Item 1 – Interim Financial Statements (Unaudited)
Plug Power Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
|
|
|
2014
|
|
2013
|
Assets
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
63,231,651
|
|
$
|
5,026,523
|
|
Accounts receivable, net
|
|
|
6,342,316
|
|
6,429,400
|
|
Inventory
|
|
|
11,943,724
|
|
10,406,320
|
|
Prepaid expenses and other current assets
|
|
2,796,505
|
|
1,850,859
|
|
|
Total current assets
|
|
|
84,314,196
|
|
23,713,102
|
Restricted cash
|
|
|
500,000
|
|
500,000
|
Property, plant, and equipment, net
|
|
|
5,235,504
|
|
5,277,667
|
Leased property under capital lease, net
|
|
|
2,324,191
|
|
2,453,312
|
Note receivable
|
|
|
494,480
|
|
509,945
|
Intangible assets, net
|
|
|
2,335,651
|
|
2,901,595
|
|
|
Total assets
|
|
|
$
|
95,204,022
|
|
$
|
35,355,621
|
Liabilities, Redeemable Preferred Stock, and Stockholders' Equity (Deficit)
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
2,838,445
|
|
$
|
3,094,385
|
|
Accrued expenses
|
|
|
2,249,776
|
|
3,068,774
|
|
Product warranty reserve
|
|
|
1,478,171
|
|
1,608,131
|
|
Deferred revenue
|
|
|
3,614,686
|
|
3,434,735
|
|
Obligations under capital lease
|
|
|
735,809
|
|
717,870
|
|
Other current liabilities
|
|
|
826,924
|
|
679,176
|
|
|
Total current liabilities
|
|
|
11,743,811
|
|
12,603,071
|
|
Obligations under capital lease
|
|
|
396,061
|
|
586,879
|
|
Deferred revenue
|
|
|
5,759,654
|
|
5,579,281
|
|
Common stock warrant liability
|
|
|
25,742,408
|
|
28,829,849
|
|
Finance obligation
|
|
|
2,476,430
|
|
2,492,330
|
|
Other liabilities
|
|
|
740,075
|
|
765,281
|
|
|
Total liabilities
|
|
|
46,858,439
|
|
50,856,691
|
Redeemable Preferred Stock
|
|
|
|
|
|
|
Series C redeemable convertible preferred stock, $0.01 par value per share
|
|
|
|
|
|
|
(aggregate involuntary liquidation preference $77,907,299) 10,431 shares authorized;
|
|
|
|
|
|
Issued and outstanding: 10,431 at March 31, 2014 and December 31, 2013
|
2,371,080
|
|
2,371,080
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
Common stock, $0.01 par value per share; 245,000,000 shares authorized;
|
|
|
|
|
|
Issued (including shares in treasury):
|
|
|
|
|
|
144,124,667 at March 31, 2014 and 106,356,558 at December 31, 2013
|
|
1,441,247
|
|
1,063,566
|
|
Additional paid-in capital
|
|
|
970,533,905
|
|
831,155,925
|
|
Accumulated other comprehensive income
|
|
897,807
|
|
897,807
|
|
Accumulated deficit
|
|
|
(925,346,074)
|
|
(849,437,066)
|
|
Less common stock in treasury:
|
|
|
|
|
|
|
165,906 shares at March 31, 2014 and December 31, 2013
|
|
(1,552,382)
|
|
(1,552,382)
|
|
|
Total stockholders' equity (deficit)
|
|
|
45,974,503
|
|
(17,872,150)
|
|
|
Total liabilities, redeemable preferred stock, and stockholders' equity (deficit)
|
$
|
95,204,022
|
|
$
|
35,355,621
|
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
Plug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2014
|
|
2013
|
|
Product revenue
|
$
|
3,162,327
|
|
$
|
4,671,337
|
|
Service revenue
|
2,065,715
|
|
1,373,352
|
|
Research and development contract revenue
|
346,399
|
|
400,418
|
|
Total revenue
|
5,574,441
|
|
6,445,107
|
|
Cost of product revenue
|
3,444,964
|
|
5,088,848
|
|
Cost of service revenue
|
4,018,382
|
|
2,909,344
|
|
Cost of research and development contract revenue
|
417,917
|
|
620,096
|
|
Research and development expense
|
1,253,396
|
|
750,484
|
|
Selling, general and administrative expenses
|
3,252,009
|
|
2,881,275
|
|
Amortization of intangible assets
|
565,944
|
|
573,730
|
|
|
Operating loss
|
(7,378,171)
|
|
(6,378,670)
|
|
Interest and other income
|
45,009
|
|
16,212
|
|
Change in fair value of common stock warrant liability
|
(68,433,468)
|
|
(2,131,314)
|
|
Interest and other expense
|
(90,469)
|
|
(82,607)
|
|
|
Net loss attributable to the Company
|
$
|
(75,857,099)
|
|
$
|
(8,576,379)
|
|
Preferred stock dividends declared
|
(51,909)
|
|
-
|
|
|
Net loss attributable to common shareholders
|
$
|
(75,909,008)
|
|
$
|
(8,576,379)
|
|
Loss per share:
|
|
|
|
|
|
Basic and diluted
|
$
|
(0.57)
|
|
$
|
(0.18)
|
|
Weighted average number of common shares outstanding
|
133,750,522
|
|
48,566,794
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
Plug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive
Loss
(Unaudited)
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2014
|
|
2013
|
Net loss attributable to the Company
|
$
|
(75,857,099)
|
|
$
|
(8,576,379)
|
Other comprehensive loss:
|
|
|
|
|
Foreign currency translation loss
|
-
|
|
(38,655)
|
Comprehensive Loss
|
$
|
(75,857,099)
|
|
$
|
(8,615,034)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
P
lug Power Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
Three months ended
|
|
|
|
|
March 31,
|
|
|
|
|
2014
|
|
2013
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
Net loss attributable to the Company
|
$
|
(75,857,099)
|
|
$
|
(8,576,379)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
Depreciation of property, plant and equipment, and investment in leased property
|
457,735
|
|
544,798
|
|
|
Amortization of intangible assets
|
565,944
|
|
573,730
|
|
|
Stock-based compensation
|
648,750
|
|
505,685
|
|
|
Change in fair value of common stock warrant liability
|
68,433,468
|
|
2,131,314
|
|
|
Changes in operating assets and liabilities that provide (use) cash:
|
|
|
|
|
|
Accounts receivable
|
87,084
|
|
(1,555,264)
|
|
|
Inventory
|
(1,537,404)
|
|
(1,540,017)
|
|
|
Prepaid expenses and other current assets
|
(945,646)
|
|
91,624
|
|
|
Note receivable
