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, 2013 and 2012, and the related consolidated
statements of operations, comprehensive loss, stockholders’ (deficit) equity,
and cash flows for each of the years in the three-year period ended December
31, 2013. These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits
in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the
audit 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, 2013 and 2012, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31, 2013,
in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Albany, New York
March
31, 2014
F-1
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
2013
|
|
2012
|
Assets
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
5,026,523
|
|
$
|
9,380,059
|
|
Accounts receivable, net
|
|
|
6,429,400
|
|
4,021,725
|
|
Inventory
|
|
|
10,406,320
|
|
8,550,457
|
|
Prepaid expenses and other current assets
|
|
1,850,859
|
|
1,988,457
|
|
|
Total current assets
|
|
|
23,713,102
|
|
23,940,698
|
Restricted cash
|
|
|
500,000
|
|
-
|
Property, plant, and equipment, net
|
|
|
5,277,667
|
|
6,708,237
|
Leased property under capital lease, net
|
|
|
2,453,312
|
|
2,969,799
|
Note receivable
|
|
|
509,945
|
|
570,697
|
Intangible assets, net
|
|
|
2,901,595
|
|
5,270,571
|
|
|
Total assets
|
|
|
$
|
35,355,621
|
|
$
|
39,460,002
|
Liabilities, Redeemable Preferred Stock, and Stockholders' (Deficit) Equity
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Borrowings under line of credit
|
|
|
$
|
-
|
|
$
|
3,380,835
|
|
Accounts payable
|
|
|
3,094,385
|
|
3,558,157
|
|
Accrued expenses
|
|
|
3,068,774
|
|
3,828,045
|
|
Product warranty reserve
|
|
|
1,608,131
|
|
2,671,409
|
|
Deferred revenue
|
|
|
3,434,735
|
|
2,950,375
|
|
Obligations under capital lease
|
|
|
717,870
|
|
650,379
|
|
Other current liabilities
|
|
|
679,176
|
|
-
|
|
|
Total current liabilities
|
|
|
12,603,071
|
|
17,039,200
|
|
Obligations under capital lease
|
|
|
586,879
|
|
1,304,749
|
|
Deferred revenue
|
|
|
5,579,281
|
|
4,362,092
|
|
Common stock warrant liability
|
|
|
28,829,849
|
|
475,825
|
|
Finance obligation
|
|
|
2,492,330
|
|
-
|
|
Other liabilities
|
|
|
765,281
|
|
1,247,833
|
|
|
Total liabilities
|
|
|
50,856,691
|
|
24,429,699
|
Redeemable Preferred Stock
|
|
|
|
|
|
|
Series C redeemable convertible preferred stock, $0.01 par value per share
|
|
|
|
|
|
|
(aggregate involuntary liquidation preference $17,007,931) 10,431 shares authorized;
|
|
|
|
|
|
Issued and outstanding: 10,431 at December 31, 2013 and 0 at December 31, 2012
|
2,371,080
|
|
-
|
Stockholders' (deficit) equity:
|
|
|
|
|
|
|
Common stock, $0.01 par value per share; 245,000,000 shares authorized;
|
|
|
|
|
|
Issued (including shares in treasury):
|
|
|
|
|
|
106,356,558 at December 31, 2013 and 38,404,764 at December 31, 2012
|
|
1,063,566
|
|
384,048
|
|
Additional paid-in capital
|
|
|
831,155,925
|
|
801,840,491
|
|
Accumulated other comprehensive income
|
|
897,807
|
|
1,004,412
|
|
Accumulated deficit
|
|
|
(849,437,066)
|
|
(786,646,266)
|
|
Less common stock in treasury:
|
|
|
|
|
|
|
165,906 shares at December 31, 2013 and December 31, 2012
|
|
(1,552,382)
|
|
(1,552,382)
|
|
|
Total stockholders' (deficit) equity
|
|
|
(17,872,150)
|
|
15,030,303
|
|
|
Total liabilities, redeemable preferred stock, and stockholders' (deficit) equity
|
$
|
35,355,621
|
|
$
|
39,460,002
|
See accompanying notes to consolidated financial
statements.
F-2
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
For the years ended December 31, 2013, 2012 and 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
|
Product revenue
|
$
|
18,446,082
|
|
$
|
20,791,874
|
|
$
|
19,591,786
|
|
Service revenue
|
6,658,816
|
|
3,615,253
|
|
3,631,479
|
|
Research and development contract revenue
|
1,496,530
|
|
1,701,330
|
|
3,886,114
|
|
Licensed technology revenue
|
-
|
|
-
|
|
516,563
|
|
Total revenue
|
26,601,428
|
|
26,108,457
|
|
27,625,942
|
|
Cost of product revenue
|
20,414,084
|
|
25,353,541
|
|
22,625,306
|
|
Cost of service revenue
|
14,928,595
|
|
12,304,158
|
|
8,044,296
|
|
Cost of research and development contract revenue
|
2,505,989
|
|
2,804,817
|
|
6,232,210
|
|
Research and development expense
|
3,121,007
|
|
5,434,235
|
|
5,655,748
|
|
Selling, general and administrative expenses
|
12,325,466
|
|
14,576,998
|
|
14,545,965
|
|
Gain on sale of assets
|
-
|
|
-
|
|
(673,358)
|
|
Amortization of intangible assets
|
2,270,858
|
|
2,306,489
|
|
2,322,876
|
|
|
Operating loss
|
(28,964,571)
|
|
(36,671,781)
|
|
(31,127,101)
|
|
Interest and other income
|
150,006
|
|
226,120
|
|
248,430
|
|
Change in fair value of common stock warrant liability
|
(37,101,818)
|
|
4,845,165
|
|
3,447,153
|
|
Interest and other expense and foreign currency gain (loss)
|
(398,275)
|
|
(261,958)
|
|
(22,436)
|
|
Gain on sale of equity interest in joint venture
|
3,234,717
|
|
-
|
|
-
|
|
|
Loss before income taxes
|
$
|
(63,079,941)
|
|
$
|
(31,862,454)
|
|
$
|
(27,453,954)
|
|
Income tax benefit
|
410,259
|
|
-
|
|
-
|
|
Net loss attributable to the Company
|
$
|
(62,669,682)
|
|
$
|
(31,862,454)
|
|
$
|
(27,453,954)
|
|
Preferred stock dividends declared
|
(121,118)
|
|
-
|
|
-
|
|
Net loss attributable to common shareholders
|
$
|
(62,790,800)
|
|
$
|
(31,862,454)
|
|
$
|
(27,453,954)
|
|
Loss per share:
|
|
|
|
|
|
|
Basic and diluted
|
$
|
(0.82)
|
|
$
|
(0.93)
|
|
$
|
(1.46)
|
|
Weighted average number of common shares outstanding
|
76,436,408
|
|
34,376,427
|
|
18,778,066
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial
statements.
F-3
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the years ended December 31, 2013, 2012 and 2011
|
|
2013
|
|
2012
|
|
2011
|
Net loss attributable to the Company
|
$
|
(62,669,682)
|
|
$
|
(31,862,454)
|
|
$
|
(27,453,954)
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
Foreign currency translation (loss) gain
|
(106,605)
|
|
75,668
|
|
(55,626)
|
|
Unrealized gain on available-for-sale securities, net
|
-
|
|
-
|
|
18,502
|
Comprehensive Loss
|
$
|
(62,776,287)
|
|
$
|
(31,786,786)
|
|
$
|
(27,491,078)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-4
PLUG POWER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
For the years ended December 31, 2013, 2012 and 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
|
|
|
Common Stock
|
|
|
Additional Paid-
|
|
|
Comprehensive
|
|
|
|
Treasury Stock
|
|
Accumulated
|
|
(Deficit)
|
|
|
Shares
|
|
|
|
Amount
|
|
|
in-Capital
|
|
|
|
Income (Loss)
|
|
|
|
Shares
|
|
|
Amount
|
|
Deficit
|
|
Equity
|
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 attributable to the Company
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(27,453,954)
|
|
|
(27,453,954)
|
Other comprehensive loss
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(37,124)
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
(37,124)
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the Company
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(31,862,454)
|
|
|
(31,862,454)
|
Other comprehensive income
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75,668
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
75,668
|
Stock based compensation
|
|
|
530,353
|
|
|
|
5,304
|
|
|
|
1,985,850
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
1,991,154
|
Public offering common stock, net
|
|
|
14,950,000
|
|
|
|
149,500
|
|
|
|
15,640,770
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
15,790,270
|
December 31, 2012
|
|
|
38,404,764
|
|
|
|
$
|
384,048
|
|
|
|
$
|
801,840,491
|
|
|
|
$
|
1,004,412
|
|
|
|
$
|
165,906
|
|
|
|
$
|
(1,552,382)
|
|
|
$
|
(786,646,266)
|
|
|
$
|
15,030,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the Company
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(62,669,682)
|
|
|
(62,669,682)
|
Other comprehensive loss
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(106,605)
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
(106,605)
|
Stock based compensation
|
|
|
2,198,154
|
|
|
|
21,982
|
|
|
|
2,127,510
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
2,149,492
|
Public Offering, common stock, net (1)
|
|
|
43,101,800
|
|
|
|
431,018
|
|
|
|
9,991,406
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
10,422,424
|
Exercise of warrants (2)
|
|
|
22,494,987
|
|
|
|
224,950
|
|
|
|
17,076,968
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
17,301,918
|
Stock dividend
|
|
|
156,853
|
|
|
|
1,568
|
|
|
|
119,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(121,118)
|
|
|
-
|
December 31, 2013
|
|
106,356,558
|
|
|
|
$
|
1,063,566
|
|
|
|
$
|
831,155,925
|
|
|
|
$
|
897,807
|
|
|
|
$
|
165,906
|
|
|
|
$
|
(1,552,382)
|
|
|
$
|
(849,437,066)
|
|
|
$
|
(17,872,150)
|
|
(1)
|
As a result of the 2013 public offerings discussed in
Note 4, Stockholders’ Equity, the Company received net proceeds of
$12,873,452, of which $2,451,028 in value was ascribed to the warrants issued
in the February 2013 public offering.
