UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED September 30, ~~2020~~2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 1-34392

PLUG POWER INC.

(Exact name of registrant as specified in its charter)



Delaware		22-3672377
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

968 ALBANY SHAKER ROAD, LATHAM, NEW YORK 12110

(Address of Principal Executive Offices, including Zip Code)

(518) 782-7700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:




Title of ~~each class~~Each Class	Trading Symbol(s)	Trading Symbol(s)	Name of ~~each exchange~~Each Exchange on ~~which registered~~ Which Registered
Common Stock, par value ~~$0.01~~ $.01 per share	~~PLUG~~	PLUG	The ~~Nasdaq~~NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐☒

Accelerated filer ☒☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule ~~12b 2~~12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock, par value of $0.01 per share, outstanding as of November ~~6, 2020~~8, 2021 was ~~415,598,288.~~576,355,807.

Table of Contents

INDEX to FORM 10-Q

	Page

PART I. FINANCIAL INFORMATION

Item 1 – Interim Condensed Consolidated Financial Statements (Unaudited)	3

Condensed Consolidated Balance Sheets	3

Condensed Consolidated Statements of Operations	4

Condensed Consolidated Statements of Comprehensive Loss	5

Condensed Consolidated Statements of Stockholders’ ~~(Deficit)~~ Equity	6

Condensed Consolidated Statements of Cash Flows	7

Notes to Interim Condensed Consolidated Financial Statements	8

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	4233

Item 3 – Quantitative and Qualitative Disclosures About Market Risk	6759

Item 4 – Controls and Procedures	6860

PART II. OTHER INFORMATION

Item 1 – Legal Proceedings	6861

Item 1A – Risk Factors	6963

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	6963

Item 3 – Defaults Upon Senior Securities	6963

Item 4 – Mine Safety Disclosures	6963

Item 5 – Other Information	6963

Item 6 – Exhibits	6964

Signatures	7165

Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1 — Interim Financial Statements (Unaudited)

Plug Power Inc. and Subsidiaries

Condensed Consolidated Balance ~~Sheet~~sSheets

(In thousands, except share and per share amounts)

(Unaudited)

September 30,

December 31,

2020

2019
Assets

Current assets:

Cash and cash equivalents

$
448,140

$
139,496
Restricted cash

55,704

54,813
Accounts receivable

113,133

25,448
Inventory

134,306

72,391
Prepaid expenses and other current assets

26,731

21,192
Total current assets

778,014

313,340

Restricted cash

227,528

175,191
Property, plant, and equipment, net of accumulated depreciation of $20,661 and $17,417, respectively

64,820

14,959
Leased property, net

309,475

244,740
Goodwill

71,962

8,842
Intangible assets, net

39,169

5,539
Other assets

9,661

8,573
Total assets

$
1,500,629

$
771,184

Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity

Current liabilities:

Accounts payable

$
58,793

$
40,376
Accrued expenses

32,031

14,213
Deferred revenue

17,226

11,691
Finance obligations

63,692

49,507
Current portion of long-term debt

74,829

26,461
Other current liabilities

17,280

8,543
Total current liabilities

263,851

150,791
Deferred revenue

29,648

23,369
Finance obligations

337,150

265,228
Convertible senior notes, net

105,088

110,246
Long-term debt

120,380

85,708
Other liabilities

27,068

13
Total liabilities

883,185

635,355

Redeemable preferred stock:

Series C redeemable convertible preferred stock, $0.01 par value per share (aggregate involuntary liquidation preference $16,664); 10,431 shares authorized; Issued and outstanding: 0 at September 30, 2020 and 2,620 at December 31, 2019

—

709
Series E redeemable preferred stock, $0.01 par value per share; Shares authorized: 35,000 at both September 30, 2020 and December 31, 2019; Issued and outstanding: 0 at September 30, 2020 and 500 at December 31, 2019

—

441
Stockholders’ equity:

Common stock, $0.01 par value per share; 750,000,000 shares authorized; Issued (including shares in treasury): 406,123,816 at September 30, 2020 and 318,637,560 at December 31, 2019

4,061

3,186
Additional paid-in capital

2,083,199

1,507,116
Accumulated other comprehensive income

1,958

1,400
Accumulated deficit

(1,431,340)

(1,345,807)
Less common stock in treasury: 15,926,068 at September 30, 2020 and 15,259,045 at December 31, 2019

(40,434)

(31,216)
Total stockholders’ equity

617,444

134,679
Total liabilities, redeemable preferred stock, and stockholders’ equity

$
1,500,629

$
771,184


	September 30,		December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	3,371,962	$	1,312,404
Restricted cash		90,688		64,041
Available-for-sale securities, at fair value (amortized cost $756,841 and allowance for credit losses of $0 at September 30, 2021)		752,766		—
Equity securities		147,649		—
Accounts receivable		132,370		43,041
Inventory		229,814		139,386
Prepaid expenses and other current assets		62,746		44,324
Total current assets		4,787,995		1,603,196

Restricted cash		390,542		257,839
Property, plant, and equipment, net		169,586		74,549
Right of use assets related to finance leases, net		22,039		5,724
Right of use assets related to operating leases, net		167,907		117,016
Equipment related to power purchase agreements and fuel delivered to customers, net		78,711		75,807
Goodwill		71,856		72,387
Intangible assets, net		37,644		39,251
Other assets		13,820		5,513
Total assets	$	5,740,100	$	2,251,282

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	68,378	$	50,198
Accrued expenses		52,645		46,083
Deferred revenue		35,463		23,275
Operating lease liabilities		23,284		14,314
Finance lease liabilities		2,758		903
Finance obligations		35,595		32,717
Current portion of long-term debt		23,491		25,389
Other current liabilities		28,329		29,487
Total current liabilities		269,943		222,366

Deferred revenue		63,402		32,944
Operating lease liabilities		139,400		99,624
Finance lease liabilities		17,027		4,493
Finance obligations		172,242		148,836
Convertible senior notes, net		192,320		85,640
Long-term debt		123,764		150,013
Other liabilities		55,113		40,447
Total liabilities		1,033,211		784,363

Stockholders’ equity:
Common stock, $0.01 par value per share; 1,500,000,000 shares authorized; Issued (including shares in treasury): 593,077,995 at September 30, 2021 and 473,977,469 at December 31, 2020		5,930		4,740
Additional paid-in capital		6,978,454		3,446,650
Accumulated other comprehensive (loss) gain		(2,338)		2,451
Accumulated deficit		(2,203,989)		(1,946,488)
Less common stock in treasury: 17,032,648 at September 30, 2021 and 15,926,068 at December 31, 2020		(71,168)		(40,434)
Total stockholders’ equity		4,706,889		1,466,919
Total liabilities and stockholders’ equity	$	5,740,100	$	2,251,282

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements

Table of Contents

Plug Power Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,


2020

2019

2020

2019
Net revenue:

Sales of fuel cell systems and related infrastructure

$
83,528

$
38,877

$
151,661

$
80,117
Services performed on fuel cell systems and related infrastructure

6,829

6,205

19,586

17,889
Power Purchase Agreements

6,704

6,595

19,854

19,114
Fuel delivered to customers

9,831

7,649

24,536

21,320
Other

97

135

235

135
Net revenue

106,989

59,461

215,872

138,575
Cost of revenue:

Sales of fuel cell systems and related infrastructure

68,509

24,990

115,929

50,440
Services performed on fuel cell systems and related infrastructure

7,074

6,461

21,746

18,802
Provision for loss contracts related to service

4,306

—

4,306

—
Power Purchase Agreements

14,087

10,353

42,034

28,064
Fuel delivered to customers

14,172

9,160

32,267

25,935
Other

131

150

275

150
Total cost of revenue

108,279

51,114

216,557

123,391

Gross (loss) profit

(1,290)

8,347

(685)

15,184

Operating expenses:

Research and development

11,964

8,028

32,133

24,334
Selling, general and administrative

14,277

10,400

46,948

33,351
Total operating expenses

26,241

18,428

79,081

57,685

Operating loss

(27,531)

(10,081)

(79,766)

(42,501)

Interest and other expense, net

(17,241)

(7,972)

(42,022)

(24,178)
Change in fair value of common stock warrant liability

—

427

—

7
Change in fair value of contingent consideration

(1,130)

—

(1,130)

—
Gain (loss) on extinguishment of debt

—

(518)

13,222

(518)

Loss before income taxes

$
(45,902)

$
(18,144)

$
(109,696)

$
(67,190)

Income tax benefit

6,523

—

24,182

—

Net loss attributable to the Company

$
(39,379)

$
(18,144)

$
(85,514)

$
(67,190)

Preferred stock dividends declared and accretion of discount

—

(13)

(19)

(39)
Net loss attributable to common stockholders

$
(39,379)

$
(18,157)

$
(85,533)

$
(67,229)
Net loss per share:

Basic and diluted

$
(0.11)

$
(0.08)

$
(0.26)

$
(0.29)
Weighted average number of common stock outstanding

371,010,544

236,759,521

330,949,265

229,519,323


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net revenue:
Sales of fuel cell systems and related infrastructure	$	115,999	$	83,662	$	262,049	$	151,876
Services performed on fuel cell systems and related infrastructure		6,677		6,829		18,397		19,586
Power Purchase Agreements		9,321		6,629		25,508		19,629
Fuel delivered to customers		11,556		9,831		33,804		24,536
Other		369		97		679		235
Net revenue		143,922		107,048		340,437		215,862
Cost of revenue:
Sales of fuel cell systems and related infrastructure		89,235		69,428		198,122		117,290
Services performed on fuel cell systems and related infrastructure		18,697		9,180		47,258		27,300
Provision for loss contracts related to service		7,462		25,147		15,641		25,948
Power Purchase Agreements		31,199		14,744		71,776		44,019
Fuel delivered to customers		27,857		17,002		90,331		39,332
Other		550		131		856		275
Total cost of revenue		175,000		135,632		423,984		254,164

Gross loss		(31,078)		(28,584)		(83,547)		(38,302)

Operating expenses:
Research and development		16,634		7,386		37,623		17,033
Selling, general and administrative		42,421		17,210		106,652		49,963
Change in fair value of contingent consideration		8,530		1,130		8,760		1,130
Total operating expenses		67,585		25,726		153,035		68,126

Operating loss		(98,663)		(54,310)		(236,582)		(106,428)

Interest, net		(5,361)		(17,248)		(27,895)		(42,407)
Other expense, net		(50)		(303)		(318)		(452)
Realized loss on investments, net		(254)		—		(236)		—
Change in fair value of equity securities		(607)		—		(284)		—
Gain on extinguishment of debt		—		—		—		13,222
Loss on equity method investments		(1,736)		—		(1,736)		—