|
15,465
|
|
15,024
|
|
|
Accounts payable, accrued expenses, product warranty reserve and other liabilities
|
(1,115,631)
|
|
642,949
|
|
|
Deferred revenue
|
360,324
|
|
1,233,120
|
|
|
|
Net cash used in operating activities
|
(8,887,010)
|
|
(5,933,416)
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
Purchase of property, plant and equipment
|
(286,451)
|
|
(1,909)
|
|
|
|
Net cash used in investing activities
|
(286,451)
|
|
(1,909)
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
Restricted cash
|
-
|
|
(750,000)
|
|
|
Proceeds from exercise of warrants
|
18,311,658
|
|
435,000
|
|
|
Proceeds from issuance of common stock and warrants
|
52,400,005
|
|
3,257,117
|
|
|
Stock issuance costs
|
(3,120,762)
|
|
(943,557)
|
|
|
Repayment of borrowings under line of credit
|
-
|
|
(3,380,835)
|
|
|
Proceeds from finance obligation
|
-
|
|
2,600,000
|
|
|
Principal payments on obligations under capital lease and finance obligation
|
(187,106)
|
|
(158,049)
|
|
|
|
Net cash provided by financing activities
|
67,403,795
|
|
1,059,676
|
|
|
Effect of exchange rate changes on cash
|
(25,206)
|
|
(1,572)
|
|
|
Increase (decrease) in cash and cash equivalents
|
58,205,128
|
|
(4,877,221)
|
|
|
Cash and cash equivalents, beginning of period
|
5,026,523
|
|
9,380,059
|
|
|
Cash and cash equivalents, end of period
|
$
|
63,231,651
|
|
$
|
4,502,838
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
1. Nature of Operations
Description of Business
Plug Power Inc., or the Company, is a leading provider
of alternative energy technology focused on the design, development,
commercialization and manufacture of fuel cell systems for the industrial
off-road (forklift or material handling) market.
We are focused on proton exchange membrane, or PEM,
fuel cell and fuel processing technologies and fuel cell/battery hybrid
technologies, from which multiple products are available. A fuel cell is an
electrochemical device that combines hydrogen and oxygen to produce electricity
and heat without combustion. Hydrogen is derived from hydrocarbon fuels such as
liquid petroleum gas, 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, S.A.S., 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, 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 attributable to common
shareholders. We incurred a net loss attributable to common shareholders of
$75.9 million for the three months ended March 31, 2014, and 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 we have an
accumulated deficit of $925.3 million at March 31, 2014. 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.
Net cash used in operating activities for the three
months ended March 31, 2014 was $8.9 million. Additionally, on March 31, 2014,
we had cash and cash equivalents of $63.2 million and net working capital of
$72.6 million. This compares to $5.0 million and $11.1 million, respectively,
at December 31, 2013.
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. The total net proceeds to Plug Power from
the January 2014 public offering were $27,970,256.
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. The total net proceeds to Plug
Power from the March 2014 public offering were $21,308,987.
On April 30, 2014, we completed an underwritten public
offering of 22,600,000 shares of common stock. The shares were sold at $5.50
per share for gross proceeds of approximately $124.3 million. Net proceeds,
after underwriting discounts and commissions and other estimated fees and
expenses payable by Plug Power were approximately $116.3 million.
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. Basis of Presentation
Principles of Consolidation:
The accompanying unaudited condensed interim
consolidated financial statements include the financial statements of the
Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation. It is the
Company’s policy to reclassify prior period consolidated financial
statements to conform to current period presentation.
Interim Financial Statements
:
The
accompanying unaudited condensed interim consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). In the opinion of management, all adjustments, which
consist solely of normal recurring adjustments, necessary to present fairly, in
accordance with U.S. generally accepted accounting principles (GAAP), the
financial position, results of operations and cash flows for all periods
presented, have been made. The results of operations for the interim periods
presented are not necessarily indicative of the results that may be expected
for the full year.
Certain information and footnote disclosures normally
included in annual consolidated financial statements prepared in accordance
with U.S. generally accepted accounting principles have been condensed or
omitted. These unaudited condensed consolidated financial statements should be
read in conjunction with the Company’s audited consolidated financial
statements and notes thereto included in the Company’s Annual Report on
Form 10-K, as amended by the Company’s Annual Report on Form 10-K/A,
filed for the fiscal year ended December 31, 2013.
The information presented in the accompanying
condensed consolidated balance sheet as of December 31, 2013 has been
derived from the Company’s December 31, 2013 audited consolidated
financial statements. All other information has been derived from the
Company’s unaudited condensed consolidated financial statements as of
March 31, 2014 and for the three months ended March 31, 2014 and 2013.