|
|
|
|
|
(2)
|
Pursuant to the exercise of warrants, additional
paid-in capital was increased by $5,878,146 from the issuance of 22,494,987
shares of common stock. Additionally, paid-in capital was increased by
$11,198,822 and warrant liability was reduced by $11,198,822 (the fair value of
the warrants on the exercise date).
|
See accompanying notes to consolidated financial
statements.
F-5
PLUG
POWER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2013, 2012 and 2011
|
|
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
Net loss attributable to the Company
|
$
|
(62,669,682)
|
|
$
|
(31,862,454)
|
|
$
|
(27,453,954)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment, and investment in leased property
|
1,907,940
|
|
2,069,672
|
|
2,132,117
|
|
|
Amortization of intangible assets
|
2,270,858
|
|
2,306,489
|
|
2,322,876
|
|
|
Stock-based compensation
|
2,180,869
|
|
2,001,840
|
|
1,452,259
|
|
|
Gain on sale of equity interest in joint venture
|
(3,234,717)
|
|
-
|
|
-
|
|
|
Loss on disposal of property, plant and equipment
|
65,899
|
|
51,975
|
|
308,621
|
|
|
Loss (gain) on sale of leased assets
|
-
|
|
20,068
|
|
(673,358)
|
|
|
Realized loss on available for sale securities
|
-
|
|
-
|
|
22,421
|
|
|
Change in fair value of common stock warrant liability
|
37,101,818
|
|
(4,845,165)
|
|
(3,447,153)
|
|
|
Changes in operating assets and liabilities that provide (use) cash:
|
|
|
|
|
|
|
|
Accounts receivable
|
(2,407,675)
|
|
9,367,539
|
|
(9,192,901)
|
|
|
Inventory
|
(1,855,863)
|
|
(1,294,671)
|
|
1,438,195
|
|
|
Prepaid expenses and other current assets
|
137,598
|
|
(94,443)
|
|
(310,089)
|
|
|
Note receivable
|
60,752
|
|
(570,697)
|
|
-
|
|
|
Accounts payable, accrued expenses, product warranty reserve and other liabilities
|
(2,140,157)
|
|
914,388
|
|
(1,101,356)
|
|
|
Deferred revenue
|
1,701,549
|
|
1,770,463
|
|
1,192,255
|
|
|
|
Net cash used in operating activities
|
(26,880,811)
|
|
(20,164,996)
|
|
(33,310,067)
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
Proceeds from sale of equity interest in joint venture
|
3,234,717
|
|
-
|
|
-
|
|
|
Purchase of property, plant and equipment
|
(111,032)
|
|
(77,527)
|
|
(1,326,144)
|
|
|
Restricted cash
|
-
|
|
-
|
|
525,000
|
|
|
Proceeds from disposal of property, plant and equipment
|
84,250
|
|
63,605
|
|
46,650
|
|
|
Proceeds from sale of leased assets
|
-
|
|
-
|
|
673,358
|
|
|
Proceeds from maturities and sales of available-for-sale securities
|
-
|
|
-
|
|
10,399,396
|
|
|
|
Net cash provided by (used in) investing activities
|
3,207,935
|
|
(13,922)
|
|
10,318,260
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
Change in restricted cash
|
(500,000)
|
|
-
|
|
-
|
|
|
Purchase of treasury stock
|
-
|
|
-
|
|
(158,492)
|
|
|
Proceeds from exercise of warrants
|
6,103,096
|
|
-
|
|
-
|
|
|
Proceeds from issuance of preferred stock
|
2,595,400
|
|
-
|
|
-
|
|
|
Preferred stock issuance costs
|
(224,320)
|
|
-
|
|
-
|
|
|
Proceeds from issuance of common stock and warrants
|
14,807,718
|
|
17,192,500
|
|
22,583,877
|
|
|
Common stock issuance costs
|
(1,934,265)
|
|
(1,402,230)
|
|
(1,891,378)
|
|
|
Repayment of borrowings under line of credit
|
(3,380,835)
|
|
(2,024,275)
|
|
5,405,110
|
|
|
Proceeds from finance obligation
|
2,600,000
|
|
2,105,282
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on obligations under capital lease and finance obligation
|
(698,674)
|
|
(170,222)
|
|
(9,956)
|
|
|
|
Net cash provided by financing activities
|
19,368,120
|
|
15,701,055
|
|
25,929,161
|
|
|
Effect of exchange rate changes on cash
|
(48,780)
|
|
1,029
|
|
(35,864)
|
|
|
Increase (decrease) in cash and cash equivalents
|
(4,353,536)
|
|
(4,476,834)
|
|
2,901,490
|
|
|
Cash and cash equivalents, beginning of year
|
9,380,059
|
|
13,856,893
|
|
10,955,403
|
|
|
Cash and cash equivalents, end of year
|
$
|
5,026,523
|
|
$
|
9,380,059
|
|
$
|
13,856,893
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial
statements.
F-6
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, 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 sell and continue to develop fuel cell
product solutions to replace lead-acid batteries in material handling vehicles
and industrial trucks for some of North America’s largest distribution
and manufacturing businesses. 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. Our
current product line includes: GenDrive, a hydrogen fueled PEM fuel cell system
providing power to material handling vehicles; GenKey, our turn-key solution
offering complete simplicity to customers transitioning their material handling
vehicles to fuel cell power; GenFuel, our hydrogen fueling
delivery system; and GenCare,
our ongoing
maintenance program for both the GenDrive fuel cells and GenFuel products.
We sell our products worldwide, with a primary focus
on North America, through our direct product sales force, leveraging
relationships with original equipment manufacturers, or OEMs, and their dealer
networks. We are party to a joint venture 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. We sell to businesses, government
agencies and commercial consumers.
We were organized in the State of Delaware on
June 27, 1997.
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
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, funding the growth in our GenKey
“turn-key” solution which also includes the installation of our
customer’s hydrogen infrastructure as well as delivery of the hydrogen
molecule, 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.
We have experienced and continue to experience
negative cash flows from operations and net losses. The Company incurred
net losses attributable to common shareholders of $62.8 million, $31.9 million
and $27.5 million for the years ended December 31, 2013, 2012 and 2011,
respectively, and has an accumulated deficit of $849.4 million at December 31,
2013. Substantially all of our accumulated deficit has been incurred in
connection with our operating expenses, research and development expenses and
from general and administrative costs associated with our operations. We expect
that for fiscal year 2014, our operating cash burn will be approximately
$10-$15 million.
F-7
Net cash used in operating activities for
the year ended December 31, 2013 was $26.9 million. Additionally, on December
31, 2013, we had cash and cash equivalents of $5.0 million and net working
capital of $11.1 million. This compares to $9.4 million and $6.9 million,
respectively, at December 31, 2012.
On January 15, 2014, we completed an underwritten
public offering of 10,000,000 shares of common stock and accompanying warrants
to purchase 4,000,000 shares of common stock. The shares and the warrants were
sold together in a fixed combination, with each combination consisting of one
share of common stock and 0.40 of a warrant to purchase one share of common
stock, at a price of $3.00 per fixed combination for gross proceeds of $30.0
million. The securities were placed with a single institutional investor. The
warrants have an exercise price of $4.00 per share, are immediately exercisable
and will expire on January 15, 2019. Net proceeds, after underwriting
discounts and commissions and other estimated fees and expenses were approximately
$28.0 million.
On
March 11, 2014, we completed an underwritten public offering of 3,902,440
shares of common stock. The shares were sold at $5.74 per share for gross
proceeds of approximately $22.4 million. The shares were placed with a single
institutional investor. Net proceeds, after underwriting discounts and
commissions and other estimated fees and expenses were approximately $21.5
million.