Loss before income taxes	$	(106,671)	$	(71,861)	$	(267,051)	$	(136,065)

Income tax benefit		—		6,644		—		24,015

Net loss attributable to the Company	$	(106,671)	$	(65,217)	$	(267,051)	$	(112,050)

Preferred stock dividends declared		—		—		—		(26)

Net loss attributable to common stockholders	$	(106,671)	$	(65,217)	$	(267,051)	$	(112,076)

Net loss per share:
Basic and diluted	$	(0.19)	$	(0.18)	$	(0.48)	$	(0.34)

Weighted average number of common stock outstanding		574,520,806		371,010,544		551,894,779		330,949,265

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements

Table of Contents

Plug Power Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

Three months ended

Nine months ended

September 30,

September 30,


2020

2019

2020

2019

Net loss attributable to the Company

$
(39,379)

$
(18,144)

$
(85,514)

$
(67,190)
Other comprehensive gain (loss) - foreign currency translation adjustment

687

(531)

558

(655)
Comprehensive loss

$
(38,692)

$
(18,675)

$
(84,956)

$
(67,845)


	Three months ended				Nine months ended
	September 30,				September 30,
	2021		2020		2021		2020

Net loss attributable to the Company	$	(106,671)	$	(65,217)	$	(267,051)	$	(112,050)
Other comprehensive gain (loss):
Foreign currency translation (loss) gain		(172)		687		(714)		558
Change in net unrealized loss on available-for-sale securities		(2,200)		—		(4,075)		—
Comprehensive loss attributable to the Company	$	(109,043)	$	(64,530)	$	(271,840)	$	(111,492)

Preferred stock dividends declared		—		—		—		(26)
Comprehensive loss attributable to common stockholders	$	(109,043)	$	(64,530)	$	(271,840)	$	(111,518)

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements

Table of Contents

Plug Power Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ ~~(Deficit)~~ Equity

(In thousands, except share amounts)

(Unaudited)

Accumulated










Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Treasury Stock

Accumulated

Stockholders’


Shares

Amount

Capital

Income

Shares

Amount

Deficit

(Deficit) Equity
December 31, 2019

318,637,560

$
3,186

$
1,507,116

$
1,400

15,259,045

$
(31,216)

$
(1,345,807)

$
134,679
Net loss attributable to the Company

—

—

—

—

—

—

(85,514)

(85,514)
Other comprehensive loss

—

—

—

558

—

—

—

558
Stock-based compensation

402,003

4

9,254

—

—

—

—

9,258
Stock dividend

5,156

—

19

—

—

—

(19)

—
Public offerings, common stock, net

35,276,250

353

344,045

—

—

—

—

344,398
Stock option exercises

13,736,265

137

32,416

—

667,023

(9,218)

—

23,335
Equity component of 3.75% Convertible Senior Notes issued, net of issuance costs and income tax expense

—

—

108,347

—

—

—

—

108,347
Purchase of capped calls

—

—

(16,253)

—

—

—

—

(16,253)
Termination of capped calls

—

—

24,158

—

—

—

—

24,158
Provision for common stock warrants

—

—

32,529

—

—

—

—

32,529
Accretion of discount, preferred stock

—

—

(29)

—

—

—

—

(29)
Conversion of preferred stock

2,998,526

30

1,148

—

—

—

—

1,178
Conversion of 7.5% Convertible Senior Note

16,000,000

160

42,713

—

—

—

—

42,873
Repurchase of 5.5% Convertible Senior Notes, net of income tax benefit

9,409,591

94

(51,840)

—

—

—

—

(51,746)
Shares issued for acquisitions

9,658,465

97

49,576

—

—

—

—

49,673
September 30, 2020

406,123,816

$
4,061

$
2,083,199

$
1,958

15,926,068

$
(40,434)

$
(1,431,340)

$
617,444

December 31, 2018

234,160,661

$
2,342

$
1,289,714

$
1,584

15,002,663

$
(30,637)

$
(1,260,290)

$
2,713
Net loss attributable to the Company

—

—

—

—

—

—

(67,190)

(67,190)
Other comprehensive loss

—

—

—

(655)

—

—

—

(655)
Stock-based compensation

1,715,454

17

7,910

—

—

—

—

7,927
Stock dividend

15,067

—

39

—

—

—

(39)

—
Issuance of common stock, net

16,333,585

163

37,935

—

—

—

—

38,098
Stock option exercises

258,409

3

460

—

256,382

(579)

—

(116)
Provision for common stock warrants

—

—

10,244

—

—

—

—

10,244
Accretion of discount, preferred stock

—

—

(772)

—

—

—

—

(772)
Conversion of preferred stock

1,499,402

15

1,868

—

—

—

—

1,883
September 30, 2019

253,982,578

$
2,540

$
1,347,398

$
929

15,259,045

$
(31,216)

$
(1,327,519)

$
(7,868)


						Accumulated
				Additional		Other							Total
	Common Stock			Paid-in		Comprehensive		Treasury Stock			Accumulated		Stockholders’
	Shares	Amount		Capital		Income		Shares	Amount		Deficit		Equity
December 31, 2020	473,977,469	$	4,740	$	3,446,650	$	2,451	15,926,068	$	(40,434)	$	(1,946,488)	$	1,466,919
Net loss attributable to the Company	—		—		—		—	—		—		(267,051)		(267,051)
Cumulative impact of Accounting Standards Update 2020-06 adoption	—		—		(130,185)		—	—		—		9,550		(120,635)
Other comprehensive loss	—		—		—		(4,789)	—		—		—		(4,789)
Stock-based compensation	61,408		—		34,813		—	—		—		—		34,813
Public offerings, common stock, net	32,200,000		322		2,022,871		—	—		—		—		2,023,193
Private offerings, common stock, net	54,966,188		549		1,564,088		—	—		—		—		1,564,637
Stock option exercises	4,576,102		46		5,270		—	—		—		—		5,316
Stock exchanged for tax withholding	—		—		—		—	1,106,580		(30,734)		—		(30,734)
Exercise of warrants	24,210,984		242		15,203		—	—		—		—		15,445
Provision for common stock warrants	—		—		4,430		—	—		—		—		4,430
Conversion of 3.75% Convertible Senior Notes	3,016,036		30		15,155		—	—		—		—		15,185
Conversion of 5.5% Convertible Senior Notes	69,808		1		159		—	—		—		—		160
September 30, 2021	593,077,995	$	5,930	$	6,978,454	$	(2,338)	17,032,648	$	(71,168)	$	(2,203,989)	$	4,706,889

December 31, 2019	318,637,560	$	3,186	$	1,506,953	$	1,288	15,259,045	$	(31,216)	$	(1,350,307)	$	129,904
Net loss attributable to the Company	—		—		—		—	—		—		(112,050)		(112,050)
Other comprehensive gain	—		—		—		558	—		—		—		558
Stock-based compensation	402,003		4		9,254		—	—		—		—		9,258
Stock dividend	5,156		—		20		—	—		—		(20)		—
Public offerings, net	35,276,250		353		344,045			—		—		—		344,398
Stock option exercises	13,736,265		137		32,416		—	—		—		—		32,553
Stock exchanged for tax withholding	—		—		—		—	667,023		(9,218)		—		(9,218)
Equity component of convertible senior notes, net of issuance costs and income tax benefit	—		—		108,479		—	—		—		—		108,479
Purchase of capped calls	—		—		(16,253)		—	—		—		—		(16,253)
Termination of capped calls	—		—		24,158		—	—		—		—		24,158
Provision for common stock warrants	—		—		32,529		—	—		—		—		32,529
Accretion of discount, preferred stock	—		—		(29)		—	—		—		—		(29)
Conversion of preferred stock	2,998,526		30		1,148		—	—		—		—		1,178
Conversion of 7.5% Convertible Senior Note	16,000,000		160		42,713		—	—		—		—		42,873
Repurchase of 5.5% Convertible Senior Notes, net of income tax benefit	9,409,591		94		(51,840)		—	—		—		—		(51,746)
Shares issued for acquisitions	9,658,465		97		49,576		—	—		—		—		49,673
September 30, 2020	406,123,816	$	4,061	$	2,083,169	$	1,846	15,926,068	$	(40,434)	$	(1,462,377)	$	586,265

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements

Table of Contents

Plug Power Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Nine months ended

September 30,

2020

2019
Operating Activities

Net loss attributable to the Company

$
(85,514)

$
(67,190)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation of property, plant and equipment, and leased property

9,381

8,944
Amortization of intangible assets

835

518
Stock-based compensation

9,258

7,927
Gain on extinguishment of debt

(13,222)

—
Provision for bad debts and other assets

—

1,253
Amortization of debt issuance costs and discount on convertible senior notes

12,183

6,257
Provision for common stock warrants

25,198

3,706
Loss on disposal of leased assets

—

212
Fair value adjustment to contingent consideration

1,130

—
Provision for loss contracts related to service

4,306

—
Change in fair value of common stock warrant liability

—

(7)
Income tax benefit

(24,182)

—
Changes in operating assets and liabilities that provide (use) cash:

Accounts receivable

(86,004)

11,702
Inventory

(57,718)

(32,691)
Prepaid expenses, and other assets

(4,956)

427
Accounts payable, accrued expenses, and other liabilities

35,748

13,293
Deferred revenue

16,647

(6,152)
Net cash used in operating activities

(156,910)

(51,801)
Investing Activities

Purchases of property, plant and equipment

(11,265)

(4,635)
Purchase of intangible assets

(1,638)

(1,860)
Purchases for construction of leased property

(13,699)

(2,851)
Net cash paid for acquisitions

(45,113)

—
Proceeds from sale of leased assets

—

375
Net cash used in investing activities

(71,715)

(8,971)
Financing Activities

Proceeds from issuance of preferred stock, net of transaction costs

—

(37)
Proceeds from public offerings, net of transaction costs

344,398

38,098
Proceeds from exercise of stock options

23,335

(116)
Payments for redemption of preferred stock

—

(4,040)
Proceeds from issuance of convertible senior notes, net

205,098

39,052
Repurchase of convertible senior notes

(90,238)

—
Purchase of capped calls

(16,253)

—
Proceeds from termination of capped calls

24,158

—
Principal payments on long-term debt

(27,845)

(21,186)
Proceeds from long-term debt, net

99,000

99,496
Repayments of finance obligations

(18,634)

(59,461)
Proceeds from finance obligations

47,568

57,249
Net cash provided by financing activities

590,587

149,055
Effect of exchange rate changes on cash

(90)