Use of Management Estimates:
The
unaudited condensed interim consolidated financial statements have been
prepared in conformity with GAAP, which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant Accounting Policies:
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 Company’s 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
Company’s 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.
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 March 31, 2014 and December 31, 2013, the Company
had unbilled amounts from product and service revenues in the amount of
approximately $223,000 and $184,000, respectively, which is included in other
current assets in the accompanying condensed consolidated balance sheets. At March
31, 2014 and December 31, 2013, the Company had deferred product and service
revenues in the amount of $9.4 million and $9.0 million, respectively.
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.
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, S.A.S. (HyPulsion or 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.
The Company and the JV have also entered into an engineering
service agreement under which, among other things, the Company provides the JV
with engineering and technical services. The JV made payments to the Company of
$1,033,993 and $1,545,402 for the three months ended March 31, 2014 and March
31, 2013, respectively, for engineering and technical services, as well as for
the purchase of fuel cell systems and parts.
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 March 31, 2014, the
Company had a zero basis for its investment in the JV.
3. Inventory
Inventory as of March 31, 2014 and
December 31, 2013 consisted of the following:
|
March 31, 2014
|
|
December 31, 2013
|
Raw materials and supplies
|
$
|
9,780,483
|
|
$
|
8,881,596
|
Work-in-process
|
879,319
|
|
219,327
|
Finished goods
|
1,283,922
|
|
1,305,397
|
|
$
|
11,943,724
|
|
$
|
10,406,320
|
|
|
|
|
|
|
|
|
4. Stockholders’ Equity
Changes
in stockholders’ equity for the three months ended March 31, 2014 are as
follows:
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
Stockholders'
|
|
|
|
|
Common Stock
|
|
Additional
|
Comprehensive
|
Treasury Stock
|
Accumulated
|
(Deficit)
|
|
|
Shares
|
|
Amount
|
|
in-Capital
|
|
Income
|
|
Shares
|
Amount
|
Deficit
|
Equity
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the Company
|
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
(75,857,099)
|
(75,857,099)
|
Stock based compensation
|
|
|
56,944
|
|
570
|
|
591,371
|
|
-
|
|
-
|
|
-
|
-
|
591,941
|
Public Offering, common stock, net (1)
|
|
13,902,440
|
|
139,024
|
|
37,366,979
|
|
-
|
|
-
|
|
-
|
-
|
37,506,003
|
Exercise of warrants (2)
|
|
23,800,989
|
|
238,010
|
|
101,367,798
|
|
-
|
|
-
|
|
-
|
-
|
101,605,808
|
Stock dividend
|
|
|
|
7,736
|
|
77
|
|
51,832
|
|
|
|
|
|
|
(51,909)
|
-
|
March 31, 2014
|
|
144,124,667
|
|
$
|
1,441,247
|
|
$
|
970,533,905
|
|
$
|
897,807
|
|
165,906
|
|
$
|
(1,552,382)
|
$
|
(925,346,074)
|
$
|
45,974,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
As a result of the January and March
2014 public offerings discussed further below, the Company received net
proceeds of $49,279,243, of which $11,773,240 in value was ascribed to the
warrants issued in the January 2014 public offering. The associated warrants
have been separately valued and classified as a liability on the accompanying
consolidated balance sheet.
|
|
|
(2)
|
Pursuant to the exercise of warrants,
additional paid-in capital was increased by $18,073,649 from the issuance of 23,800,989
shares of common stock. Additionally, paid-in capital was increased by $83,294,149
and warrant liability was reduced by $83,294,149 (the fair value of the
warrants on the exercise date).
|
|
|
First Quarter 2014 Public Offerings
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. The total net proceeds to Plug Power from
the January 2014 public offering were $27,970,256.
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. The total net proceeds to Plug
Power from the March 2014 public offering were $21,308,987.
First Quarter 2013 Public Offerings
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 to Plug Power from the February 2013 public offerings were $2,313,560.
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 18,846,400 warrants at $0.15 and 1,891,000
warrants at $0.18 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 $0.234520 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”).
6.
Earnings Per Share
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:
|
|
Three Months Ended
|
|
|
March 31, 2014
|
|
March 31, 2013
|
Numerator:
|
|
|
|
|
Net loss attributable to common shareholders
|
$
|
(75,909,008)
|
|
$
|
(8,576,379)
|
Denominator:
|
|
|
|
|
Weighted average number of common shares
|
|
|
|
|
outstanding
|
133,750,522
|
|
48,566,794
|
The potential dilutive common shares are summarized as
follows:
|
At March 31,
|
|
2014
|
|
2013
|
Stock options outstanding
|
|
4,785,485
|
|
1,986,255
|
Restricted stock outstanding
|
|
650,002
|
|
-
|
Common stock warrants (1)
|
|
4,250,490
|
|
39,662,889
|
Preferred stock (2)
|
|
11,065,897
|
|
-
|
Number of dilutive potential common shares
|
|
20,751,874
|
|
41,649,144
|
|
|
|
|
|
|
(1)
|
In
May 2011, the Company issued 7,128,563 warrants as part of an underwritten
public offering. As a result of additional public offerings, and pursuant to
the effect of the anti-dilution provisions of these warrants, the number of
warrants increased to 22,995,365. Of the warrants issued in May 2011,
22,744,975 have been exercised as of March 31, 2014. In February 2013,
the Company issued 23,637,500 warrants as part of an underwritten public
offering. Of the warrants issued in February 2013, 23,637,400 were exercised
as of March 31, 2014. In January 2014, the Company issued 4,000,000
warrants as part of an underwritten public offering. Of the warrants
issued in January 2014, none of have been exercised as of March 31,
2014.
|
(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.