Between January 1, 2014 and March 21, 2014,
we have received an additional $18.2 million from the exercise of previously
issued common stock warrants.
To date, we have funded our operations
primarily through public and private offerings of common and preferred stock, a
sale-leaseback of our building, our previous line of credit and maturities and
sales of our available-for-sale securities. The Company believes that its
current cash, cash equivalents, cash generated from future sales, cash
generated from the exercise of outstanding warrants, and cash generated from
recent public offerings will provide sufficient liquidity to fund operations
for at least the next twelve months. This projection is based on our current
expectations regarding product sales, cost structure, cash burn rate and
operating assumptions.
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 Company’s policy to reclassify prior year
consolidated financial statements to conform to current year presentation.
Cash Equivalents
Cash equivalents consist of money market accounts 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. The Company’s cash and cash equivalents are deposited
with financial institutions located in the U.S. and may at times exceed insured
limits.
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 and 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. As of
December 31, 2013 and December 31, 2012, the allowance for doubtful accounts
was $0.
F-8
Inventory
Inventory is stated at the lower of cost or market
value and consists primarily of raw materials. In the case of our 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, 2013 and 2012, inventory on consignment was valued at
approximately $1,178,000 and $406,000, 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.
Revenue Recognition
The
Company recognizes revenue under arrangements for products and services, which
may include the sale of products (GenDrive units) and related services, including
revenue from installation, service and maintenance, spare parts, hydrogen fueling
services, which may include hydrogen supply as well as hydrogen fueling
infrastructure, and leased units. The Company also recognizes revenue under
research and development contracts, which are primarily cost reimbursement
contracts associated with the development of PEM fuel cell technology. Revenue
is generally recognized under these arrangements as follows.
Products and Services
The
Company enters into revenue arrangements that may contain a combination of fuel
cell systems and equipment, which may be sold, or under a limited number of
arrangements leased to customers, installation, service, maintenance, spare
parts, hydrogen fueling and other support services. For these multiple
deliverable arrangements, the Company accounts for each separate deliverable as
a separate unit of accounting if the delivered item or items have value to the
customer on a standalone basis. The Company considers a deliverable to have
standalone value if the item is sold separately by us or another entity or if
the item could be resold by the customer. The Company allocates revenue to each
separate deliverable based on its relative selling price. When determining the
relative selling price, the Company utilizes its best estimate of the selling
price as vendor-specific objective evidence and third-party evidence is
generally not available for the deliverables involved in our revenue
arrangements due to a lack of a competitive environment in selling fuel cell
technology. For a majority of our deliverables, the Company determines relative
selling prices using its best estimate of the selling price as vendor-specific
objective evidence and third-party evidence is generally not available for the
deliverables involved in its revenue arrangements due to a lack of a
competitive environment in selling fuel cell technology. When determining
estimated selling prices, 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 determines estimated selling
prices for deliverables in its agreements based on the specific facts and circumstances
of each arrangement and analyzes the estimated selling prices used for its
allocation of arrangement consideration at least annually. 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.
Once
relative selling prices are determined, the Company proportionately allocates
the sale consideration to each element of the arrangement. The allocated sales
consideration related to fuel cell systems and equipment, spare parts, and
hydrogen is recognized as revenue at shipment if title and risk of loss have
passed to the customer, there is persuasive evidence of an arrangement, the
sales price is fixed or determinable, collection of the related receivable is
reasonably assured, and customer acceptance criteria, if any, have been
successfully demonstrated. The allocated sales consideration related to
installation, service, maintenance, and hydrogen delivery infrastructure is
generally recognized as revenue when completed or on a straight-line basis over
the term of the contract, as appropriate.
In
the case of 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
Company does not include a right of return on its products other than rights
related to warranty provisions that permit repair or replacement of defective
goods. The Company accrues for anticipated warranty costs at the same time that
revenue is recognized for the related product.
F-9
The
Company has also sold extended warranty contracts that generally provide for a
five to ten year warranty from the date of product installation. These types of
contacts are accounted for as a separate deliverable, and accordingly, revenue
generated from these transactions is deferred and recognized in income over the
warranty period, generally on a straight-line basis. Additionally, the Company
may enter into annual service and maintenance contracts that are billed
monthly. Revenue generated from these transactions is recognized in income on a
straight-line basis over the term of the contract.
At
December 31, 2013 and 2012, the Company had unbilled amounts from product and
service revenue in the amount of approximately $184,000 and $118,000,
respectively, which is included in other current assets in the accompanying
consolidated balance sheets. At December 31, 2013 and 2012, the Company had
deferred product and service revenue in the amount of $9.0 million and $7.3
million, respectively.
Research and
Development Contracts
Contract
accounting is used for research and development contract revenue. 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, 2013 and 2012, the Company had unbilled amounts from
research and development contract revenue in the amount of approximately $111,000
and $182,000, respectively and is included in other current assets in the accompanying
consolidated balance sheets. Unbilled amounts at December 31, 2013 are expected
to be billed during the first quarter of 2014.
Product
Warranty Reserve
Our
GenDrive products are generally sold with a one to two-year product warranty to
customers that commences on the product installation date. 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’s product warranty reserve as of December 31, 2013
is approximately $1.6 million and is included in product warranty reserve in
the accompanying consolidated balance sheets. Included in this balance is
approximately $1.2 million related to specific GenDrive component quality
issues that were identified during the year ended December 31, 2012.
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, which includes depreciation on the
Company’s facility that is accounted for as a financing obligation (see Note
10, Finance Obligation), 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
|
|
5–20 years
|
Software, machinery and equipment
|
|
1–15 years
|
|
|
|
Gains and losses resulting from the sale of property
and equipment are recorded in current operations.
F-10
Leased Property Under Capital Lease
Leased
property under capital lease is stated at the present value of minimum lease
payments. Amortization expense is recorded on a straight‑line basis over
6 years, the shorter of the lease term and the estimated useful life of the
asset. Amortization expense amounted to $516,497 and $129,122 for the years
ended December 31, 2013 and December 31, 2012, respectively, and has been
included in cost of service revenue in the accompanying consolidated statements
of operations.
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 consolidated 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 consolidated
balance sheet.
Common Stock Warrant Accounting
The Company accounts for common stock warrants in
accordance with applicable accounting guidance provided in Accounting Standards
Codification (ASC) Subtopic 815-40,
Derivatives and Hedging –
Contracts in Entity’s 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
accompanying consolidated balance sheets as a long-term liability, which is
revalued at each balance sheet date subsequent to the initial issuance using
the Black-Scholes pricing model. 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. Changes in the fair
value of the warrants are reflected in the accompanying consolidated statements
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
recognizes in its consolidated financial statements the impact of a tax
position only if that position is more likely than not to be sustained on
audit, based on the technical merits of the position.
F-11
Foreign
Currency Translation
Historically,
foreign currency translation adjustments arose from conversion of the Company’s
foreign subsidiary’s financial statements to U.S. dollars for reporting
purposes, and were included in accumulated other comprehensive income (loss) in
stockholders’ (deficit) equity on the accompanying consolidated balance
sheets. As of September 30, 2013, the functional currency of our last
remaining foreign subsidiary, Plug Power Canada Inc., was changed to the U.S.
dollar, therefore these translation adjustments will no longer occur. Transaction
gains and losses resulting from the effect of exchange rate changes on
transactions denominated in currencies other than the U.S. dollar give rise to
realized foreign currency transaction gains and losses, and are included in
interest and other expense in the accompanying consolidated statements of operations.
Research and
Development
Costs incurred in
research and development by the Company are expensed as incurred.
Joint
Venture
The Company accounts for investments in joint ventures
in which we have significant influence in accordance with applicable accounting
guidance in ASC 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 an initial 55% ownership of
the JV, subject to certain conditions. We have not contributed any cash to the
JV and we are not obligated to contribute any cash. We contributed to the JV
the right to use our technology, including design and technology know-how on
GenDrive systems, in exchange for an initial 45% ownership of the JV.
On April 19, 2013 Axane purchased an additional 25%
ownership interest in HyPulsion from the Company for a cash purchase price of
$3.3 million (Euro 2.5 million). We now own 20% and Axane owns 80% of
HyPulsion, and we will share in 20% of the profits from the JV. The Company has
the right to purchase an additional 60% of HyPulsion from Axane at any time
between January 4, 2018 and January 29, 2018 at a formula price. If the Company
exercises its purchase right, Axane will have the right, at any time between
February 1, 2018 and December 31, 2021, to require the Company to buy the
remaining 20% interest at a formula price.
In addition, the Company and HyPulsion also entered
into an engineering service agreement under which, among other things, the
Company will provide HyPulsion with engineering and technical services for a new
fuel cell assembly line and manufacturing execution system. Under the service
agreement, HyPulsion has paid the Company approximately $659,000 (Euro 500,000)
in the aggregate for services to be performed by the Company.