(119)
Increase in cash, cash equivalents and restricted cash

361,872

88,164
Cash, cash equivalents, and restricted cash beginning of period

369,500

110,153
Cash, cash equivalents, and restricted cash end of period

$
731,372

$
198,317

Supplemental disclosure of cash flow information

Cash paid for interest

$
16,975

$
8,673

Summary of non-cash investing and financing activity

Recognition of right of use asset

$
56,377

$
78,626
Conversion of preferred stock to common stock

—

1,883
Conversion of convertible notes to common stock

42,873

—


	Nine months ended
	September 30,
	2021		2020
Operating Activities
Net loss attributable to the Company	$	(267,051)	$	(112,050)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of long-lived assets		15,903		9,860
Amortization of intangible assets		1,095		835
Stock-based compensation		34,813		9,258
Gain on extinguishment of debt		—		(13,222)
Amortization of debt issuance costs and discount on convertible senior notes		2,371		12,183
Provision for common stock warrants		4,746		25,198
Income tax benefit		—		(24,015)
Impairment of long-lived assets		1,329		—
Loss on service contracts		9,586		25,110
Fair value adjustment to contingent consideration		(8,760)		1,130
Net realized loss on investments		236		—
Lease origination costs		(7,889)		—
Change in fair value for equity securities		284		—
Loss on equity method investments		1,736		—
Changes in operating assets and liabilities that provide (use) cash:
Accounts receivable		(89,329)		(86,056)
Inventory		(90,428)		(57,615)
Prepaid expenses, and other assets		(28,465)		(4,956)
Accounts payable, accrued expenses, and other liabilities		28,992		41,125
Deferred revenue		42,330		16,709
Net cash used in operating activities		(348,501)		(156,506)

Investing Activities
Purchases of property, plant and equipment		(91,384)		(11,265)
Purchase of intangible assets		—		(1,638)
Purchases of equipment related to power purchase agreements and equipment related to fuel delivered to customers		(17,900)		(13,699)
Purchase of available-for-sale securities		(1,862,951)		—
Proceeds from sales and maturities of available-for-sale securities		1,105,874		—
Proceeds from sales of equity securities		21,780		—
Purchase of equity securities		(169,713)		—
Net cash paid for acquisition		—		(45,113)
Net cash used in investing activities		(1,014,294)		(71,715)

Financing Activities
Proceeds from exercise of warrants, net of transaction costs		15,445		—
Proceeds from public and private offerings, net of transaction costs		3,587,830		344,398
Payments of tax withholding on behalf of employees for net stock settlement of stock-based compensation		(30,734)		(9,218)
Proceeds from exercise of stock options		5,316		32,553
Proceeds from issuance of convertible senior notes, net		—		205,098
Repurchase of convertible senior notes		—		(90,238)
Purchase of capped calls and common stock forward		—		(16,253)
Proceeds from termination of capped calls		—		24,158
Principal payments on long-term debt		(29,129)		(27,845)
Proceeds from long-term debt, net		—		99,000
Repayments of finance obligations and finance leases		(20,413)		(19,038)
Proceeds from finance obligations		53,447		47,568
Net cash provided by financing activities		3,581,762		590,183
Effect of exchange rate changes on cash		(59)		(90)
Increase in cash, cash equivalents and restricted cash		2,218,908		361,872
Cash, cash equivalents, and restricted cash beginning of period		1,634,284		369,500
Cash, cash equivalents, and restricted cash end of period	$	3,853,192	$	731,372

Supplemental disclosure of cash flow information
Cash paid for interest, net capitalized interest of $2.6 million	$	10,341	$	16,975

Summary of non-cash activity
Recognition of right of use asset - finance leases	$	16,961	$	—
Recognition of right of use asset - operating leases		65,083		25,857
Conversion of preferred stock to common stock		—		43,058
Conversion of convertible senior notes to common stock		15,345		—
Accrued purchase of fixed assets, cash to be paid in subsequent period		8,832		—

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements

Table of Contents

~~Notes to Interim Condensed Consolidated Financial Statements~~1.

~~(unaudited)~~Nature of Operations

~~Unless the context indicates, the terms “Company,” “Plug Power,” “we,” “our” or “us” as used herein refers to~~ Plug Power ~~Inc. and its subsidiaries.~~

1.	~~Nature of Operations~~

~~Description of Business~~

~~As a leading provider of comprehensive hydrogen fuel cell turnkey solutions, Plug Power Inc., or~~is facilitating the ~~Company, is seeking~~paradigm shift to ~~build a green hydrogen economy. The Company is focused on~~an increasingly electrified world by innovating cutting-edge hydrogen and fuel cell ~~systems that are used~~solutions. In our core business, we provide and continue to power electric motors primarily in the electric mobility and stationary power markets, given the ongoing paradigm shift in the power, energy, and transportation industries to address climate change, energy security, and meet sustainability goals. Plug Power created the firstdevelop commercially viable ~~market for~~ hydrogen and fuel cell orproduct solutions to replace lead-acid batteries in electric material handling vehicles and industrial trucks for some of the ~~HFC technology. As a result, the Company has deployed over 38,000 fuel cell systems,~~world’s largest retail-distribution and ~~has become the largest buyer of liquid hydrogen, having built and operated a hydrogen network across North America.~~

manufacturing businesses. We are ~~focused~~focusing our efforts on ~~proton exchange membrane, or PEM, fuel cell~~industrial mobility applications, including electric forklifts and ~~fuel processing technologies, fuel cell/battery hybrid technologies,~~electric industrial vehicles, at multi-shift high volume manufacturing and ~~associated hydrogen storage~~high throughput distribution sites where we believe our products and ~~dispensing infrastructure from which multiple products are available. A fuel cell is an electrochemical device that combines hydrogen~~services provide a unique combination of productivity, flexibility, and oxygen to produce electricity and heat without combustion. Hydrogen is derived from multiple sources. The majority of liquid hydrogen in the United States is produced using the steam methane reforming process and utilizing by-product hydrogen from chlor alkali production. By-product hydrogen from a chlor alkali plant is considered to be low carbon hydrogen and in some cases, considered green hydrogen, depending on the source of electricity and geographic location. We source a significant amount of liquid hydrogen based on the chlor alkali process today.environmental benefits. Additionally, we manufacture and sell fuel cell products to replace batteries and diesel generators in stationary backup power applications. These products have proven valuable with telecommunications, transportation, and utility customers as robust, reliable, and sustainable power solutions.

We provide and continue to develop commercially-viable hydrogen and fuel cell solutions for industrial mobility applications (including electric forklifts and electric industrial vehicles) at multi-shift high volume manufacturing and high throughput distribution sites where we believe our products and services provide a unique combination of productivity, flexibility and environmental benefits. In June of 2020, Plug Power completed the acquisitions of United Hydrogen Group, Inc. and Giner ELX, Inc. in line with the Company’s hydrogen vertical integration strategy, with plans to have more than 50% of the hydrogen used by the Company to be green by 2024. These acquisitions further enhance Plug Power’s position in the hydrogen industry with capabilities in generation, liquefaction and distribution of hydrogen fuel complementing its industry-leading position in the design, construction, and operation of customer-facing hydrogen fueling stations. These acquisitions establish a pathway for Plug Power to transition from low-carbon to zero-carbon hydrogen solutions.

Our current products and services include:

GenDrive: GenDrive is our hydrogen fueled ~~PEM~~Proton Exchange Membrane (“PEM”) fuel cell system providing power to material handling electric vehicles, including class 1, 2, 3 and 6 electric forklifts, Automated Guided Vehicles (“AGVs”) and ground support equipment;

GenFuel: GenFuel is our liquid hydrogen fueling delivery, generation, storage, and dispensing system;

GenCare: GenCare is our ongoing ‘internet of things’-based maintenance and on-site service program for GenDrive fuel cell systems, GenSure fuel cell systems, GenFuel hydrogen storage and dispensing products and ProGen fuel cell engines;

GenSure: GenSure is our stationary fuel cell solution providing scalable, modular PEM fuel cell power to support the backup and grid-support power requirements of the telecommunications, transportation, and utility sectors; GenSure High Power Fuel Cell Platform will support large scale stationary power and data center markets;

GenKey: GenKey is our vertically integrated “turn-key” solution combining either GenDrive or GenSure fuel cell power with GenFuel fuel and GenCare aftermarket service, offering complete simplicity to customers transitioning to fuel cell power; ~~and~~

ProGen: ProGen is our fuel cell stack and engine technology currently used globally in mobility and stationary fuel cell systems, and as engines in electric delivery vans. This includes the Plug Power ~~MEA (membrane~~membrane electrode ~~assembly)~~assembly (“MEA”), a critical component of the fuel cell stack used in zero-emission fuel cell electric vehicle ~~engines, in which Plug Power~~engines; and

GenFuel Electrolyzers: GenFuel electrolyzers are modular, scalable hydrogen generators optimized for clean hydrogen production. Electrolyzers generate hydrogen from water using electricity and a special membrane and “green” hydrogen is ~~the largest producer in North America.~~generated by using renewable energy inputs, such as solar or wind power.

We provide our products worldwide through our direct product sales force, and by leveraging relationships with original equipment manufacturers (“OEMs”) and their dealer networks. Plug Power is targeting Asia and Europe for expansion in adoption. Europe has rolled out ambitious targets for the hydrogen economy and Plug Power is executing on its strategy to become one of the European leaders. This includes a targeted account strategy for material handling as well as securing strategic partnerships with European OEMs, energy companies, utility leaders and accelerating our electrolyzer business. We manufacture our ~~commercially-viable~~commercially viable products in Latham, ~~NY,~~New York, Rochester, NYNew York and Spokane, WAWashington and support liquid hydrogen generation and logistics in Charleston, ~~TN.~~

~~Liquidity~~Tennessee.

Our ~~cash requirements relate primarily~~wholly-owned subsidiary, Plug Power France, created a joint venture with Renault SAS (“Renault”) named HyVia, a French société par actions simplifiée (“HyVia”) in the second quarter 2021. HyVia plans to ~~working capital needed~~manufacture and sell fuel cell powered electric light commercial vehicles (“FCELCVs”) and 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, growth in equipment leased to customers under long-term arrangements, funding the growth in our GenKey “turn-key” solution, which includes the installation of our customers’ hydrogen infrastructure as well as production and delivery of thesupply hydrogen fuel ~~continued development~~ and expansion of our products, payment of lease/financing obligations under sale/leaseback financings, and the repayment or refinancing of our long-term debt. 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; attaining and expanding positive gross margins across all product lines; the timing and amount of our operating expenses; the timing and costs of working capital needs; the timing and costs of developing marketing and distribution channels; the ability of our customers to obtain financing to support commercial transactions; our ability to obtain financing arrangementsfueling stations to support the ~~sale or leasing of our products~~FCE-LCV market, in each case primarily in Europe. HyVia is owned 50% by Plug Power France and services to customers and to repay or refinance our long-term debt, and the terms of such agreements that may require us to pledge or restrict substantial amounts of our cash to support these financing arrangements; 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 timing and costs of product development and introductions; the extent of our ongoing and new research and development programs; and changes in our strategy or our planned activities. If we are unable to fund our operations with positive cash flows and cannot obtain external financing, we may not be able to sustain future operations. As a result, 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 stockholders of $85.5 million and $67.2 million for the nine months ended September 30, 2020 and 2019, respectively, and had an accumulated deficit of $1.4 billion at September 30, 2020.