|
7. Intangible Assets
The gross carrying amount and accumulated amortization
of the Company’s acquired identifiable intangible assets as of March 31,
2014 are as follows:
|
|
Weighted Average
|
|
Gross Carrying
|
|
Accumulated
|
|
|
|
|
Amortization Period
|
|
Amount
|
|
Amortization
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Acquired Technology
|
8 years
|
|
|
$
|
17,036,835
|
|
$
|
(14,836,601)
|
|
$
|
2,200,234
|
|
Customer Relationships
|
8 years
|
|
|
1,000,000
|
|
(864,583)
|
|
135,417
|
|
|
|
|
|
$
|
18,036,835
|
|
$
|
(15,701,184)
|
|
$
|
2,335,651
|
|
|
|
|
|
|
|
|
|
|
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
|
8. Property, Plant and Equipment
Property,
plant and equipment at March 31, 2014 and December 31, 2013 consist of the
following:
|
March 31,
|
|
December 31,
|
|
2014
|
|
2013
|
Land
|
$
|
90,000
|
|
$
|
90,000
|
Buildings
|
15,332,232
|
|
15,332,232
|
Building improvements
|
4,923,827
|
|
4,923,827
|
Software, machinery and equipment
|
10,944,687
|
|
10,658,236
|
|
31,290,746
|
|
31,004,295
|
Less accumulated depreciation
|
(26,055,242)
|
|
(25,726,628)
|
Property, plant, and equipment, net
|
$
|
5,235,504
|
|
$
|
5,277,667
|
|
|
|
|
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.
Leased property under capital lease at March 31, 2014
and December 31, 2013 consist of the following:
|
March 31,
|
|
December 31,
|
|
2014
|
|
2013
|
Leased property under capital lease
|
$
|
3,098,921
|
|
$
|
3,098,921
|
Less accumulated depreciation
|
(774,730)
|
|
(645,609)
|
Leased property under capital lease, net
|
$
|
2,324,191
|
|
$
|
2,453,312
|
|
|
|
|
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 $2,476,430 and $61,048
have been recorded as finance obligation and current portion finance obligation
(other current liabilities), respectively, in the condensed consolidated
balance sheet as of March 31, 2014.
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. Additionally, 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 March 31, 2014, $500,000 has been
recorded to restricted cash in the condensed consolidated balance sheet.
11. Income Taxes
Under Internal Revenue Code (IRC) Section 382, the use
of loss carryforwards may be limited if a change in ownership of a company
occurs. If it is determined that, due to transactions involving the
Company’s shares owned by its 5 percent or greater shareholders, a change
of ownership has occurred under the provisions of IRC Section 382, the
Company's federal and state net operating loss carryforwards could be subject
to significant IRC Section 382 limitations.
Based upon 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 generated through December 31, 2013 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 at March 31, 2014.
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. These recognized built
in losses will translate into unfavorable book to tax add backs in the
Company's 2014 to 2018 U.S. corporate income tax returns of approximately $28.0
million that resulted in a gross deferred tax liability of $10.7 million at
March 31, 2014 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.
The Company's remaining 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 tax assets
may not be realized.
12. Fair Value
The Company complies with the provisions of FASB ASC
No. 820, Fair Value Measurements and Disclosures
(ASC 820), in measuring
fair value and in disclosing fair value measurements. The aforementioned
codification guidance defines fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements required under
other accounting pronouncements. In addition, the guidance 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. The guidance 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.
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) are also
outlined within the guidance. Also, the codification guidance outlines a fair
value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels. The following is a brief
description of those three levels:
Level
1 Inputs – Level 1 inputs are unadjusted quoted prices in active markets
for assets or liabilities identical to those to be reported at fair value. An
active market is a market in which transactions occur for the item to be fair
valued with sufficient frequency and volume to provide pricing information on
an ongoing basis.
Level
2 Inputs – Level 2 inputs are inputs other than quoted prices included
within Level 1. Level 2 inputs are observable either directly or indirectly.
These inputs include: (a) Quoted prices for similar assets or liabilities
in active markets; (b) Quoted prices for identical or similar assets or
liabilities in markets that are not active, such as when there are few
transactions for the asset or liability, the prices are not current, price
quotations vary substantially over time or in which little information is
released publicly; (c) Inputs other than quoted prices that are observable
for the asset or liability; and (d) Inputs that are derived principally
from or corroborated by observable market data by correlation or other means.
Level
3 Inputs – Level 3 inputs are unobservable inputs for an asset or
liability. These inputs should be used to determine fair value only when
observable inputs are not available. Unobservable inputs should be developed
based on the best information available in the circumstances, which might
include internally generated data and assumptions being used to price the asset
or liability.
When determining the fair value measurements for
assets or liabilities required or permitted to be recorded at and/or marked to
fair value, the Company considers the principal or most advantageous market in
which it would transact and considers assumptions that market participants
would use when pricing the asset or liability. When possible, the Company looks
to active and observable markets to price identical assets. When identical
assets are not traded in active markets, the Company looks to market observable
data for similar assets.