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 December 31, 2013,
the Company had a zero basis for its investment in the JV.
Redeemable
Preferred Stock
On May 8, 2013, the Company entered into a Securities
Purchase Agreement with Air Liquide, pursuant to which the Company agreed to
issue and sell 10,431 shares of the Company’s Series C Redeemable
Convertible Preferred Stock, par value $0.01 per share, for an aggregate
purchase price of approximately $2.6 million (Euro 2 million) in cash, as more
fully discussed in Note 5, Redeemable Preferred Stock. We account for preferred
stock as temporary equity in accordance with applicable accounting guidance in
Accounting Standards Codification (ASC) 480,
Distinguishing Liabilities from
Equity.
Dividends on the redeemable preferred stock are accounted for as a
reduction (increase) in the net income (loss) attributable to common
shareholders.
F-12
Stock-Based
Compensation
The
Company maintains employee stock-based compensation plans, which are described
more fully in Note 6, 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
option’s 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 revenue”, “Cost of service revenue”, “Research
and development expense” and “Selling, general and administrative
expenses” in the accompanying consolidated statements of operations based
on the employees’ respective function.
The
Company records deferred tax assets for awards that result in deductions on the
Company’s 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, 2013, 2012 and 2011 since the Company remains in a NOL
position.
Per Share Amounts
Basic earnings per common share are computed by
dividing net loss attributable to common shareholders 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, common stock warrants, and preferred stock) 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 conversion of preferred stock, and the
Company’s 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:
|
|
Year Ended December 31,
|
|
|
2013
|
|
|
2012
|
|
2011
|
Numerator:
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders
|
$
|
(62,790,800)
|
|
|
$
|
(31,862,454)
|
|
$
|
(27,453,954)
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average number of common shares
|
|
|
|
|
|
|
|
outstanding
|
76,436,408
|
|
|
34,376,427
|
|
18,778,066
|
|
|
|
|
|
|
|
|
The dilutive potential common shares are summarized as
follows:
F-13
|
At December 31,
|
|
2013
|
|
2012
|
|
2011
|
Stock options outstanding
|
|
4,703,326
|
|
|
1,986,255
|
|
1,948,997
|
Restricted stock outstanding
|
|
650,002
|
|
|
-
|
|
280,771
|
Common stock warrants (1)
|
|
24,137,878
|
|
|
9,421,008
|
|
7,128,563
|
Preferred stock (2)
|
|
10,972,859
|
|
|
-
|
|
-
|
Number of dilutive potential common shares
|
|
40,464,065
|
|
|
11,407,263
|
|
9,358,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
On May 31, 2011, the Company issued 7,128,563
warrants as part of an underwritten public offering. As a result of the March
28 and 29, 2012 and February 20 and 21, 2013 public offerings, the May 8,
2013 issuance of Series C redeemable convertible preferred stock, and the
September 16, 2013 public offering described in Note 4, the number of
warrants increased to 22,995,365 pursuant to the anti-dilution provisions of
those warrants. Additionally, on February 20, 2013, the Company issued 23,637,500
warrants as part of an underwritten public offering. Of the warrants issued
in these offerings, 22,494,987 were exercised as of December 31, 2013.
|
(2)
|
The preferred stock amount represents the dilutive
potential common shares of the 10,431 shares of Series C redeemable
convertible preferred stock issued on May 16, 2013.
|
Use of
Estimates
The consolidated financial statements of the Company
have been prepared in conformity with U.S. generally accepted accounting
principles, which require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Subsequent Events
The Company evaluates subsequent events at the date of
the balance sheet as well as conditions that arise after the balance sheet date
but before the financial statements are issued. The effects of conditions that
existed at the date of the balance sheet date are recognized in the financial
statements. Events and conditions arising after the balance sheet date but
before the financial statements are issued are evaluated to determine if
disclosure is required to keep the financial statements from being misleading.
To the extent such events and conditions exist, if any, disclosures are made
regarding the nature of events and the estimated financial effects for those
events and conditions.
Reclassifications
Certain reclassifications have been made to prior
period financial statements to conform to the current period
presentation. These reclassifications include separating what was
previously presented as product and service revenue and cost of product and
service revenue into separate product revenue and service revenue and cost of
product revenue and cost of service revenue line items on the consolidated
statements of operations. These reclassifications did not impact the
results of operations or net cash flows in the periods presented.
Recent
Accounting Pronouncements
There are no recently issued accounting
standards with pending adoptions that the Company’s management currently
anticipates will have any material impact upon its financial statements.
F-14
3. Inventory
Inventory as of December 31, 2013 and
December 31, 2012 consisted of the following:
|
December 31, 2013
|
|
December 31, 2012
|
Raw materials and supplies
|
|
$
|
8,881,596
|
|
$
|
7,576,862
|
Work-in-process
|
|
219,327
|
|
314,321
|
Finished goods
|
|
1,305,397
|
|
659,274
|
|
|
$
|
10,406,320
|
|
$
|
8,550,457
|
4.
Stockholders’ Equity
Common Stock
The Company has one class of common stock, par value
$.01 per share. Each share of the Company’s common stock is entitled to
one vote on all matters submitted to stockholders. There were 106,190,652 and 38,238,858
shares of common stock issued and outstanding as of December 31, 2013 and 2012,
respectively.
Preferred Stock
The Company has authorized 5.0 million shares of
preferred stock, par value $.01 per share. The Company’s certificate of
incorporation provides that shares of preferred stock may be issued from time
to time in one or more series. The Company’s 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.
The Company has registered Series A Junior
Participating Cumulative Preferred Stock, par value $.01 per share. As of
December 31, 2013 and 2012, there were no shares of Series A Junior
Participating Cumulative Preferred Stock issued and outstanding.
2013
Public Offerings
On September 16, 2013, the Company completed an
underwritten public offering of 18,600,000 shares of common stock. The shares
were sold at $0.54 per share. Net proceeds, after underwriting discounts and
commissions and other fees and expenses payable by Plug Power were $9,151,221.
The Company also sold an additional 2,790,000 shares of common stock at $0.54
per share, pursuant to the underwriter’s exercise of its over-allotment
option in connection with the September 16, 2013 underwritten public offering,
resulting in additional net proceeds to Plug Power of $1,408,671. The total net
proceeds from the September 2013 public offering to Plug Power were
$10,559,892.
On February 20, 2013, the Company completed an
underwritten public offering of 18,910,000 shares of common stock and warrants
to purchase an aggregate of 18,910,000 shares of common stock. The shares and
warrants in the underwritten public offering were sold as a fixed combination,
with each combination consisting of one share of common stock and one warrant
to purchase one share of common stock at a price to the public of $0.15 per
fixed combination. The underwriter also purchased 2,836,500 warrants pursuant
to the exercise of its over-allotment option. These warrants have an exercise
price of $0.15 per share, are immediately exercisable and will expire on
February 20, 2018. The warrants are 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 holder’s warrants at a price determined using a Black-Scholes
option pricing model. The underwriter was also granted an additional 1,891,000
warrants at $0.18 per share. These warrants are exercisable on February 13,
2014 and will expire on February 13, 2018. Net proceeds, after underwriting
discounts and commissions and other fees and expenses payable by Plug Power,
were $1,948,766. On February 21, 2013, the Company sold 2,801,800 additional
shares of common stock, pursuant to the underwriter’s exercise of its
overallotment option in connection with the public offering, resulting in
additional net proceeds to the Company of approximately $364,794. The total net
proceeds from the February 2013 public offerings to Plug Power were $2,313,560.
F-15
2012
Public Offerings
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
underwriter’s 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.
2011
Public Offerings
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 warrant 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 holder’s 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. As a result of the February 20 and 21, 2013
public offerings and pursuant to the effect of the anti-dilution provisions,
the exercise price of the warrants was reduced to $1.13 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 was increased to
18,925,389 shares. As a result of the May 8, 2013 agreement to issue and sell
Air Liquide 10,431 shares of Series C Redeemable Convertible Preferred Stock,
and pursuant to the effect of the anti-dilution provisions, the exercise price
of the warrants was reduced to $1.03 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 was increased to 20,762,805 shares. As a
result of the September 16, 2013 public offering and pursuant to the effect of
the anti-dilution provisions, the exercise price of the warrants was reduced to
$0.93 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 22,995,365.
On June 8, 2011, the Company sold 836,750 additional
shares of common stock, pursuant to the underwriter’s 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 underwriter’s partial exercise of
its over-allotment option, resulting in additional net proceeds to Plug Power
of $
527,626.
F-16
5.
Redeemable Preferred Stock
On May 8, 2013, the Company entered into a Securities Purchase
Agreement (the “Purchase Agreement”) with Air Liquide
Investissements d'Avenir et de Demonstration (“Air Liquide”),
pursuant to which the Company agreed to issue and sell to Air Liquide 10,431
shares of the Company’s Series C Redeemable Convertible Preferred Stock,
par value $0.01 per share (the “Series C Preferred Stock”), for an
original issue price of $2,595,400 in cash. Net proceeds, after fees and
expenses paid by the Company, were $2,371,080.