We have historically funded our operations primarily through public and private offerings of equity and debt, as well as short-term borrowings, long-term debt and project financings. The Company believes that its current working capital and cash anticipated to be generated from future operations, as well as borrowings from lending and project financing sources and proceeds from equity and debt offerings, including our at-the-market offering, will provide sufficient liquidity to fund operations for at least one year after the date the financial statements are issued. There is no guarantee that future funding will be available if and when required or at terms acceptable to the Company. This projection is based on our current expectations regarding new project financing and product sales and service, cost structure, cash burn rate and other operating assumptions.

During the nine months ended September 30, 2020, net cash used in operating activities was $156.9 million, consisting primarily of a net loss attributable to the Company of $85.5 million, and net outflows from fluctuations in working capital and other assets and liabilities of $96.3 million. The changes in working capital primarily were related to increases and decreases in various current asset and liability accounts. As of September 30, 2020, we had cash and cash equivalents of $448.1 million and net working capital of $514.2 million. By comparison, at December 31, 2019, we had cash and cash equivalents of $139.5 million and net working capital of $162.5 million.

50% by Renault.

~~Net cash used in investing activities for the nine months ended September 30, 2020 totaled $71.7 million and included net cash paid for acquisitions, purchases~~Table of intangible assets, purchases of property, plant and equipment, and outflows associated with materials, labor, and overhead necessary to construct new leased property. Cash outflows related to equipment that we lease directly to customers are included in net cash used in investing activities.

Contents

Net cash provided by financing activities for the nine months ended September 30, 2020 totaled $590.6 million and primarily resulted from the issuance of shares of common stock and convertible senior notes, and proceeds from borrowing on long-term debt, offset by the repurchase of convertible senior notes and purchase of related capped calls.

~~Public and Private Offerings of Equity and Debt~~

~~Common Stock Issuances~~

In August 2020, the Company issued and sold in a registered direct offering an aggregate of 35,276,250 shares of its common stock at a purchase price of $10.25 per share for net proceeds of approximately $344.4 million.

On April 13, 2020, the Company entered into an At Market Issuance Sales Agreement (ATM), with B. Riley FBR, Inc., as sales agent, or FBR, pursuant to which the Company may offer and sell, from time to time through FBR, shares of Company common stock having an aggregate offering price of up to $75.0 million. As of the date of this filing, the Company has not issued any shares of common stock pursuant to the ATM.

In December 2019, the Company issued and sold in a registered public offering an aggregate of 46 million shares of its common stock at a purchase price of $2.75 per share for net proceeds of approximately $120.4 million.

Prior to December 31, 2019, the Company entered into a previous ATM with FBR, which was terminated in the fourth quarter of 2019. Under this ATM, for the nine months ended September 30, 2019, the Company issued 6.3 million shares of common stock, resulting in net proceeds of $14.6 million.

In March 2019, the Company issued and sold in a registered direct offering an aggregate of 10 million shares of its common stock at a purchase price of $2.35 per share for net proceeds of approximately $23.5 million.

~~Convertible Senior Notes~~

In May 2020, the Company issued $212.8 million in aggregate principal amount of 3.75% convertible senior notes due 2025, which we refer to herein as the 3.75% Convertible Senior Notes. The total net proceeds from this offering, after deducting costs of the issuance, were $205.1 million. The Company used $90.2 million of the net proceeds from the offering of the 3.75% Convertible Senior Notes to repurchase $66.3 million of the $100 million in aggregate principal amount of 5.5% Convertible Senior Notes due 2023, which we refer to herein as the 5.5% Convertible Senior Notes. In addition, the Company used approximately $16.3 million of the net proceeds from the offering of the 3.75% Convertible Senior Notes to enter into privately negotiated capped called transactions.~~In October 2020, $28.0 million of the remaining 5.5% Convertible Senior Notes converted into 12.2 million shares of common stock.~~

In September 2019, the Company issued a $40.0 million in aggregate principal amount of 7.5% convertible senior note due 2023, which we refer to herein as the 7.5% Convertible Senior Note. The Company’s total obligation, net of interest accretion, due to the holder was $48.0 million. The total net proceeds from this offering, after deducting costs of the issuance, were $39.1 million. On July 1, 2020, the note automatically converted fully into 16.0 million shares of common stock.

~~Operating and Finance Leases~~

as operating leases and therefore the sales of the fuel cell systems and hydrogen infrastructure are recognized as revenue. In connection with certain sale/leaseback transactions, the financial institutions require the Company to maintain cash balances in restricted accounts securing the Company’s finance obligations. Cash received from customers under the PPAs is used to make payments against the Company’s finance obligations. As the Company performs under these agreements, the required restricted cash balances are released, according to a set schedule. The total remaining lease payments to financial institutions under these agreements at September 30, 2020 was $332.8 million, $286.2 million of which were secured with restricted cash, security deposits backing letters of credit, and pledged service escrows.

The Company has varied master lease agreements with Wells Fargo Equipment Finance, Inc., or Wells Fargo, to finance the Company’s commercial transactions with various customers. The Wells Fargo lease agreements were entered into during 2017, 2018, 2019 and 2020. Pursuant to the lease agreements, the Company sells fuel cell systems and hydrogen infrastructure to Wells Fargo and then leases them back and operates them at Walmart sites. The Company has a customer guarantee for a large portion of the transactions entered into in connection with such lease agreements. The Wells Fargo lease agreements required letters of credit totaling approximately $78.8 million for the unguaranteed portion as of September 30, 2020. The total remaining lease liabilities owed to Wells Fargo were $114.3 million at September 30, 2020.

Over recent years, including in 2019, the Company has entered into master lease agreements with multiple institutions such as Key Equipment Finance (KeyBank), SunTrust Equipment Finance & Lease Corp. (now known as Truist Bank), First American Bancorp, Inc. (First American), Crestmark Equipment Finance (Crestmark) and U.S. Bank. During the nine months ended September 30 2020, the Company entered into additional lease agreements with KeyBank, First American, Truist Bank, Crestmark and U.S. Bank. Similar to the Wells Fargo lease agreements, the primary purpose of these agreements is to finance commercial transactions with varied customers. Most of the transactions with these financial institutions required cash collateral for the unguaranteed portions totaling $189.9million as of September 30, 2020. Similar to the Wells Fargo lease agreements, in many cases the Company has a customer guarantee for a large portion of the transactions. The total remaining lease liabilities owed to these financial institutions were $218.5 million at September 30, 2020.

~~Long-Term Debt~~

In March 2019, the Company entered into a loan and security agreement (Loan Agreement) with Generate Lending, LLC (Generate Capital) pursuant to which the Company borrowed $85.0 million (Term Loan Facility). The initial proceeds of the loan were used to pay in full the Company’s long-term debt and accrued interest of $17.6 million under the loan agreement with NY Green Bank, a Division of the New York State Energy Research & Development Authority, and terminate approximately $50.3 million of certain equipment leases with Generate Plug Power SLB II, LLC as well as repurchase the associated leased equipment. In April 2019 and November 2019, the Company borrowed an additional $15.0 million and $20.0 million, respectively, under the Term Loan Facility with Generate Capital at 12% interest to fund working capital for ongoing deployments and other general corporate purposes. On March 31, 2020, the outstanding balance was $107.5 million. The principal and interest payments are paid primarily by restricted cash.

On May 6, 2020, the Company and Generate amended the Loan Agreement to, among other things, (i) provide an incremental term loan facility in the amount of $50.0 million, which has been fully funded, (ii) provide for additional, incremental term loans in an aggregate amount not to exceed $50.0 million, which are available to the Company in Generate Capital’s sole discretion, (iii) reduce the interest rate on all loans to 9.50% from 12.00% per annum, and (iv) extend the maturity date to October 31, 2025 from October 6, 2022. In the third quarter of 2020, the Company borrowed an additional $50.0 million under the amended Loan Agreement. See Note 8, Long-Term Debt, for additional information. Based on the amortization schedule as September 30, 2020, the outstanding balance of $185.0 million under the Term Loan Facility must be fully paid by October 31, 2025.

2. Summary of Significant Accounting Policies

Restatement

As previously disclosed in the Explanatory Note to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 10-K”), the Company restated its previously issued audited consolidated financial statements as of and for the years ended December 31, 2019 and 2018 and its unaudited interim condensed consolidated financial statements as of and for each of the quarterly periods ended March 31, 2020 and 2019, June 30, 2020 and 2019, September 30, 2020 and 2019 and December 31, 2019.

Previously filed annual reports on Form 10-K and quarterly reports on Form 10-Q for the periods affected by the restatement have not been amended. Accordingly, investors should not rely upon the Company’s previously released financial statements for these periods and any earnings releases or other communications relating to these periods, and, for these periods, investors should rely solely on the financial statements and other financial data for the relevant periods included in the 2020 10-K. Commencing with our quarterly report on Form 10-Q for the quarterly period ended March 31, 2021, we are including in our quarterly reports for fiscal 2021 restated results for the corresponding interim periods of fiscal 2020.

Principles of Consolidation

The unaudited interim condensed consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. In addition, we include our share of the results of HyVia using the equity method based on our economic ownership interest and our ability to exercise significant influence over the operating and financial decisions of HyVia.

Interim Financial Statements

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ~~(SEC)~~(“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)~~(“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 GAAP have been condensed or omitted. These unaudited interim 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, filed for the fiscal year ended December 31, 2019.~~2020 10-K.

The information presented in the accompanying unaudited interim condensed consolidated balance sheets as of December 31, ~~2019~~2020 has been derived from the Company’s December 31, ~~2019~~2020 audited consolidated financial statements.

Certain amounts in the prior period condensed consolidated financial statements have been reclassified to conform to the presentation of the current period condensed consolidated financial statements.