The following tables summarize the basis used to
measure certain financial assets and liabilities at fair value on a recurring
basis in the condensed consolidated balance sheets:
|
|
|
|
|
Quoted Prices in Active
|
Significant
|
|
Significant
|
|
|
|
|
|
Markets for Identical
|
|
Other Observable
|
|
Other Unobservable
|
|
|
|
|
|
Items
|
|
Inputs
|
|
Inputs
|
Balance at March 31, 2014
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
Common stock warrant liability
|
|
$
|
25,742,408
|
|
$
|
-
|
|
$
|
-
|
|
$
|
25,742,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
The following tables show reconciliations of the
beginning and ending balances for liabilities measured at fair value on a
recurring basis using significant unobservable inputs (i.e. Level 3) for the three
months ended March 31, 2014:
|
|
Fair Value
|
|
|
Measurement Using
|
|
|
Significant
|
Common stock warrant liability
|
|
Unobservable Inputs
|
|
|
|
Beginning of period - January 1, 2014
|
|
$
|
28,829,849
|
Change in fair value of common stock warrants
|
|
68,433,468
|
Issuance of common stock warrants
|
|
11,773,240
|
Exercise of common stock warrants
|
|
(83,294,149)
|
Fair value of common stock warrant liability at March 31, 2014
|
|
$
|
25,742,408
|
|
|
|
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, 2013, and March 31, 2014 was 0.75%,
0.52%, and 0.61% respectively. The volatility of the market price of the
Company’s common stock for May 31, 2011, December 31, 2013, and March 31,
2014 was 94.4%, 119.3%, and 144.8%, respectively. The expected average term of
the warrant used for May 31, 2011, December 31, 2013 and March 31, 2014 was 2.5
years, 2.4 years, and 2.2 years, respectively.
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), December 31, 2013, and March 31, 2014
was 0.85%, 1.14%, and 1.23%, respectively. The volatility of the market price
of the Company’s common stock for February 20, 2013, December 31, 2013,
and March 31, 2014 was 102.0%, 99.0%, and 121.4%, respectively. The expected
average term of the warrant used for February 20, 2013, December 31, 2013, and
March 31, 2014 was 5.0 years, 4.1 years, and 3.9 years, respectively.
The Company used the following assumptions for its
common stock warrants issued on January 15, 2014. The risk-free interest rate
for January 15, 2014 (issuance date) and March 31, 2014 was 1.65% and 1.64%,
respectively. The volatility of the market price of the Company’s common
stock for January 15, 2014 and March 31, 2014 was 107.6% and 113.5%, respectively.
The expected average term of the warrant used for January 15, 2014 and March
31, 2014 were 5.0 years and 4.8 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.
13. Commitments and Contingencies
In September 2011, the Company signed a letter of
credit with Silicon Valley Bank in the amount of $525,000. The standby letter
of credit is required by an agreement negotiated between Air Products and
Chemicals, Inc. and the Company to supply hydrogen infrastructure and hydrogen
to Central Grocers at their distribution center. There are no collateral
requirements associated with this letter of credit.
Customer
Concentration
Concentrations of credit risk with respect to
receivables exist due to the limited number of select customers that the
Company has initial commercial sales arrangements with and with government
agencies. To mitigate credit risk, the Company performs appropriate evaluation
of a prospective customer’s financial condition.
At March 31, 2014, five customers comprise
approximately 74.0% of the total accounts receivable balance, with each
customer individually representing 27.3%, 21.5%, 14.8%, 5.3% and 5.1% of total
accounts receivable, respectively. 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.
For the three months ended March 31, 2014,
contracts with two customers comprise approximately 31.6% of total consolidated
revenues, with each customer representing 21.1% and 10.5%, respectively.
For the three months ended March 31, 2013, contracts with two customers
comprise approximately 58.3% of total consolidated revenues, with each customer
representing 42.7% and 15.6%, respectively.
Product
Warranty
The
contracts we entered into generally provide a one to two-year product warranty
to customers from date of installation. We currently estimate the costs of
satisfying warranty claims based on an analysis of past experience and provide
for future claims in the period the revenue is recognized. Factors that
affect our warranty liability include the number of installed units, estimated
material costs, estimated travel, and labor costs.
The following table summarizes product warranty activity
recorded during the three months ended March 31, 2014 and 2013:
|
March 31, 2014
|
|
March 31, 2013
|
Beginning balance - January 1
|
$
|
1,608,131
|
|
$
|
2,671,409
|
Additions for current period deliveries
|
227,431
|
|
167,362
|
Reductions for payments made
|
(357,391)
|
|
(965,878)
|
Ending balance - March 31
|
$
|
1,478,171
|
|
$
|
1,872,893
|
|
|
|
|
14. Supplemental Disclosures of Cash Flows Information
The following represents required supplemental
disclosures of cash flows information and non-cash financing and investing
activities which occurred during the three months ended March 31, 2014 and 2013:
|
March 31, 2014
|
|
March 31, 2013
|
Cash paid for interest
|
$
|
115,130
|
|
$
|
82,607
|
15.
Subsequent Events
The Company has evaluated subsequent events and
transactions through the date of this filing for potential recognition or
disclosure in the financial statements and has noted no other subsequent events
requiring recognition or disclosure other than as stated below.
On April 2, 2014, we
and
our wholly owned subsidiary, Emergent Power Inc., or Emergent Power, entered
into an asset purchase agreement with ReliOn, Inc., (ReliOn), pursuant to which
Emergent Power
acquired substantially all of the assets of ReliOn,
including patents, technology and other intangible assets, and
equipment and other tangible assets. ReliOn is
a developer of hydrogen fuel
cell stack technology based in Spokane, Washington. As consideration, we issued
530,504 shares of our common stock
,
and assumed certain
specified liabilities of ReliOn. The
530,504 shares were
valued at $4,000,000. In connection with the ReliOn Acquisition, Emergent Power
and Cummins Inc. entered into a License Agreement pursuant to which Emergent
Power granted to Cummins Inc. a non-exclusive, world-wide, royalty-free license
to a portfolio of patents acquired as part of the ReliOn Acquisition that
relate generally to fuel cell systems.
On April 21, 2014, we signed a non-binding memorandum
of understanding (MOU) with Hyundai Hysco Co. Ltd., or Hyundai, to create a
joint venture partnership to develop, manufacture and sell hydrogen fuel cell
products and stacks for applications in countries throughout Asia using
Hyundai’s advanced stack and plate technology. The MOU provides that the
parties intend to finalize the joint venture by July 31, 2014.