Under the terms of the Purchase Agreement, for so long
as Air Liquide holds any shares of Series C Preferred Stock, Air Liquide shall
be entitled to designate one director to the Company’s Board of
Directors. In the event the Series C Preferred Stock is converted into shares
of Common Stock and Air Liquide continues to hold at least 5% of the
outstanding shares of Common Stock of the Company, or 50% of the shares of
Common Stock held by Air Liquide on an as-converted basis immediately following
the issuance of the Series C Preferred Stock, Air Liquide shall continue to be
entitled to designate one director to the Company’s Board of Directors.
The Purchase Agreement also provides Air Liquide with the right to participate
in certain future equity financings by the Company.
The Series C Preferred Stock will rank senior to the
Common Stock with respect to rights upon the liquidation, dissolution or
winding up of the Company. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, or other deemed
liquidation event, as defined in the Securities Purchase Agreement, the holders
of the Series C Preferred Stock will be entitled to be paid an amount per share
equal to the greater of (i) the original issue price, plus any accrued but
unpaid dividends or (ii) the amount per share that would have been payable had
all shares of Series C Preferred Stock been converted to shares of common stock
immediately prior to such liquidation event.
The Series C Preferred Stock will be entitled to
receive dividends at a rate of 8% per annum, based on the original issue price
of $2,595,400, payable in equal quarterly installments in cash or in shares of
Common Stock, at the Company’s option. The Series C Preferred Stock will
be convertible into shares of Common Stock, at a conversion price equal to
$0.248794 per share, at Air Liquide’s option, (1) on or after May 8, 2014
or (2) upon any liquidation, dissolution or winding up of the Company, any
sale, consolidation or merger of the Company resulting in a change of control,
or any sale or other transfer of all or substantially all of the assets of the
Company. The number of shares of common stock is determined by dividing the
original issue price of $2,595,400 by the conversion price in effect at the
time the shares are converted.
The Series C Preferred Stock has weighted average
anti-dilution protection. Therefore, the conversion price is subject to
adjustment in the event the Company issues additional shares of common stock
for a consideration per share less than the Series C conversion price in effect
immediately prior to such issue. Upon this occurrence, the conversion price
shall be reduced to a price determined in accordance with a prescribed formula.
Accordingly, with the exercise of 16,096,400 warrants at $0.15 occurring after
the close of the redeemable preferred stock sale, the Series C Preferred Stock
conversion price was adjusted from $0.248794 per share to $0.236529 per share.
The Series C Preferred Stock may not be redeemed by
the Company until May 8, 2016. After this date, the Series C Preferred Stock
may be redeemed by the holders of the Series C Preferred Stock or the Company.
If redeemed by the holder, the redemption price will be equal to the Series C
Original Issue Price per share, plus any accruing but unpaid dividends. If
redeemed at the election of the Company, the redemption price for shares of
Series C Preferred Stock shall be a per share price equal to the greater of (i)
the Series C original issue price per share, plus any Series C accruing
dividends accrued but unpaid thereon and (ii) the fair market value of a single
share of Series C preferred stock as of the date of the redemption.
The Series C Preferred Stock will vote together with
the Common Stock on an as-converted basis on all matters. The shares of Series
C Preferred Stock were issued in a private placement exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”).
F-17
6. Employee Benefit
Plans
Stock Option Plan
2011 Stock Option and Incentive
Plan
On
May 12, 2011, the Company’s 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 Company’s common stock authorized for
issuance under the 2011 Plan from 1.0 million to 6.5 million.
At
December 31, 2013, there were approximately 4.7 million options
granted and outstanding and 1.1 million 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 one to three years in duration and expire ten years
after issuance.
Compensation cost associated with employee stock
options represented approximately $1,445,000 of the total share-based payment
expense recorded for the year ended December 31, 2013. The Company
estimates the fair value of stock options 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 Company’s stock, an
appropriate risk-free rate, and the Company’s 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 3,090,900, 78,400 and
1,618,400 options granted during the years ended December 31, 2013, 2012
and 2011, respectively, were as follows:
|
2013
|
|
2012
|
|
2011
|
Divident yield:
|
0%
|
|
0%
|
|
0%
|
Expected term of options (years):
|
6
|
|
6
|
|
6
|
Risk free interest rate:
|
0.93%-1.70%
|
|
0.80%-1.16%
|
|
1.16%-2.61%
|
Volatility:
|
92%-107%
|
|
80%
|
|
74%-79%
|
The Company’s 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 Company’s actual historic stock prices over the past six years,
which represents the Company’s best estimate of expected volatility.
A summary of stock option activity for the year
December 31, 2013 is as follows:
F-18
|
|
|
|
Weighted
|
|
Weighted Average
|
|
Aggregate
|
|
|
|
|
Average Exercise
|
|
Remaining
|
|
Intrinsic
|
|
Shares
|
|
Price
|
|
Contractual Terms
|
|
Value
|
Options outstanding at December 31, 2012
|
|
1,986,255
|
|
$
|
8.95
|
|
7.9
|
|
$
|
-
|
Granted
|
|
3,090,900
|
|
0.40
|
|
9.6
|
|
-
|
Exercised
|
|
-
|
|
-
|
|
-
|
|
-
|
Forfeited
|
|
(340,837)
|
|
6.41
|
|
-
|
|
-
|
Expired
|
|
(32,992)
|
|
51.05
|
|
-
|
|
-
|
Options outstanding at December 31, 2013
|
|
4,703,326
|
|
$
|
3.22
|
|
8.7
|
|
-
|
Options exercisable at December 31, 2013
|
|
1,193,800
|
|
10.45
|
|
6.7
|
|
-
|
Options unvested at December 31, 2013
|
|
3,509,526
|
|
$
|
0.77
|
|
9.4
|
|
$
|
2,751,453
|
|
|
|
|
|
|
|
|
|
The weighted average grant date fair value of options
granted during the years ended December 31, 2013, 2012 and 2011 was $0.32,
$0.83 and $3.58, respectively. There were no stock options exercised during the
year ended December 31, 2013. As of December 31, 2013, there was approximately
$1,437,000 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, 2013 and 2012 was approximately
$1,445,000 and $1,407,000, respectively.
Restricted stock awards generally vest in equal
installments over a period of one to three years. Restricted stock awards are
valued based on the closing price of the Company’s 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 $33,000
associated with its restricted stock awards in 2013. Additionally, as of
December 31, 2013, there was $207,000 of unrecognized compensation cost
related to restricted stock awards to be recognized over the next three years.
A summary of restricted stock activity for the year
ended December 31, 2013 is as follows:
|
|
|
|
Aggregate
|
|
|
|
|
Instrinsic
|
|
Shares
|
|
Value
|
Unvested restricted stock at December 31, 2012
|
|
-
|
|
$
|
-
|
Granted
|
|
683,336
|
|
1,059,171
|
Forfeited
|
|
(33,334)
|
|
(51,668)
|
Unvested restricted stock at December 31, 2013
|
|
650,002
|
|
$
|
1,007,503
|
|
|
|
|
|
For the years ended December 31, 2013, 2012, and 2011, the Company recorded
expense of approximately $2.2 million, $2.0 million,
and $1.5 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 Company’s 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 1,319,914, 403,579 and
133,748 shares of common stock to the Plug Power Inc. 401(k) Savings &
Retirement Plan during 2013, 2012 and 2011, respectively.
The Company’s expense for this plan, including
the issuance of shares, was approximately $371,000, $436,000 and $374,000 for
years ended December 31, 2013, 2012 and 2011, respectively.
F-19
7
.
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 $509,945 and $65,735 have been recorded as note
receivable and current portion of note receivable (prepaid expenses and other
current assets), respectively, in the accompanying consolidated balance sheet
as of December 31, 2013, and $570,697 and $59,017 have been recorded as note
receivable and current portion note receivable (prepaid expenses and other
current assets), respectively, in the accompanying consolidated balance sheet
as of December 31, 2012. The carrying amounts reported are considered to approximate fair value.
8.
Property, Plant and Equipment
Property,
plant and equipment at December 31, 2013 and 2012 consist of the
following:
|
December 31,
|
|
December 31,
|
|
2013
|
|
2012
|
Land
|
$
|
90,000
|
|
$
|
90,000
|
Buildings
|
15,332,232
|
|
15,332,232
|
Building improvements
|
4,923,827
|
|
4,939,283
|
Software, machinery and equipment
|
10,658,236
|
|
13,741,573
|
|
31,004,295
|
|
34,103,088
|
Less accumulated depreciation
|
(25,726,628)
|
|
(27,394,851)
|
Property, plant, and equipment, net
|
$
|
5,277,667
|
|
$
|
6,708,237
|
|
|
|
|
Depreciation expense related to property, plant and
equipment was $1.4 million, $1.9 million and $2.1 million for the years ended
December 31, 2013, 2012 and 2011, respectively.