~~Leases~~

~~The Company is a lessee~~There have been no changes in ~~noncancelable (1) operating leases, primarily related to sale/leaseback transactions with financial institutions~~our accounting policies from those reported in our 2020 10-K, except for ~~deployment~~the adoption of the Company’s products at certain customer sites, and (2) finance leases, also primarily related to sale/leaseback transactions with financial institutions for similar commercial purposes. The Company accounts for leases in accordance with Accounting Standards ~~Codification (ASC) Topic 842,~~ ~~Leases~~ ~~(ASC Topic 842)~~Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), as ~~amended.~~

The Company determines if an arrangement is or contains a lease at contract inception. The Company recognizes a right of use (ROU) asset and a lease liability (i.e. finance obligation) at the lease commencement date. For operating leases, the lease liability is initially measured at the present value of the unpaid lease payments at the lease commencement date. For finance leases, the lease liability is initially measureddescribed in the ~~same manner~~Recently Adopted Accounting Guidance section. We have also expanded our accounting policy relating to cash equivalents, available-for-sale securities, equity securities, and ~~date~~stock-based compensation as ~~for operating leases, and is subsequently measured at amortized cost using the effective interest method.~~

~~Key estimates and judgments include how the Company determines (1) the discount rate it uses to discount the unpaid lease payments to present value, (2) the lease term and (3) the lease payments.~~

●

ASC Topic 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, the Company generally uses its incremental borrowing rate as the discount rate for the lease. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

●

The lease term for all of the Company’s leases includes the noncancelable period of the lease, plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.

●

Lease payments included in the measurement of the lease liability comprise fixed payments, and the exercise price of a Company option to purchase the underlying asset if the Company is reasonably certain to exercise the option.

follows:

The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of the useful life of the underlying asset or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized and presented separately from interest expense on the lease liability. The Company’s leases do not contain variable lease payments.

~~ROU assets for operating and finance leases are periodically reviewed for impairment losses. The Company uses the long-lived assets impairment guidance in ASC Subtopic 360-10,~~ ~~Property, Plant, and Equipment – Overall~~Cash Equivalents~~, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize. NaN impairment losses have been recognized to date.~~

The Company monitors for events or changes in circumstances that require a reassessment of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset.

Operating and finance lease ROU assets are presented within leased property, net on the unaudited interim condensed consolidated balance sheets. The current portion of operating and finance lease liabilities is included in finance obligations within current liabilities and the long-term portion is presented in finance obligations within noncurrent liabilities on the unaudited interim condensed consolidated balance sheets.

The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less. The Company has elected to apply the short-term lease recognition and measurement exemption for other classes of leased assets. The Company recognizes the lease payments associated with its short-term leases as an expense on a straight-line basis over the lease term.

~~Revenue Recognition~~

The Company enters into contracts that may contain one or a combination of fuel cell systems and infrastructure, installation, maintenance, spare parts, fuel delivery and other support services. Contracts containing fuel cell systems and related infrastructure may be sold or provided to customers under a PPA, discussed further below.

The Company does not include a right of return on its products other than rights related to standard warranty provisions that permit repair or replacement of defective goods. The Company accrues for anticipated standard warranty costs at the same time that revenue is recognized for the related product, or when circumstances indicate that warranty costs will be incurred, as applicable.

Revenue is measured based on the transaction price specified in a contract with a customer, subject to the allocation of the transaction price to distinct performance obligations as discussed below. The Company recognizes revenue when it satisfies a performance obligation by transferring a product or service to a customer.

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The Company accounts for each distinct performance obligation within its arrangements as a separate unit of accounting if the items under the performance obligation have value to the customer on a standalone basis. The Company considers a performance obligation to be distinct and have a standalone value if the customer can benefit from the good or service either on its own or together with other resources readily available to the customer and the Company’s promise to transfer the goods or service to the customer is separately identifiable from other promises in the contract. The Company allocates revenue to each distinct performance obligation based on relative standalone selling prices.

Payment terms for sales of fuel cells, infrastructure and service to customers are typically 30 to 90 days. Sale/leaseback transactions with financial institutions are invoiced and collected upon transaction closing. Service is prepaid upfront in a majority of the arrangements. The Company does not adjust the transaction price for a significant financing component when the performance obligation is expected to be fulfilled within a year.

In 2017, in separate transactions, the Company issued to each of Amazon and Walmart warrants to purchase shares of the Company’s common stock. The Company presents the provision for common stock warrants within each revenue-related line item on the unaudited interim consolidated statements of operations. This presentation reflects a discount that those common stock warrants represent, and therefore revenue is net of these non-cash charges. The provision of common stock warrants is allocated to the relevant revenue-related line items based upon the expected mix of the revenue for each respective contract. See Note 12, Warrant Transaction Agreements, for more details.

~~Nature of goods and services~~

~~The following is a description of principal activities from which the Company generates its revenue.~~

~~(i)~~

~~Sales of Fuel Cell Systems and Related Infrastructure~~

~~Revenue from sales of fuel cell systems and related infrastructure represents sales of our GenDrive units, GenSure stationary backup power units, as well as hydrogen fueling infrastructure.~~

The Company considers comparable list prices, as well as historical average pricing approaches to determine standalone selling prices for GenDrive fuel cells. The Company uses observable evidence from similar products in the market to determine standalone selling prices for GenSure stationary backup power units and hydrogen fueling infrastructure. The determination of standalone selling prices of the Company’s performance obligations requires significant judgment, including continual assessment of pricing approaches and available observable evidence in the market. Once relative standalone selling prices are determined, the Company proportionately allocates the transaction price to each performance obligation within the customer arrangement. The allocated transaction price related to fuel cell systems and spare parts is recognized as revenue at a point in time which usually occurs at shipment (and occasionally upon delivery). Revenue on hydrogen infrastructure installations is generally recognized at the point at which transfer of control passes to the customer, which usually occurs upon customer acceptance of the hydrogen infrastructure. In certain instances, control of hydrogen infrastructure installations transfers to the customer over time, and the related revenue is recognized over time as the performance obligation is satisfied. The Company uses an input method to determine the amount of revenue to recognize during each reporting period based on the Company’s efforts to satisfy the performance obligation.

~~(ii)Services performed on fuel cell systems and related infrastructure~~

Revenue from services performed on fuel cell systems and related infrastructure represents revenue earned on our service and maintenance contracts and sales of spare parts. The transaction price allocated to services as discussed above is generally recognized as revenue over time on a straight-line basis over the expected service period.

~~In substantially all of its commercial transactions, the Company sells extended maintenance contracts that generally provide for a~~ ~~five~~ to ten year service period from the date of product installation in exchange for an up-front payment. Services include monitoring, technical support, maintenance and services that provide for 97% to 98% uptime of the fleet. These services are accounted for as a separate performance obligation, and accordingly, revenue generated from these transactions, subject to the proportional allocation of transaction price, is deferred and recognized as revenue

over the term of the contract, generally on a straight-line basis. Additionally, the Company may enter into annual service and extended maintenance contracts that are billed monthly. Revenue generated from these transactions is recognized as revenue on a straight-line basis over the term of the contract. Costs are recognized as incurred over the term of the contract. Sales of spare parts are included within service revenue on the unaudited interim consolidated statements of operations. When costs are projected to exceed revenues over the life of the extended maintenance contract, an accrual for loss contracts is recorded. Costs are estimated based upon historical experience and consider the estimated impact of the Company’s cost reduction initiatives. The actual results may differ from these estimates.

~~Upon expiration of the extended maintenance contracts, customers either choose to extend the contract or switch to purchasing spare parts and maintaining the fuel cell systems on their own.~~

~~(iii)Power Purchase Agreements~~

~~Revenue from PPAs primarily represents payments received from customers who make monthly payments to access the Company’s GenKey solution.~~

When fuel cell systems and related infrastructure are provided to customers through a PPA, revenues associated with these agreements are treated as rental income and recognized on a straight-line basis over the life of the agreements.

In conjunction with entering into a PPA with a customer, the Company may enter into sale/leaseback transactions with third-party financial institutions, whereby the fuel cells, a majority of the related infrastructure and, in some cases, service are sold to the third-party financial institution and leased back to the Company through either an operating or finance lease.

Certain of the Company’s sale/leaseback transactions with third-party financial institutions are required to be accounted for as finance leases. As a result, 0 upfront revenue was recognized at the closing of these transactions and a finance obligation for each lease was established. The fuel cell systems and related infrastructure that are provided to customers through these PPAs are classified as leased property, net in the unaudited interim condensed consolidated balance sheets. Costs to service the leased property, depreciation of the leased property, and other related costs are included in cost of PPA revenue in the unaudited interim condensed consolidated statements of operations. Interest cost associated with finance leases is presented within interest and other expense, net in the unaudited interim condensed consolidated statements of operations.

The Company also has sale/leaseback transactions with financial institutions, which were required to be accounted for as operating leases. The Company has lease obligations associated with these sale/leaseback agreements with financial institutions paid over the term of the agreements. At inception of these sale/lease transactions, the Company records a right of use asset value which is amortized over the term of the lease and recognized in conjunction with the interest expense on the obligation collectively as rental expense. Rental expense is recognized on a straight-line basis over the life of the agreements and is characterized as cost of PPA revenue on the unaudited interim condensed consolidated statements of operations.

~~The Company includes all lease and non-lease components (i.e., maintenance services) related to PPAs within PPA revenue.~~

To recognize revenue, the Company, as lessee, is required to determine whether each sale/leaseback arrangement meets operating lease criteria. As part of the assessment of these criteria, the Company estimates certain key inputs to the associated calculations such as: 1) discount rate it uses to discount the unpaid lease payments to present value and 2) useful life of the underlying asset(s):

●

ASC Topic 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, the Company cannot determine the interest rate implicit in its leases because it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, the Company generally uses its incremental borrowing rate to estimate the discount rate for each lease.

●

In order for a lease to be classified as an operating lease, the lease term cannot exceed 75% (major part) of the estimated useful life of the leased asset. The average estimated useful life of the fuel cells is 10 years, and the average estimated useful life of the hydrogen infrastructure is 20 years. These estimated useful lives are compared to the term of each lease to ensure that 75% of the estimated useful life of the assets is not exceeded which allows the Company to meet the operating lease criteria.

~~(iv)Fuel Delivered to Customers~~

Revenue associated with fuel delivered to customers represents the sale of hydrogen to customers that has been purchased by the Company from a third party or generated on site. Fuel is delivered to customers under stand-ready arrangement, with no long-term commitment.

The Company purchases hydrogen fuel from suppliers in certain cases (and produces hydrogen onsite) and sells to its customers upon delivery. Revenue and cost of revenue related to this fuel is recorded as dispensed and is included in the respective “Fuel delivered to customers” lines on the unaudited interim consolidated statements of operations.

~~Contract costs~~

~~The Company expects that incremental commission fees paid to employees as a result of obtaining sales contracts are recoverable and therefore the Company capitalizes them as contract costs.~~

Capitalized commission fees are amortized on a straight-line basis over the period of time which the transfer of goods or services to which the assets relate occur, typically ranging from 5 to 10 years. Amortization of the capitalized commission fees is included in selling, general and administrative expenses.