On April 30, 2014, we completed an underwritten public
offering of 22,600,000 shares of common stock. The shares were sold at $5.50
per share for gross proceeds of approximately $124.3 million. Net proceeds,
after underwriting discounts and commissions and other estimated fees and expenses
payable by Plug Power were approximately $116.3 million.
Item 2 –
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction
with our accompanying unaudited condensed consolidated financial statements and
notes thereto included within this report, and our audited consolidated
financial statements and notes thereto included in our Annual Report on Form
10-K, as amended by our Annual Report on Form 10-K/A, filed for the fiscal year
ended December 31, 2013. In addition to historical information, this Form
10-Q and the following discussion contain statements that are not historical
facts and are considered forward-looking within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act. These forward-looking
statements contain projections of our future results of operations or of our
financial position or state other forward-looking information. In some cases
you can identify these statements by forward-looking words such as
“anticipate,” “believe,” “could,”
“continue,” “estimate,” “expect,” “intend,”
“may,” “should,” “will,”
“would,” “plan,” “projected” or the
negative of such words or other similar words or phrases. We believe that it is
important to communicate our future expectations to our investors. However,
there may be events in the future that we are not able to accurately predict or
control and that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements. Investors are
cautioned not to
unduly
rely on forward-looking statements
because they involve risks and uncertainties, and actual results may differ
materially from those discussed as a result of various factors, including, but
not limited to: the risk that we continue to incur losses and might never
achieve or maintain profitability, the risk that we will need to raise
additional capital to fund our operations and such capital may not be available
to us; the risk that our lack of extensive experience in manufacturing and
marketing products may impact our ability to manufacture and market products on
a profitable and large-scale commercial basis; the risk that unit orders will
not ship, be installed and/or converted to revenue, in whole or in part; the
risk that a loss of one or more of our major customers could result in a material
adverse effect on our financial condition; the risk that a sale of a
significant number of shares of stock could depress the market price of our
common stock; the risk that negative publicity related to our business or stock
could result in a negative impact on our stock value and profitability; the
risk of potential losses related to any product liability claims and contract
disputes; the risk of loss related to an inability to maintain an effective
system of internal controls or key personnel; risks related to the use of
flammable fuels in our products; the risk that pending orders may not convert
to purchase orders, in whole or in part; the cost and timing of developing,
marketing and selling our products and our ability to raise the necessary capital
to fund such costs; the ability to achieve the forecasted gross margin on the
sale of our products; the risk that our actual net cash used for operating
expenses may exceed the projected net cash for operating expenses; the cost and
availability of fuel and fueling infrastructures for our products; market
acceptance of our products, including GenDrive systems; the volatility of our
stock price; our ability to establish and maintain relationships with third
parties with respect to product development, manufacturing, distribution and
servicing and the supply of key product components; the cost and availability
of components and parts for our products; our ability to develop commercially
viable products; our ability to reduce product and manufacturing costs; our
ability to successfully expand our product lines; our ability to successfully
expand internationally; our ability to improve system reliability for our
GenDrive systems; competitive factors, such as price competition and
competition from other traditional and alternative energy companies; our
ability to protect our intellectual property; the cost of complying with
current and future federal, state and international governmental regulations;
risks associated with potential future acquisitions; and other risks and
uncertainties discussed under Item IA—Risk Factors in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2013, as filed on March 31,
2014. Readers should not place undue reliance on our forward-looking
statements. These forward-looking statements speak only as of the date on which
the statements were made and are not guarantees of future performance. Except
as may be required by applicable law, we do not undertake or intend to update
any forward-looking statements after the date of this Form 10-Q.
Overview
Plug Power Inc., or the Company, is a leading provider
of alternative energy technology focused on the design, development,
commercialization and manufacture of fuel cell systems for the industrial
off-road (forklift or material handling) market.
We are focused on proton exchange membrane, or PEM,
fuel cell and fuel processing technologies and fuel cell/battery hybrid
technologies, from which multiple products are available. A fuel cell is an
electrochemical device that combines hydrogen and oxygen to produce electricity
and heat without combustion. Hydrogen is derived from hydrocarbon fuels such as
liquid petroleum gas, or LPG, natural gas, propane, methanol, ethanol, gasoline
or biofuels. Hydrogen can also be obtained from the electrolysis of water. Hydrogen
can be purchased directly from industrial gas providers or can be produced
on-site at consumer locations.
We concentrate our efforts on
developing, manufacturing and selling our hydrogen-fueled PEM GenDrive
®
products on commercial terms for industrial off-road (forklift or material
handling) applications, with a focus on multi-shift high volume manufacturing
and high throughput distribution sites.
Recent Developments
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. The total net proceeds to Plug Power from
the January 2014 public offering were $27,970,256.
In February 2014, we
received a multiple site purchase order from Wal-Mart Stores East, LP, or
Walmart, to roll out our hydrogen fuel cell solution to power electric forklift
truck fleets in six distribution centers in North America. The purchase order
included over 1,700 GenDrive fuel cell units to be deployed over the next two
years, GenFuel infrastructure construction and hydrogen fuel supply, and a
six-year GenCare service contract for each site. This agreement may be
terminated by Walmart at its option by written notice to us, with certain amounts
due from Walmart depending on the date of termination in respect of the
commissioning process at each site.
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. The total net proceeds to Plug
Power from the March 2014 public offering were $21,308,987.