9.
Capital Lease
On October 1, 2012, the Company entered into an agreement
under which it is providing a customer with 255 GenDrive units, service and
maintenance of the units and daily delivery of hydrogen in exchange for a
monthly utility payment tied to the amount of energy (kilograms of hydrogen)
consumed each month. The agreement has an initial term of three years
with an automatic three year renewal unless the customer terminates at the end
of the initial 3 year term.
On December 28, 2012, Plug Power sold the 255 GenDrive
units in use under the agreement to a third party and leased back the equipment
to fulfill its obligations under the agreement
or at other customer sites as agreed to by the owner/lessor. The transaction
has been recorded by the Company as leased property under capital lease with a
corresponding liability of obligations under capital lease on the consolidated
balance sheets.
Future
minimum capital lease payments as of December 31, 2014 are:
F-20
Year ending December 31,
|
Capital leases
|
2014
|
$
|
815,184
|
2015
|
611,388
|
Total future minimum lease payments
|
$
|
1,426,572
|
|
|
|
Less amount representing interest (at 9.9%)
|
121,823
|
Present value of net minimum capital lease payments
|
1,304,749
|
Less current installments of obligations under capital leases
|
717,870
|
|
Obligations under capital leases, excluding current installments
|
$
|
586,879
|
|
|
|
|
|
|
Leased property under capital lease at December 31,
2013 and December 31, 2012 consists of the following:
|
December 31,
|
|
December 31,
|
|
2013
|
|
2012
|
Leased property under capital lease
|
$
|
3,098,921
|
|
$
|
3,098,921
|
Less accumulated depreciation
|
(645,609)
|
|
(129,122)
|
Leased property under capital lease, net
|
$
|
2,453,312
|
|
$
|
2,969,799
|
|
|
|
|
10. Finance
Obligation
On March 27, 2013, the Company completed a
sale-leaseback transaction of its property located at 968 Albany Shaker Road,
Latham, New York, for an aggregate sale price of $4,500,000, of which
$2,750,000 was received in cash at closing and $1,750,000 is receivable with 5%
annual interest, over 15 years in equal monthly installments of $13,839.
Although the property was sold and the Company has no legal ownership of the
facility, the Company was prohibited from recording the transaction as a sale
because of continuing involvement with the property. Accordingly, the
sale has been accounted for as a financing transaction, which requires the
Company to continue reporting the building as an asset and to record a
financing obligation for the sale price. Liabilities relating to this agreement
of $2,492,330 and $59,375 have been recorded as finance obligation and current
portion finance obligation (other current liabilities), respectively, in the
accompanying consolidated balance sheet as of December 31, 2013.
In connection with the sale-leaseback transaction, the
Company also entered into an agreement with the buyer, pursuant to which the
Company leases from the buyer a portion of the premises sold for a term of 15
years. The Company’s remaining future minimum payments under the 15 year
lease are as follows:
|
|
|
|
Year ending December 31, 2013
|
|
|
2014
|
|
$
|
459,564
|
2015
|
|
459,564
|
2016
|
|
459,564
|
2017
|
|
459,564
|
2018
|
|
483,132
|
Thereafter
|
|
4,795,976
|
Total future minimum financing obligation payments
|
7,117,364
|
Less interest
|
|
(2,825,497)
|
Present value of future minimum financing obligation payments
|
$
|
4,291,867
|
|
|
|
|
|
|
F-21
As part of the terms of the transaction, the Company
issued a standby letter of credit to the benefit of the landlord/lessor that
can be drawn by the beneficiary in the event of default on the lease by Plug
Power. The standby letter totals $500,000 and is 100% collateralized by cash
balances of the Company. The standby letter is renewable for a period of ten
years and can be cancelled in part or in full if certain covenants are met and
maintained by the Company. Accordingly, as of December 31, 2013, $500,000 has
been recorded to restricted cash in the accompanying consolidated balance
sheet.
11. Loan and
Security Agreement
At December 31, 2012, the Company was a party to a
loan and security agreement, as amended, 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. The Loan Agreement expired on March 29, 2013. 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, the Company 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.
12. Intangible Assets
Intangible assets, consisting of acquired technology
and customer relationships, are amortized using the straight-line method over
their useful lives of eight years.
The gross carrying amount and accumulated amortization
of the Company’s acquired identifiable intangible assets as of
December 31, 2013 are as follows:
|
|
Weighted Average
|
|
Gross Carrying
|
|
Accumulated
|
|
|
|
|
Amortization Period
|
|
Amount
|
|
Amortization
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired Technology
|
8 years
|
|
|
$
|
17,036,835
|
|
$
|
(14,301,907)
|
|
$
|
2,734,928
|
|
Customer Relationships
|
8 years
|
|
|
1,000,000
|
|
(833,333)
|
|
166,667
|
|
|
|
|
|
|
$
|
18,036,835
|
|
$
|
(15,135,240)
|
|
$
|
2,901,595
|
|
|
|
|
|
|
|
|
|
|
|
The gross carrying amount and accumulated amortization
of the Company’s acquired identifiable intangible assets as of
December 31, 2012 are as follows:
|
|
Weighted Average
|
|
Gross Carrying
|
|
Accumulated
|
|
|
|
|
Amortization Period
|
|
Amount
|
|
Amortization
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired Technology
|
8 years
|
|
|
$
|
17,134,953
|
|
$
|
(12,156,049)
|
|
$
|
4,978,904
|
|
Customer Relationships
|
8 years
|
|
|
1,000,000
|
|
(708,333)
|
|
291,667
|
|
|
|
|
|
|
$
|
18,134,953
|
|
$
|
(12,864,382)
|
|
$
|
5,270,571
|
|
|
|
|
|
|
|
|
|
|
|
The
change in the gross carrying amount of the acquired technology from December 31,
2012 to December 31, 2013 is due to changes in foreign exchange rates.
F-22
Amortization expense for acquired identifiable
intangible assets for the years ended December 31, 2013, 2012, and 2011
was $2.3 million, $2.3 million, and $2.3 million, respectively. Estimated
amortization expense for subsequent years is as follows:
2014
|
$
|
2,263,776
|
2015
|
637,819
|
Total
|
$
|
2,901,595
|
|
|
13. Accrued
Expenses
Accrued
expenses at December 31, 2013 and 2012 consist of:
|
2013
|
|
2012
|
Accrued payroll and compensation related costs
|
$
|
1,531,175
|
|
$
|
708,495
|
Accrued dealer commissions and customer rebates
|
235,690
|
|
1,097,498
|
Other accrued liabilities
|
1,301,909
|
|
2,022,052
|
Total
|
$
|
3,068,774
|
|
$
|
3,828,045
|
|
|
|
|
14. 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.
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– 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 – 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 – 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.
F-23
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.
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
|
|
Other Unobservable
|
|
|
|
|
|
|
Items
|
|
Inputs
|
|
Inputs
|
Balance at December 31, 2013
|
|
Total
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrant liability
|
|
$
|
28,829,849
|
|
|
$
|
-
|
|
$
|
-
|
|
$
|
28,829,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in Active
|
Significant
|
|
Significant
|
|
|
|
|
|
Markets for Identical
|
|
Other Observable
|
|
Other Unobservable
|
|
|
|
|
|
|
Items
|
|
Inputs
|
|
Inputs
|
Balance at December 31, 2012
|
|
Total
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
Common stock warrant liability
|
|
$
|
475,825
|
|
|
$
|
-
|
|
$
|
-
|
|
$
|
475,825
|
|
|
|
|
|
|
|
|
|
|
|
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, 2013
|
|
$
|
475,825
|
Change in fair value of common stock warrants
|
|
37,101,818
|
Issuance of common stock warrants
|
|
2,451,028
|
Exercise of common stock warrants
|
|
(11,198,822)
|
Fair value of common stock warrant liability at December 31, 2013
|
|
$
|
28,829,849
|
|
|
|
|
|
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
|
|
(4,845,165)
|
Fair value of common stock warrant liability at December 31, 2012
|
|
$
|
475,825
|
|
|
|
F-24
The
following summarizes the valuation technique for assets measured and recorded
at fair value:
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.
The
Company used the following assumptions for its common stock warrants issued on
May 31, 2011. The risk-free interest rate for May 31, 2011 (issuance date),
December 31, 2012, and December 31, 2013 was 0.75%, 0.31% and 0.52%,
respectively. The volatility of the market price of the Company’s common
stock for May 31, 2011, December 31, 2012 and December 31, 2013 was 94.4%,
73.5%, and 119.3%, respectively. The expected average term of the warrant used
for all periods was 2.4 years.