The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in selling, general and administrative expenses.

~~Cash Equivalents~~

~~For purposes of the unaudited interim condensed consolidated statements of cash flows, the~~ Company considers all highly-liquid debt ~~instruments~~securities with original maturities of three months or less to be cash equivalents. At September 30, ~~2020,~~2021, cash equivalents consisted of commercial paper and U.S. Treasury securities with original maturities of three months or less, and money market ~~accounts. The Company’s cash and cash equivalents are deposited with financial institutions located~~funds. Due to their short-term nature, the carrying amounts reported in ~~the United States and may at times exceed insured limits.~~

~~Equity Instruments – Common Stock Warrants~~

~~Common stock warrants that meet certain applicable requirements of ASC Subtopic 815-40,~~ ~~Derivatives and Hedging – Contracts in Entity’s Own Equity~~, and other related guidance, including the ability of the Company to settle the warrants without the issuance of registered shares or the absence of rights of the grantee to require cash settlement, are accounted for as equity instruments. The Company classifies these equity instruments within additional paid-in capital on the unaudited interim condensed consolidated balance ~~sheets.~~sheets approximate the fair value of cash and cash equivalents.

~~Common stock warrants accounted~~Available-for-sale securities

Available-for-sale securities is comprised of commercial paper with original maturities greater than three months, U.S. Treasury securities, certificates of deposit and corporate bonds. We consider these securities to be available for use in our current year operations, and therefore classify them as ~~equity instruments~~current even if we do not dispose of the securities in the following year.

Available-for-sale securities are recorded at fair value as of each balance sheet date. As of each balance sheet date, unrealized gains and losses, with the exception of credit related losses, are recorded to accumulated other comprehensive income (loss). Any credit related losses are recognized as a credit loss allowance on the balance sheet with a corresponding adjustment to operations. Realized gains and losses are due to the sale and maturity of securities classified as available-for-sale and represent the ~~warrants issued~~net gain (loss) from accumulated other comprehensive income (loss) reclassifications for previously unrealized net gains on available-for-sale debt securities.

Equity securities

Equity securities are comprised of fixed income and equity market index mutual funds. Equity securities are valued at fair value with changes in the fair value recognized in our unaudited interim condensed consolidated statement of operations. We consider these securities to ~~Amazon~~be available for use in our current year operations, and ~~Walmart~~therefore classify them as ~~discussed~~current even if we do not dispose of the securities in ~~Note 12, Warrant Transaction Agreements. The Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update 2019-08,~~ the following year.

~~Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606)~~Stock-based compensation ~~(ASU 2019-08), which requires entities~~

Stock-based compensation represents the cost related to ~~measure and classify share-based payment~~stock-based awards granted to ~~a customer by applying the guidance under Topic 718, as of January 1, 2019. As a result, the amount recorded as a reduction of revenue is measured~~employees and directors. The Company measures stock-based compensation cost at grant date, based on the ~~grant-date~~ fair value of the ~~warrants. Except for~~award estimated under the ~~third tranche,~~current provisions of Accounting Standards Codification (“ASC”) Topic 718, Compensation - Stock Compensation. For service stock options and restricted stock awards, the ~~fair value of all warrants was measured at January 1, 2019, the adoption date of ASU 2019-08.~~

In order to calculate warrant charges, the Company uses the Black-Scholes pricing model, which requires key inputs including volatility and risk-free interest rate and certain unobservable inputs for which there is little or no market data, requiring the Company to develop its own assumptions. The Company estimates the fair value of ~~unvested warrants, considered to be probable of vesting. Based~~stock-based awards using a Black-Scholes valuation model and recognizes the cost as expense on ~~this estimated~~a straight-line basis over the option’s requisite service period.

In September 2021, the Company also issued performance stock option awards that include a market condition. The grant date fair value of performance stock options is estimated using a Monte Carlo simulation model and the ~~Company determines warrant charges, which are~~cost is recognized using the accelerated attribution method.

Stock-based compensation expense is recorded ~~as a reduction~~in cost of revenue associated with sales of fuel cell systems and related infrastructure, cost of revenue for services performed on fuel cell systems and related infrastructure, research and development expense and selling, general and administrative expenses in the ~~unaudited interim condensed~~ consolidated ~~statement of operations.~~

~~Use of Estimates~~

~~The unaudited interim condensed consolidated financial~~ statements of operations based on 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 unaudited interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

~~Reclassifications~~

~~Reclassifications are made, whenever necessary, to prior period financial statements to conform to the current period presentation. As of September 30, 2020, there have been no such reclassifications.~~employees’ respective function.

Recent Accounting Pronouncements

Recently Adopted Accounting ~~Pronouncements~~Guidance

~~In June 2016,~~ ~~Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~~~, was issued. Also, In April 2019,~~ ~~Accounting Standards Update (ASU) 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments~~~~, was issued to make improvements to updates 2016-01,~~ ~~Financial Instruments – Overall~~ ~~(Subtopic 825-10), 2016-13,~~ ~~Financial Instruments – Credit Losses~~ ~~(Topic 326) and 2017-12,~~ ~~Derivatives and Hedging~~ (Topic 815). ASU 2016-13 significantly changes how entities account for credit losses for financial assets and certain other instruments, including trade receivables and contract assets, that are not measured at fair value through net income. The ASU requires a number of changes toOther than the assessment of credit losses, including the utilization of an expected credit loss model, which requires consideration of a broader range of information to estimate expected credit losses over the entire lifetimeadoption of the ~~asset, including losses where probability is considered remote. Additionally,~~accounting guidance mentioned in our 2020 10-K and ASU 2020-06, there have been no other significant changes in our reported financial position or results of operations and cash flows resulting from the ~~standard requires the estimation~~adoption of ~~lifetime expected losses for trade receivables and contract assets that are classified as current. The Company adopted these standards effective~~new accounting pronouncements.

On January 1, ~~2020 and determined the impact of the standards to be immaterial to the consolidated financial statements.~~

~~In April 2019,~~ ~~Accounting Standards Update (ASU) 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments~~~~, was issued to make improvements to updates 2016-01,~~ ~~Financial Instruments – Overall~~ ~~(Subtopic 825-10), 2016-13,~~ ~~Financial Instruments – Credit Losses~~ ~~(Topic 326) and 2017-12,~~ ~~Derivatives and Hedging~~ ~~(Topic 815). The Company~~2021, we early adopted ~~this standard effective January 1, 2020 and determined the impact of this standard to be immaterial to the consolidated financial statements.~~

~~In January 2017,~~ ~~Accounting Standards Update (ASU) 2017-04, Intangibles – Goodwill and Other (Topic 350)~~, was issued to simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwillASU No. 2020-06, Debt—Debt with ~~the carrying amount of that goodwill. The Company adopted this standard effective January 1, 2020.~~

~~In August 2016,~~ ~~Accounting Standards Update (ASU) 2016-15, Statement of Cash Flows (Topic 230)s:~~ ~~Classification of Certain Cash Receipts and Cash Payments~~, was issued to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The Company adopted this standard in 2019 and determined the impact of this standard to be immaterial to the consolidated financial statements.

~~Recently Issued and Not Yet Adopted Accounting Pronouncements~~

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the impact of recognizing the equity component of the Company’s convertible notes at issuance and ~~Contracts in an Entity’s Own Equity,~~ ~~was issued to address issues identified~~the subsequent accounting impact of additional interest expense from debt discount amortization. Future interest expense of the convertible notes will be lower as a result of adoption of this guidance and net loss per share will be computed using the ~~complexity associated with applying GAAP~~if-converted method for ~~certain financial instruments with characteristics~~convertible instruments. The cumulative effect of ~~liabilities~~the accounting change upon adoption on January 1, 2021 increased the carrying amount of the 3.75% Convertible Senior Notes by $120.6 million, reduced accumulated deficit by $9.6 million and ~~equity. This update is effective after December 15,~~reduced additional paid-in capital by $130.2 million as of September 30, 2021. ~~The Company is evaluating the adoption method as well as the impact this update will have on the consolidated financial statements.~~

Recent Accounting Guidance Not Yet Effective

~~In March 2020,~~ ~~Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848): Facilitation~~All issued but not yet effective accounting and reporting standards as of ~~the Effects of Reference Rate Reform on Financial Reporting, was issued to provide temporary optional expedients and exceptions~~September 30, 2021 are either not applicable to the ~~GAAP guidance on contract modifications and hedge accounting~~Company or are not expected to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This update is effective starting March 12, 2020 and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is evaluating the adoption method as well as thehave a material impact ~~this update will have~~ on the ~~consolidated financial statements.~~

Company.

~~In March 2020,~~ ~~Accounting Standards Update (ASU) 2020-03, Codification Improvements to Financial Instruments~~, was issued to make various codification improvements to financial instruments to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. This update will be effective at various dates as described in this ASU. The Company is evaluating the adoption method as well as the impact this update will have on the consolidated financial statements.

~~In December 2019,~~ ~~Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes~~, was issued to identify, evaluate, and improve areas of GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. This update will be effective beginning after December 15, 2020. The Company is evaluating the adoption method as well as the impact this update will have on the consolidated financial statements.

~~3. Acquisitions~~

~~Giner ELX, Inc. Acquisition~~

On June 22, 2020, the Company acquired 100% of the outstanding shares of Giner ELX, Inc. (Giner ELX). Giner ELX is developer of electrolysis hydrogen generators which is used for on-site refueling of hydrogen fuel cells.

