (Extensible Business Reporting Language) information is
furnished and not filed or a part of registration statement or prospectus for
purposes of Section 11 or 12 of the Securities Act of 1933, as amended, is
deemed not filed for purposes of Section 18 of the Securities Exchange Act of
1934, and is not otherwise subject to liability under the Sections.
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II-5
Grafico Azioni Plug Power (NASDAQ:PLUG)
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Da Giu 2024 a Lug 2024
Grafico Azioni Plug Power (NASDAQ:PLUG)
Storico
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