The
Company used the following assumptions for its common stock warrants issued on
February 20, 2013. The risk-free interest rate for February 20, 2013 (issuance
date) and December 31, 2013 was 0.85% and 1.14%, respectively. The volatility
of the market price of the Company’s common stock for February 20, 2013
and December 31, 2013 was 102.0% and 99.0%, respectively. The expected average
term of the warrant used for February 20, 2013 and December 31, 2013 were 5.0
years and 4.1 years, respectively.
There was no expected dividend yield for the warrants
granted. 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.
15. Income Taxes
The components of loss before income taxes and the
provision for income taxes for the years ended December 31, 2013, 2012 and 2011
are as follows:
Loss before income taxes:
|
2013
|
|
2012
|
|
2011
|
United States
|
|
$
|
(61,730,000)
|
|
$
|
(30,399,000)
|
|
$
|
(25,483,000)
|
Foreign
|
|
(1,350,000)
|
|
(1,463,000)
|
|
(1,971,000)
|
|
|
$
|
(63,080,000)
|
|
$
|
(31,862,000)
|
|
$
|
(27,454,000)
|
|
|
|
|
|
|
|
Income tax benefit
|
2013
|
|
2012
|
|
2011
|
United States
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
Foreign
|
|
(410,000)
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
$
|
(410,000)
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
The significant components of U.S. deferred income tax
expense (benefit) for the years ended December 31, 2013, 2012 and 2011 are as
follows:
F-25
|
2013
|
|
2012
|
|
2011
|
Deferred tax (benefit) expense
|
$
|
(3,209,000)
|
|
$
|
10,661,000
|
|
$
|
17,774,000
|
Net operating loss carryforward (generated) expired
|
(6,536,000)
|
|
26,924,000
|
|
187,597,000
|
Valuation allowance increase (decrease)
|
9,745,000
|
|
(37,585,000)
|
|
(205,371,000)
|
Provision for Income taxes
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
The significant components of foreign deferred income
tax expense (benefit) for the years ended December 31, 2013, 2012 and 2011 are
as follows:
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
Deferred tax expense (benefit)
|
$
|
1,406,000
|
|
$
|
(1,041,000)
|
|
$
|
(1,268,000)
|
Net operating loss carryforward expired (generated)
|
(15,000)
|
|
(79,000)
|
|
496,000
|
Valuation allowance (decrease) increase
|
(1,391,000)
|
|
1,120,000
|
|
772,000
|
Provision for Income taxes
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
The
Company’s effective income tax rate differed from the federal statutory
rate as follows:
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
U.S. Federal statutory tax rate
|
|
(35.0%)
|
|
(35.0%)
|
|
(35.0%)
|
Deferred state taxes, net of federal benefit
|
|
|
(1.3%)
|
|
(3.3%)
|
|
(3.1%)
|
Common stock warrant liability
|
|
|
20.6%
|
|
(5.3%)
|
|
(4.4%)
|
Gain on Hypulsion transaction
|
|
|
(1.8%)
|
|
0.0%
|
|
0.0%
|
Other, net
|
|
|
0.1%
|
|
0.1%
|
|
0.6%
|
Change to uncertain tax positions
|
|
|
(1.3%)
|
|
(1.6%)
|
|
(57.5%)
|
Foreign tax rate differential
|
|
|
0.2%
|
|
0.5%
|
|
0.8%
|
Expiring attribute carryforward
|
|
|
2.2%
|
|
0.0%
|
|
5.4%
|
Adjustments to open deferred tax balance
|
|
|
(0.3%)
|
|
(5.8%)
|
|
(1.7%)
|
Writeoff of tax attributes due to imposition of Section
|
|
|
|
|
|
|
|
382 limitation
|
|
|
1.5%
|
|
165.7%
|
|
840.9%
|
Tax credits
|
|
|
0.0%
|
|
0.0%
|
|
(0.3%)
|
Change in valuation allowance
|
|
|
14.5%
|
|
(115.3%)
|
|
(745.7%)
|
|
|
|
(0.6%)
|
|
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
purposes. Significant components of the Company’s deferred tax assets and
liabilities as of December 31, 2013 and 2012 are as follows:
|
U.S.
|
|
Foreign
|
|
Years ended December 31,
|
|
Years ended December 31,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Intangible assets
|
$
|
59,000
|
|
$
|
130,000
|
|
$
|
999,000
|
|
$
|
694,000
|
Deferred revenue
|
3,425,000
|
|
2,779,000
|
|
-
|
|
-
|
Other reserves and accruals
|
1,253,000
|
|
1,621,000
|
|
-
|
|
-
|
Tax credit carryforwards
|
-
|
|
-
|
|
84,000
|
|
1,569,000
|
Property, plant and equipment
|
1,450,000
|
|
1,541,000
|
|
504,000
|
|
541,000
|
Amortization of stock-based compensation
|
9,183,000
|
|
8,495,000
|
|
-
|
|
-
|
Capitalized research & development expenditures
|
13,775,000
|
|
15,846,000
|
|
5,195,000
|
|
5,384,000
|
Net operating loss carryforwards
|
9,883,000
|
|
3,347,000
|
|
3,556,000
|
|
3,541,000
|
Total deferred tax asset
|
39,028,000
|
|
33,759,000
|
|
10,338,000
|
|
11,729,000
|
Valuation allowance
|
(26,746,000)
|
|
(17,001,000)
|
|
(10,338,000)
|
|
(11,729,000)
|
Net deferred tax assets
|
$
|
12,282,000
|
|
$
|
16,758,000
|
|
$
|
-
|
|
$
|
-
|
Non-employee stock based compensation
|
(1,556,000)
|
|
(1,556,000)
|
|
-
|
|
-
|
Section 382 recognized built in loss
|
(10,726,000)
|
|
(15,202,000)
|
|
|
|
-
|
Net deferred tax liability
|
$
|
(12,282,000)
|
|
$
|
(16,758,000)
|
|
$
|
-
|
|
$
|
-
|
Net
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
F-26
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, 2013 and 2012 of approximately $37.0 million and $28.7
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:
|
$
|
6,529,000
|
|
$
|
6,536,000
|
|
$
|
(7,000)
|
Increase in valuation allowance for current year net increase in deferred tax assets
|
|
|
|
|
|
other than net operating losses:
|
3,587,000
|
|
3,209,000
|
|
378,000
|
Decrease in valuation allowance as a result of foreign currency fluctuation
|
(798,000)
|
|
-
|
|
(798,000)
|
|
|
|
|
|
|
Decrease in valuation allowance as a result of tax attribute expiration
|
(1,478,000)
|
|
-
|
|
(1,478,000)
|
Increase in valuation allowance due to current year change of deferred tax assets
|
|
|
|
|
|
as the result of uncertain tax positions.
|
514,000
|
|
-
|
|
514,000
|
Net increase (decrease) in valuation allowance
|
$
|
8,354,000
|
|
$
|
9,745,000
|
|
$
|
(1,391,000)
|
|
|
|
|
|
|
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 at December 31, 2013 and December
31, 2012 are $0.1 million of deferred tax assets resulting from the exercise of
employee stock options, which upon subsequent realization of the tax benefits,
will be allocated directly to paid-in capital.
Before the imposition of IRC Section 382 limitations
described below, at December 31, 2013, the Company has unused federal and state
net operating loss carryforwards of approximately $741 million, of which $117
million was generated from the operations of acquired companies prior to the
dates of acquisition and $624 million was generated by the Company subsequent
to the acquisition dates and through December 31, 2013. The net operating loss
carryforwards if unused will expire at various dates from 2017 through 2033.
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
Company’s shares owned by its 5 percent shareholders a change of
ownership has occurred under the provisions of IRC Section 382, the Company's federal
and state net operating loss carryforwards could be subject to significant IRC
Section 382 limitations.
Based upon IRC Section 382 studies, Section 382
ownership changes occurred in 2013, 2012 and 2011 that resulted in $728 million
of the Company's $741 million of federal and state net operating loss
carryforwards being subject to IRC Section 382 limitations. As a result
of IRC Section 382 limitations, $715 million of the $728 million net operating
loss carryforwards that are limited 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
Company’s gross deferred tax asset as of December 31, 2013.
The ownership changes 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 $40.7 million.
This will translate into unfavorable book to tax add backs in the Company's 2013
to 2018 U.S. corporate income tax returns that resulted in a gross deferred tax
liability of $10.7 million at December 31, 2013 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 research credit carryforwards. Approximately $15.6 million of research
credit carryforwards are subject to IRC Section 382 limitations and as a result
of the IRC Section 382 limitations, the entire $15.6 million will expire prior
to utilization.
At December 31, 2013, the Company has unused foreign
net operating loss carryforwards of approximately $16.6 million. The net
operating loss carryforwards if unused will expire at various dates from 2014
through 2031. At December 31, 2013, the Company has scientific research
and experimental development expenditures of $20.8 million available to offset
future taxable income. These expenditures have no expiry date. At
December 31, 2013, the Company has Canadian ITC credit carryforwards of $0.5
million available to offset future income tax. These credit carryforwards
if unused will expire at various dates from 2014 through 2025.