~~The fair value of consideration paid by the Company in connection with the Giner ELX acquisition was as follows (in thousands):~~

Cash
$
25,820
Plug Power Stock

19,263
Contingent consideration

7,790
Total consideration

52,873

The contingent consideration represents the estimated, preliminary fair value associated with earn-out payments of $16.0 million that the sellers are eligible to receive. Of the total earnout consideration, $8.0 million is related to the achievement of the Allagash earn-out, $2.0 million is associated with the receipt of certain customer opportunities (purchase orders or other contracts) by December 31, 2021, and $6.0 million is associated with the achievement of certain revenue targets for years 2021 through 2023. The Allagash earn-out is achieved when the Company has produced at least 2 PEM electrolyzer stacks of one megawatt each, utilizing the dry build process and meets certain technical specifications as more fully described in the merger agreement. To be fully paid, the Allagash earn-out needs to be satisfied by July 31, 2023 and is reduced by approximately 8.33% each month beyond this date. In addition to the above, should the earn-out revenue exceed 150% of the 2023 target, the sellers will receive warrants with a value of $5.0 million and if

~~the earn-out revenue exceeds 200% of the 2023 revenue target, the sellers will receive warrants with a value of $10.0 million. The warrants are exercisable within two years of issuance.~~

~~In connection with the Giner ELX acquisition, the Company revised the acquisition-date fair value of contingent consideration liabilities which resulted in an increase in other liabilities and~~ ~~goodwill~~ ~~of $0.7 million for the three months ended September 30, 2020.~~

~~The following table summarizes the preliminary allocation of the purchase price to the estimated fair value of the net assets acquired, excluding goodwill (in thousands):~~

Accounts receivable
$
1,237
Inventory

4,108
Prepaid expenses and other assets, net of deferred tax liability

(4,707)
Property, plant and equipment

596
Identifiable intangibles

29,930
Accounts payable, accrued expenses and other liabilities

(2,136)
Deferred revenue

(2,348)
Total net assets acquired, excluding goodwill

26,680

~~The preliminary fair value of acquired identified intangible assets were calculated with the assistance of an independent valuator and were determined through a variety of valuation techniques.~~

~~Identifiable intangibles consisted of developed technology, non-compete agreements, estimated in-process research and development (IPR&D), and customer relationships.~~

~~The fair value of acquired developed technology and non-complete agreements was nominal.~~

The fair value of the acquired IPR&D totaling $29.0 million was calculated using the multi-period excess earnings method (MPEEM) approach which is a variant of the income approach. The basic principle of the MPEEM approach is that a single asset, in isolation, is not capable of generating cash flow for an enterprise. Several assets are brought together and exploited to generate cash flow. Therefore, to determine cash flow from the exploitation of IPR&D, one must deduct the related expenses incurred for the exploitation of other assets used for the generation of overall cash flow and revenues. The fair value of IPR&D was estimated by discounting the net cash flow derived from the expected revenues attributable to the acquired IPR&D. The fair value of the acquired customer relationships totaling $0.4 million was calculated using a distributor method approach, which is a variant of the MPEEM under the income approach. The fair value of wet stack technology totaling $0.4 million was determined using the relief from royalty method.

In addition to identifiable intangible asset, the fair value of the deferred revenue was determined using a cost build-up approach. The direct cost of fulfilling the obligation plus a normal profit margin was used to determine the value of the assumed deferred revenue liability.

Included in the purchase consideration are three contingent earn-out payments (as described above): the Allagash earn-out, the customer opportunities, and the revenue targets. Due to the nature of the Allagash and customer opportunities, as outlined in the purchase agreement, a scenario based method (SBM) was used to value these contingent payments as the payments are milestone based in nature. The revenue targets are achieved when certain revenue thresholds are met, and the catch-up provision creates path-dependency. As such, the revenue targets were valued using Monte Carlo Simulation.

Included in Giner ELX’s net assets acquired are net deferred tax liabilities of $6.1 million. In connection of the acquisition of these net deferred tax liabilities, the Company reduced its valuation allowance by $5.2 million and recognized a tax benefit $5.2 million during the nine months ended September 30, 2020.

~~Goodwill associated with the Giner ELX acquisition was calculated as follows (in thousands):~~

Consideration paid
$
52,873
Less: net assets acquired

(26,680)
Total goodwill recognized

26,193

The goodwill consists of the Company’s increased capabilities in green hydrogen supply through the production of electrolyzers. The synergies with the Company’s production of hydrogen storage and dispensing equipment is important to the Company as the demand for green hydrogen increases.

~~United Hydrogen Group Inc. Acquisition~~

~~On June 18, 2020, the Company acquired 100% of the outstanding shares of United Hydrogen Group Inc. (UHG). UHG produces and sells liquid hydrogen.~~

~~The fair value of consideration paid by the Company in connection with the UHG acquisition was as follows (in thousands):~~

Cash
$
19,293
Plug Power Stock

30,410
Contingent consideration

1,110
Total consideration

50,813

Included in cash and common stock in the above table is $1.0 million of cash and $6.5 million of common stock that was paid in April 2020 to purchase a convertible note in UHG. This convertible note included terms that allowed for reduction of the purchase price if the Company was to complete the acquisitions. As such, this note was cancelled in conjunction with the closing of this acquisition.

A portion of the purchase price of UHG was in the form of contingent consideration. The contingent consideration is contingent on future performance related to the expansion of the liquefication capacity of the Charleston, Tennessee liquid hydrogen plant (the Charleston Plant). The Company’s liability for this contingent consideration was measured at fair value based on the Company’s expectations of achieving the expansion milestone. The expected performance was assessed by management which was discounted to present value in order to derive a fair value of the contingent consideration.

In accordance with the merger agreement, the Company is obligated to pay $1.5 million by June 30, 2021 once the liquefication capacity of the Charleston Plant is complete to the UHG’s stockholders. Due to the level of progress made as of the reporting date, it is estimated that a payout will be made. As a result, the Company has recorded $1.1 million as the fair value of the contingent consideration.

The Company’s liability for contingent consideration was preliminarily measured and estimated at fair value based on unobservable inputs, and was considered a level 3 financial instrument. The fair value of the liability determined was primarily driven by the Company’s expectations of reaching the performance milestone. The expected milestone of expansion of the liquefication capacity of the Charleston Plant was discounted to present value in order to derive a fair value of the contingent consideration. The primary inputs of the calculation were the probabilities of achieving the milestone and a discount rate.

In connection with the UHG acquisition, the Company finalized the valuation of an existing customer contract and long-term debt which resulted in an increase in other liabilities of $1.9 million, a decrease in long-term debt of $1.7 million, and an increase in goodwill of $0.2 million for the three months ended September 30, 2020.

~~The following table summarizes the preliminary allocation of the purchase price to the estimated fair value of the net assets acquired, excluding goodwill (in thousands):~~


~~Accounts receivable~~		~~444~~
~~Inventory~~		89
~~Prepaid expenses and other assets~~		~~1,152~~
~~Property, plant and equipment~~		~~41,244~~
~~Leased property~~		~~796~~
~~Identifiable intangibles~~		~~2,338~~
~~Long-term debt~~		~~(11,336)~~
~~Other liabilities~~		~~(15,757)~~
~~Accounts payable, accrued expenses, deferred revenue and finance obligations~~		~~(4,631)~~
~~Total net assets acquired, excluding goodwill~~		~~14,339~~

~~The preliminary fair value of acquired identified intangible assets were calculated with the assistance of an independent valuation firm and were determined through a variety of valuation techniques.~~3. Extended Maintenance Contracts

~~Identifiable intangibles consisted~~On a quarterly basis, we evaluate any potential losses related to our extended maintenance contracts for fuel cell systems and related infrastructure that has been sold. We measure loss accruals at the customer contract level. The expected revenues and expenses for these contracts include all applicable expected costs of ~~developed technology, as described below in Note 7, Intangible Assets. The fair value~~providing services over the remaining term of the ~~developed technology totaling $2.3 million was calculated using~~contracts and the ~~relief from royalty approach which~~related unearned net revenue. A loss is ~~a variant~~recognized if the sum of expected costs of providing services under the remaining term of the ~~income approach. The application~~contract exceeds related unearned net revenue and is recorded as a provision for loss contracts related to service in the consolidated statements of operations. A key component of these estimates is the ~~relief from royalty approach involves~~expected future service costs. In estimating the ~~value of an intangible asset by quantifying the present value of the stream of market derived royalty payments that the owner of the intangible asset is exempted or ‘relieved’ from paying.~~

~~Additionally~~expected future costs, the Company ~~estimated~~considers its current service cost level and applies significant judgment related to expected cost saving initiatives. The expected future cost savings will be primarily dependent upon the fair value of an unfavorable customer contract. The fair value of the acquired unfavorable customer contract was calculated using a with and with-out analysis which is a variant of the income approach. Cash flows were calculated using pricing per terms of the existing contract and then compared to cash flows using expected market pricing. The difference between the two cash flows was used to determine the fair value of the contract.

UHG is eligible to receive earn-out payments, contingent on the company achieving certain milestones (successful completion of construction and achieving a defined capacity/production level). Due to the milestone nature of the payments, a scenario based method (SBM) was used to value these contingent payments.

~~Goodwill associated with the UHG acquisition was calculated as follows (in thousands):~~

Consideration paid
$
50,813
Less: net assets acquired

(14,339)
Total goodwill recognized

36,474

~~Goodwill consists~~success of the Company’s ~~ability~~initiatives related to ~~expand liquid hydrogen manufacturing capability with an established management team.~~increasing stack life, achieving better economies of scale for service labor, and improvements in design and operations of infrastructure. If the expected cost saving initiatives are not realized, this will increase the estimated costs of providing services and will adversely affect our estimated contract loss accrual. Further, we continue to work to improve quality and reliability; however, unanticipated additional quality issues or warranty claims may arise and additional material charges may be incurred in the future. These quality issues could also adversely affect our contract loss accrual. Service costs during 2021 have been higher than previously estimated. The Company ~~now~~ has ~~capabilities~~undertaken or will soon undertake several initiatives to extend the life and improve the reliability of its equipment. As a result of these initiatives and our additional expectation that the increase in ~~liquid hydrogen generation, liquefaction~~certain costs attributable to the global pandemic will abate, the Company believes that its contract loss accrual is sufficient. However, if elevated service costs persist, the Company will adjust its estimated future service costs and ~~distribution logistics, which is important in a growing hydrogen market.~~

For both UHG and Giner ELX, the above estimates are preliminary in nature and subject to adjustments. Any necessary adjustments will be finalized within one year from the date of acquisition. Substantially all the receivables acquired are expected to be collectible. We have not identified any material unrecorded pre-acquisition contingencies where the related asset or liability, or an impairment is probable and the amount can be reasonably estimated. Purchased goodwill is not expected to be deductible for tax purposes. increase its contract loss accrual estimate.

The ~~change~~following table shows the rollforward of balance in the ~~estimate of fair value of contingent consideration obligations during the third quarter of 2020 was primarily~~accrual for loss contracts, including changes due to ~~a change~~the passage of time, additions, and changes in ~~the discount rate and a decrease in the discount period. The Company considers the impact to be immaterial to the unaudited interim condensed consolidated financial statements.~~

21estimates (in thousands):


	Nine months ended		Year ended
	September 30, 2021		December 31, 2020
Beginning Balance	$	24,013	$	3,702
Provision for Loss Accrual		15,641		35,473
Released to Service Cost of Sales		(6,055)		(2,348)
Released to Provision for Warrants		—		(12,814)
Ending Balance	$	33,599	$	24,013

~~The results~~ ~~of the Giner ELX and UHG are included in the Company’s results for the three months ended September 30, 2020 and are also included in the Company’s results for the nine months ended 2020.~~

4. Earnings Per Share

Basic earnings per common stock are computed by dividing net loss attributable to common stockholders by the weighted average number of common stock outstanding during the reporting period. ~~Diluted~~After January 1, 2021, the date of the adoption of ASU 2020-06, in periods when we have net income, the shares of our common stock subject to the convertible notes outstanding during the period will be included in our diluted earnings per share ~~reflects~~under 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 stock 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 stock outstanding during the reporting period.if-converted method. 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 potentially dilutive securities are summarized as follows:

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	At September 30,		At September 30,
	2020	2019	2021	2020
Stock options outstanding (1)	14,434,983	23,597,871	24,784,288	14,434,983
Restricted stock outstanding (2)	5,992,974	4,333,560	4,960,376	5,992,974
Common stock warrants (3)	110,573,392	115,824,142	80,017,181	110,573,392
Preferred stock (4)	—	15,019,838
Convertible Senior Notes (5)	56,872,730	59,133,896
Convertible Senior Notes (4)			39,170,766	56,872,730
Number of dilutive potential shares of common stock	187,874,079	217,909,307	148,932,611	187,874,079

(1)

During the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company granted ~~3,192,400~~15,732,335 and ~~2,572,500~~3,192,400 stock options, respectively. During the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company granted ~~3,367,049~~16,430,835 and ~~2,936,892~~3,367,049 stock options, respectively.