On April 2, 2014, we acquired substantially all of the
assets of ReliOn, a developer of hydrogen fuel cell stack technology based in
Spokane, Washington. As consideration for the Acquisition, we issued
530,504 shares of our common stock and assumed certain
specified liabilities of ReliOn. The Shares were valued at $4,000,000 based on
the $7.54 closing sale price of our common stock on the Nasdaq
Capital Market on April 1, 2014.
On April 21, 2014, we signed a
non-binding memorandum of understanding (MOU) with Hyundai Hysco Co. Ltd., or
Hyundai, to create a joint venture partnership to develop, manufacture and sell
hydrogen fuel cell products and stacks for applications in countries throughout
Asia using Hyundai’s advanced stack and plate technology. The MOU
provides that the parties intend to finalize the joint venture by July 31,
2014.
On April 30, 2014, we completed an
underwritten public offering of 22,600,000 shares of common stock. The
shares were sold at $5.50 per share for gross proceeds of approximately $124.3
million. Net proceeds, after underwriting discounts and commissions and other
estimated fees and expenses payable by Plug Power were approximately $116.3
million.
Results
of Operations
Product revenue.
Product revenue generally includes revenue from the sale of our
GenDrive units.
Product revenue for the three months ended March 31,
2014 decreased $1.5 million or 32.3%, to $3.2 million from $4.7 million for the
three months ended March 31, 2013. This decrease is primarily related to fewer
shipments during 2014. In the product revenue category, there were 165 fuel
cell systems shipped for the three months ended March 31, 2014 as compared to 238
fuel cell systems shipped for the three months ended March 31, 2013.
Service revenue:
Service revenue generally includes revenue from our service and
maintenance contracts, hydrogen contracts, spare parts, and leased units.
Service revenue for the three months ended March 31,
2014 increased $0.7 million or 50.4%, to $2.1 million from $1.4 million for the
three months ended March 31, 2013. The increase is primarily related to an
increase in GenCare service contracts.
Research and development contract revenue.
Research and development contract revenue relates to both
cost reimbursement and fixed price research and development contracts
associated with the development of PEM fuel cell technology. Revenue from
time and material contracts is recognized on the basis of hours expended plus
other reimbursable contract costs incurred during the period. Revenue from fixed fee contracts is
recognized on the basis of percentage of completion. We expect to continue certain
research and development contract work that is related to our current product
development efforts.
Research and development contract revenue for the
three months ended March 31, 2014 decreased $0.1 million, or 13.5%, to $0.3
million from $0.4 million for the three months ended March 31, 2013. The
decrease is primarily related to a reduced effort on three funded projects that
are complete or near completion, partially offset by the start of two new
projects.
Cost of product revenue.
Cost of product revenue includes direct material and
labor costs, warranty cost, and an allocation of overhead costs that relate to
the manufacture of GenDrive products.
Cost of product revenue for the three months ended March
31, 2014 decreased $1.7 million, or 32.3%, to $3.4 million from $5.1 million
for the three months ended March 31, 2013. The decrease in the cost of product
revenue was primarily related to a decline in the number of units shipped in
2014.. In the cost of product revenue category, there were 165 fuel cell
systems shipped for the three months ended March 31, 2014 as compared to 238
fuel cell systems shipped for the three months ended March 31, 2013.
Cost of service revenue.
Cost of service revenue includes the labor and
material costs incurred for our product service and maintenance contracts, our
hydrogen contracts, replacement parts, rental units, and leased units. In
addition, cost of service revenue also includes allocation of overhead costs
that relate to the servicing of our GenDrive products.
Cost of service revenue for the three months ended March
31, 2014 increased $1.1 million, or 38.1%, to $4.0 million from $2.9 million
for the three months ended March 31, 2013. The increase in the cost of service
revenue was primarily related to a higher number of GenCare service contracts,
coupled with an increase in service personnel.
Cost of research and development contract revenue
. Cost of research and development contract revenue
includes costs associated with research and development contracts including:
cash and non-cash compensation and benefits for engineering and related support
staff, fees paid to outside suppliers for subcontracted components and
services, fees paid to consultants for services provided, materials and
supplies used and other directly allocable general overhead costs allocated to
specific research and development contracts.
Cost of research and development contract revenue for
the three months ended March 31, 2014 decreased $0.2 million, or 32.6% to $0.4
million from $0.6 million for the three months ended March 31, 2013. The
decrease is primarily related to a reduced effort on three funded projects that
are complete or near completion, partially offset by the start of two new
projects.
Research and development expense.
Research and development expense includes: materials
to build development and prototype units, cash and non-cash compensation and
benefits for the engineering and related staff, expenses for contract
engineers, fees paid to outside suppliers for subcontracted components and
services, fees paid to consultants for services provided, materials and supplies
consumed, facility related costs such as computer and network services, and
other general overhead costs associated with our research and development
activities.
Research and development expense for the three months
ended March 31, 2014 increased $0.5 million, or 67% to $1.3 million, from $0.8
million for the three months ended March 31, 2013. This increase was primarily related
to a decline in the amount of research and development costs that can be charged
to government and other projects.
Selling, general and administrative expenses.
Selling, general and administrative expenses includes
cash and non-cash compensation, benefits and related costs in support of our
general corporate functions, including general management, finance and
accounting, human resources, selling and marketing, information technology and
legal services.
Selling, general and administrative expenses for the three
months ended March 31, 2014 increased $0.4 million, or 12.9%, to $3.3 million
from $2.9 million for the three months ended March 31, 2013. This increase was primarily
related to an increase in personnel related expenses.
Amortization of intangible assets.
Amortization of intangible assets represents the
amortization associated with the Company’s acquired identifiable
intangible assets, including acquired technology and customer relationships,
which are being amortized over eight years.