Approximately $2.3 million of the foreign net operating loss carryforwards and
$0.4 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, 2013.
F-27
As of December 31, 2013, the Company has no un-repatriated
foreign earnings.
A
reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows:
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
Unrecognized tax benefits balance at beginning of year
|
$
|
1,579,000
|
|
$
|
2,046,000
|
|
$
|
17,893,000
|
Reductions for tax positions of prior years
|
(471,000)
|
|
(503,000)
|
|
(15,875,000)
|
Currency Translation
|
(75,000)
|
|
36,000
|
|
28,000
|
Unrecognized tax benefits balance at end of year
|
$
|
1,033,000
|
|
$
|
1,579,000
|
|
$
|
2,046,000
|
|
|
|
|
|
|
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, 2013 the company recognized a $0.4 million
benefit due to a reduction in interest and penalties as a result of the
expiration of the associated statute of limitations. The company had $0.8
million and $1.2 million of interest and penalties accrued at December 31, 2013
and December 31, 2012, respectively.
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 2010 to 2013, and open
tax years in foreign jurisdictions range from 2006 to 2013. However, upon
examination in subsequent years, if net operating losses carryforwards and tax
credit carryforwards are utilized, the U.S. and foreign jurisdictions can
reduce net operating loss carryforwards and tax credit carryforwards utilized
in the year being examined if they do not agree with the carryforward
amount. As of December 31, 2013, 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.
16.
Warranty Reserve
Our
GenDrive products are generally sold with a one to two-year product warranty that
commences on the product installation date. The Company currently estimates 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 the warranty liability include the number of installed
units, estimated material costs, estimated travel, and labor costs. During the
year ended December 31, 2012, the Company adjusted the reserve for additional
warranty claims arising from GenDrive component quality issues that were
identified during the year. These were isolated quality issues that were
identified in GenDrive units that are currently being used at customer
sites. These units are in the process of being retro-fitted with
replacement components that will improve the reliability of the GenDrive
products for customers.
The
following table summarizes product warranty activity recorded during the year
ended December 31, 2013 and 2012:
|
|
|
|
|
|
|
December 31, 2013
|
|
December 31, 2012
|
|
|
|
|
Beginning balance - January 1
|
$
|
2,671,409
|
|
$
|
1,210,909
|
Additions for current year deliveries
|
970,775
|
|
996,439
|
Reductions for payments made
|
(2,034,053)
|
|
(2,809,263)
|
Reserve Adjustment
|
-
|
|
3,273,324
|
Ending balance - December 31
|
$
|
1,608,131
|
|
$
|
2,671,409
|
|
|
|
|
F-28
17. Commitments and
Contingencies
Operating Leases
As of December 31, 2013 and 2012, the Company has
several non-cancelable operating leases, primarily for hydrogen infrastructure
and fork lift trucks that expire over the next five years. Minimum rent
payments under operating leases are recognized on a straight‑line basis
over the term of the lease.
Future minimum lease payments under non-cancelable
operating leases (with initial or remaining lease terms in excess of one year)
as of December 31, 2013 are:
Year ending December 31,
|
Operating leases
|
2014
|
$
|
463,652
|
2015
|
452,735
|
2016
|
451,011
|
2017
|
447,564
|
2018 and thereafter
|
959,455
|
Total future minimum lease payments
|
$
|
2,774,417
|
|
|
Rental expense and rental income for all operating
leases for the years ended December 31, 2013, and 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
Minimum rentals
|
|
$
|
769,000
|
|
$
|
764,000
|
|
Sublease rental income
|
|
(76,104)
|
|
(215,141)
|
|
|
|
$
|
692,896
|
|
$
|
548,859
|
Litigation
In May 2012, Soroof Trading Development Company Ltd., or Soroof,
filed two claims against the Company, GE Microgen, Inc., or GEM, and General
Electric Company, or GE, alleging breach of a distributor agreement and seeking
damages of $3 million. The Company, GEM and GE, are party to an agreement under
which Plug Power agreed to indemnify such parties for up to $1 million of
certain losses related to the Soroof distributor agreement. On September 24,
2008, GE made a claim for indemnification against the Company 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 the Company or for any
of the parties Plug Power has agreed to indemnify, the Company could suffer
financially as a result of the damages we would have to pay.
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 Company’s 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, 2013 and 2012, approximately
$0 and $11,000, respectively, have been recorded as accrued expenses in the
accompanying consolidated balance sheets related to the development
collaboration agreement.
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 customer’s financial condition.
F-29
At December 31, 2013, five customers comprise
approximately 78.3% of the total accounts receivable balance, with each
customer individually representing 30.8%, 26.9%, 10.2%, 5.8% and 4.6% of total
accounts receivable, respectively. At December 31, 2012, four
customers comprise approximately 82.2% of the total accounts receivable
balance, with each customer individually representing 63.1%, 7.7%, 6.3%, and
5.1% of total accounts receivable, respectively.
For the year ended December 31, 2013, contracts with
three customers comprised 33.2% of total consolidated revenues, with each
customer individually representing 11.6%, 11.2% and 10.4% of total consolidated
revenues, respectively. For the year ended December 31, 2012, contracts
with two customers comprised 43.1% of total consolidated revenues, with each
customer individually representing 27.7%, and 15.4% of total consolidated
revenues, respectively.
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.
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, which expires
on March 19, 2019. 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.
Amendment No. 2 to the Hydrogen Payment Agreement became effective December 1,
2010 and increased the monthly service charge to $27,297.
Pursuant to an agreement negotiated between Linde LLC,
(Linde), and the Company to supply hydrogen infrastructure and hydrogen to a
customer under a Power Purchase Agreement, the Company has an obligation to
purchase hydrogen, and pay a monthly service charge of $10,000 for hydrogen
infrastructure to Linde for the full term of the contract, which expires on
July 31, 2022. Under the terms of this agreement, the Company also has an
obligation for the maintenance of the hydrogen infrastructure for a monthly
service charge of $4,500.
18. Supplemental
Disclosures of Cash Flow Information
The
following represents required supplemental disclosures of cash flow information
and non-cash financing and investing activities which occurred during the years
ended December 31, 2013, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
|
|
|
Stock-based compensation accrual impact, net
|
$
|
(31,378)
|
|
$
|
(10,687)
|
|
$
|
395,257
|
Change in unrealized loss/gain on available for sale securities
|
-
|
|
-
|
|
18,502
|
Cash paid for interest
|
474,716
|
|
255,896
|
|
12,634
|
Transfer of investment in leased property to inventory
|
-
|
|
-
|
|
253,786
|
|
|
|
|
|
|
|
|
|
|
|
|
19.
Geographic Information
The United States was the physical location of all revenue
generated for the years ended December 31, 2013, 2012 and 2011.
Long-lived assets, representing the sum of net book
value of property, plant, and equipment, net book value of leased property
under capital leases, restricted cash, note receivable, and net book value of
intangible assets, based on physical location as of December 31, 2013 and
2012, are as follows:
F-30
|
|
|
|
|
|
|
2013
|
|
2012
|
United States
|
$
|
9,890,924
|
|
$
|
12,261,233
|
Canada
|
1,751,595
|
|
3,258,071
|
Total
|
$
|
11,642,519
|
|
$
|
15,519,304
|
|
|
|
|
|
|
|
|
20. Unaudited
Quarterly Financial Data (in thousands, except per share data)
|
Quarters ended
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
2013
|
|
2013
|
|
2013
|
|
2013
|
Product revenue
|
$
|
4,672
|
|
$
|
5,581
|
|
$
|
2,535
|
|
$
|
5,658
|
Service revenue
|
1,373
|
|
1,549
|
|
1,630
|
|
2,107
|
Research and development contract revenue
|
400
|
|
368
|
|
462
|
|
267
|
Net loss attributable to common shareholders
|
(8,576)
|
|
(9,338)
|
|
(15,948)
|
|
(28,929)
|
Loss per share:
|
|
|
|
|
|
|
|
Basic and Diluted
|
(0.18)
|
|
(0.14)
|
|
(0.19)
|
|
(0.28)
|
|
|
|
|
|
|
|
|
|
Quarters ended
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
2012
|
|
2012
|
|
2012
|
|
2012
|
Product revenue
|
$
|
6,572
|
|
$
|
6,244
|
|
$
|
3,418
|
|
$
|
4,558
|
Service revenue
|
665
|
|
957
|
|
855
|
|
1,138
|
Research and development contract revenue
|
515
|
|
458
|
|
502
|
|
226
|
Net loss attributable to common shareholders
|
(6,583)
|
|
(6,480)
|
|
(10,325)
|
|
(8,474)
|
Loss per share:
|
|
|
|
|
|
|
|
Basic and Diluted
|
(0.28)
|
|
(0.17)
|
|
(0.27)
|
|
(0.22)
|
|
|
|
|
|
|
|
|