Amortization of intangible assets decreased to
approximately $566,000 for the three months ended March 31, 2014, compared to
approximately $574,000 for the three months ended March 31, 2013. The
decrease is related to foreign currency fluctuations.
Interest and other income.
Interest and other income consists primarily of
interest earned on our cash, interest earned on our note receivable, interest
earned on our sale-leaseback transaction, rental income, and other income.
Interest and other income increased to approximately $45,000
for the three months ended March 31, 2014 from approximately $16,000 for the three
months ended March 31, 2013. This increase is primarily related to an increase in
rental income, coupled with an increase in interest earned on our
sale-leaseback transaction.
Change in fair value of common stock warrant
liability.
We account for common
stock warrants in accordance with applicable accounting guidance provided in
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.
Derivative warrant liabilities are valued using the Black-Scholes pricing model
at the date of initial issuance and each subsequent balance sheet date. Changes
in the fair value of the warrants are reflected in the consolidated statement
of operations as change in the fair value of common stock warrant liability.
The change in fair value of common stock warrant
liability for the three months ended March 31, 2014 resulted in an increase in
the associated warrant liability of $68.4 million as compared to an increase of
$2.1 million for the three months ended March 31, 2013. These variances are
primarily due to changes in the Company’s common stock share price, and
changes in volatility of our common stock, which are significant inputs to the
Black-Scholes valuation model.
Interest and other expense.
Interest and other expense consists of interest and
other expenses related to the Silicon Valley Bank (SVB) Loan and Security
Agreement, interest related to obligations under capital lease, interest
related to our finance obligation, and foreign currency exchange gain (loss).
Interest and other expense for the three
months ended March 31, 2014 was approximately $90,000, compared to
approximately $83,000 for the three months ended March 31, 2013. This increase
is primarily related to interest expense on obligations under capital lease,
and interest expense related to our finance obligation, offset by a decline in
interest and other expenses related to our SVB Loan and Security Agreement,
which expired on March 29, 2013.
Income taxes.
We did not report a benefit for federal and state income taxes in the
condensed consolidated financial statements for the three months ended March
31, 2014 and 2013 as the deferred tax asset generated from our net operating
loss has been offset by a full valuation allowance because it is more likely
than not that the tax benefits of the net operating loss carry forward will not
be realized. As needed, the Company also recognizes accrued interest and
penalties related to unrecognized tax benefits as a component of income tax
expense.
Liquidity and
Capital Resources
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 attributable to common
shareholders. We incurred a net loss attributable to common shareholders of
$75.9 million for the three months ended March 31, 2014, and 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
we have an accumulated deficit of $925.3 million at March 31, 2014.
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.
Net cash used in operating activities for the three
months ended March 31, 2014 was $8.9 million. Additionally, on March 31, 2014,
we had cash and cash equivalents of $63.2 million and net working capital of
$72.6 million. This compares to $5.0 million and $11.1 million, respectively,
at December 31, 2013.
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. The total net proceeds to Plug Power from
the January 2014 public offering were $27,970,256.
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. The total net proceeds to Plug
Power from the March 2014 public offering were $21,308,987.
On April 30, 2014, we completed an underwritten public
offering of 22,600,000 shares of common stock. The shares were sold at $5.50
per share for gross proceeds of approximately $124.3 million. Net proceeds, after
underwriting discounts and commissions and other estimated fees and expenses
payable by Plug Power were approximately $116.3 million.
We believe that our 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.
Several
key indicators of liquidity are summarized in the following table (in thousands
USD):
|
Three months
|
|
Three months
|
|
Year
|
|
ended or at
|
|
ended or at
|
|
ended or at
|
|
March 31, 2014
|
|
March 31, 2013
|
|
December 31, 2013
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
$
|
63,232
|
|
$
|
4,503
|
|
$
|
5,027
|
Working capital at end of period
|
72,570
|
|
7,875
|
|
11,110
|
Net loss attributable to common shareholders
|
75,909
|
|
8,576
|
|
62,791
|
Net cash used in operating activities
|
8,887
|
|
5,933
|
|
26,881
|
Purchase of property, plant and equipment
|
286
|
|
2
|
|
111
|
During the three months ended March 31, 2014, cash
used for operating activities was $8.9 million, consisting primarily of a net
loss attributable to the Company of $75.9 million, coupled with changes in
operating assets and liabilities of $3.1 million, offset by net non-cash
expenses in the amount of $70.1 million, including $1.0 million for amortization
and depreciation, $0.7 million for stock based compensation, and $68.4 million
for the change in fair value of common stock warrant liability. Cash used by
investing activities for the three months ended March 31, 2014 was $0.3
million, consisting of the purchase of property, plant, and equipment. Cash
provided by financing activities for the three months ended March 31, 2014 was
approximately $67.4 million consisting primarily of $18.3 million provided from
the exercise of warrants, and $49.3 million in net proceeds from public
offerings, offset by $0.2 million for principal payments on long-term debt.
Critical
Accounting Policies and Estimates
Management’s discussion and analysis of our
financial condition and results of operations are based upon our condensed
consolidated financial statements, which have been prepared in accordance with
U.S. generally accepted accounting principles. The preparation of these
condensed consolidated financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities at the
date of and during the reporting period. On an on-going basis, we evaluate our
estimates and judgments, including those related to bad debts, inventories,
intangible assets, equity investments, product warranty reserves, unbilled
revenue, common stock warrants, income taxes and contingencies. We base our
estimates and judgments on historical experience and on various other factors
and assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.
We refer to the policies and estimates set forth in
the section “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Critical Accounting Estimates”
of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2013, as well as a discussion of Significant Accounting
Policies included in Note 2, Basis of Presentation, of the unaudited condensed
consolidated financial statements in Part I, Item 1 of this Form 10-Q.
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.