(2)

During the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company granted ~~3,095,000~~1,159,856 and ~~2,562,500~~3,095,000 shares of restricted stock, respectively. During the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company granted ~~3,189,649~~1,812,856 and ~~2,926,892~~3,189,649 shares of restricted stock, respectively.

(3)

In April 2017, the Company issued ~~warrants~~a warrant to acquire up to 55,286,696 shares of the Company’s common stock as part of a transaction agreement with Amazon, subject to certain vesting events, as described in Note 12, ~~Warrant~~“Warrant Transaction Agreements. ~~Of these warrants issued, NaN have~~” The warrant had been exercised with respect to 17,461,994 shares of the Company’s common stock as of September 30, ~~2020.~~2021.

In July 2017, the Company issued ~~warrants~~a warrant to acquire up to 55,286,696 shares of the Company’s common stock as part of a transaction agreement with Walmart, subject to certain vesting events, as described in Note 12, ~~Warrant~~“Warrant Transaction Agreements. ~~Of these warrants issued, NaN have~~” The warrant had been exercised with respect to 13,094,217 shares of the Company’s common stock as of September 30, ~~2020.~~2021.

(4)

The preferred stock amount represents the dilutive potential on the shares of common stock as a result of the conversion of the Series C Redeemable Convertible Preferred Stock (Series C Preferred Stock) and Series E Redeemable Preferred Stock (Series E Preferred Stock), based on the conversion price of each preferred stock as of September 30, 2020, and 2019, respectively. Of the 10,431 shares of Series C Preferred Stock issued on May 16, 2013, all shares had been converted to common stock as of September 30, 2020. On November 1, 2018, the Company issued 35,000 shares of Series E Preferred Stock. As of December 31, 2019, 30,462 shares of the Series E Preferred Stock had been converted to common stock and 4,038 shares were redeemed for cash. The remaining 500 shares of Series E Preferred Stock were converted to common stock in January 2020.

~~(5)~~

In March 2018, the Company issued $100.0 million in aggregate principal amount of the 5.5% Convertible Senior ~~Notes.~~Notes due 2023 (the “5.5% Convertible Senior Notes”). In May 2020, the Company repurchased $66.3 million of the 5.5% Convertible Senior Notes and in the fourth quarter of 2020, $33.5 million of the 5.5% Convertible Senior Notes were converted into approximately 14.6 million shares of common stock. The remaining $160 thousand aggregate principal amount of the 5.5% Convertible Senior Notes were converted into 69,808 shares of common stock in January 2021. In September 2019, the Company issued $40.0 million in aggregate principal amount of the ~~$7.5%~~7.5% Convertible Senior Note due 2023 (the “7.5% Convertible Senior Note”), which was fully converted into 16.0 million shares of common stock on July 1, 2020. In May 2020, the Company issued $212.5 million in aggregate principal amount of the ~~3.5%~~3.75% Convertible Senior Notes. During the first quarter of 2021, $15.2 million of the 3.75% Convertible Senior Notes ~~and repurchased $66.3 million~~were converted into 3,016,036 shares of common stock. There were 0 conversions in the ~~5.5% Convertible Senior Notes. See Note 9, Convertible Senior Notes.~~second or third quarter of 2021.

5. Inventory

Inventory as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 consisted of the following (in thousands):


	September 30,		December 31,		September 30,		December 31,
	2020		2019		2021		2020
Raw materials and supplies - production locations	$	85,924	$	48,011	$	147,085	$	92,221
Raw materials and supplies - customer locations		10,007		9,241		13,611		12,405
Work-in-process		30,421		12,529		61,525		29,349
Finished goods		7,954		2,610		7,593		5,411
Inventory	$	134,306	$	72,391	$	229,814	$	139,386

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6. ~~Leased Property~~Equipment Related to Power Purchase Agreements and Fuel Delivered to Customers, net

~~Leased property~~Equipment related to power purchase agreements and fuel delivered to customers, net at September 30, ~~2020~~2021 and December 31, ~~2019~~2020 consisted of the following (in thousands):


	September 30,		December 31,		September 30,		December 31,
	2020		2019		2021		2020
Right of use assets - operating	$	275,211	$	198,068
Right of use assets - finance		42,161		41,475
Capitalized costs of lessor assets		51,814		41,465
Equipment related to power purchase agreements and fuel delivered to customers					$	99,230	$	92,736
Less: accumulated depreciation		(59,711)		(36,268)		(20,519)		(16,929)
Leased property, net	$	309,475	$	244,740
Equipment related to power purchase agreements and fuel delivered to customers, net						78,711		75,807

As of September 30, 2021, the Company had deployed long-lived assets at customer sites that had associated Power Purchase Agreements (“PPAs”). These PPAs expire over the next one to ten years. PPAs contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote.

Depreciation expense was $1.9 million and $2.3 million for the three months ended September 30, 2021 and 2020, respectively. Depreciation expense was $5.7 million and $6.6 million for the nine months ended September 30, 2021 and 2020, respectively.

The Company terminated its contractual relationship with a fuel provider effective March 31, 2021. The Company has historically leased fuel tanks from this provider. As a result of this termination, the Company recognized approximately $16.0 million of various costs in the six months ended June 30, 2021, primarily for removal of tanks, reimbursement of unamortized installation costs, costs to temporarily provide customers with fuel during the transition period, and certain other contract settlement costs, which were recorded in the Company’s unaudited interim condensed consolidated statement of operations as cost of revenue – fuel delivered to customers. The Company also purchased certain fuel tanks from the fuel provider during the six months ended June 30, 2021. NaN such purchases were made during the three months ended September 30, 2021.

7. Property, Plant and Equipment

Property, plant and equipment at September 30, 2021 and December 31, 2020 consisted of the following (in thousands):


	September 30, 2021		December 31, 2020
Land		1,165		1,165
Leasehold improvements	$	1,440	$	1,121
Construction in progress		100,136		15,590
Software, machinery, and equipment		94,200		78,859
Property, plant, and equipment		196,941		96,735
Less: accumulated depreciation		(27,355)		(22,186)
Property, plant, and equipment, net	$	169,586	$	74,549

Construction in progress is primarily comprised of construction of hydrogen production plants and the Gigafactory in Rochester. Completed assets are transferred to their respective asset classes, and depreciation begins when an asset is ready for its intended use. Interest on outstanding debt is capitalized during periods of capital asset construction and amortized over the useful lives of the related assets. During the nine months ended September 30, 2021, we capitalized $2.6 million of interest. Capitalized interest in 2020 was 0t significant.

Depreciation expense related to property, plant and equipment was $1.9 million and $1.4 million for the three months ended September 30, 2021 and 2020, respectively. Depreciation expense related to property, plant and equipment was $5.2 million and $3.2 million for the nine months ended September 30, 2021 and 2020, respectively.

8. Intangible Assets and Goodwill

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~~7. Intangible Assets~~

The gross carrying amount and accumulated amortization of the Company’s acquired identifiable intangible assets as of September 30, ~~2020~~2021 were as follows (in thousands):


	Weighted Average	Gross Carrying		Accumulated				Weighted Average	Gross Carrying		Accumulated
	Amortization Period	Amount		Amortization		Total		Amortization Period	Amount		Amortization		Total
Acquired technology	10 years	$	13,138	$	(3,601)	$	9,537	10 years	$	13,040	$	(4,888)	$	8,152
Customer relationships, Backlog & Trademark	6 years		890		(258)		632
In process R&D	Indefinite		29,000		—		29,000
Customer relationships, Non-compete agreements, Backlog & Trademark								6 years		890		(398)		492
In process research and development								Indefinite		29,000		—		29,000
		$	43,028	$	(3,859)	$	39,169		$	42,930	$	(5,286)	$	37,644

The gross carrying amount and accumulated amortization of the Company’s acquired identifiable intangible assets as of December 31, ~~2019~~2020 were as follows (in thousands):


	Weighted Average	Gross Carrying		Accumulated				Weighted Average	Gross Carrying		Accumulated
	Amortization Period	Amount		Amortization		Total		Amortization Period	Amount		Amortization		Total
Acquired technology	9 years	$	8,244	$	(2,815)	$	5,429	10 years	$	13,697	$	(4,042)	$	9,655
Customer relationships & Trademark	9 years		320		(210)		110
Customer relationships, Non-compete agreements, Backlog & Trademark								6 years		890		(294)		596
In process research and development								Indefinite		29,000		—		29,000
		$	8,564	$	(3,025)	$	5,539		$	43,587	$	(4,336)	$	39,251

The change in the gross carrying amount of the acquired technology from December 31, ~~2019~~2020 to September 30, ~~2020~~2021 was primarily due to ~~changes in~~ foreign currency ~~translation, acquisitions of UHG and Giner ELX, and accrual for American Fuel Cell (AFC) milestone payment payments, as discussed below.~~

In the second quarter of 2020, the Company’s in-process research and development was related to the development of the dry build process associated with electrolyzer stacks, as part of acquisition of Giner ELX. The related intangible asset is not currently amortized, as research and development is ongoing. Upon completion of the dry build process, amortization will commence based upon the estimated useful life of the underlying asset. See Note 3 – Acquisitions, for more details.

Also, in the second quarter of 2020, the Company acquired technology as part of the acquisition of UHG. The technology relates to the chemical process of manufacturing liquid hydrogen from chlor-alkali waste stream. See Note 3 – Acquisitions, for more details.

In the second quarter of 2019, the Company acquired intellectual property from EnergyOr for $1.5 million. In addition, the Company agreed to pay the sellers a royalty based on future sales of relevant applications, not to exceed $3.0 million, by May 22, 2025. These royalties are added to the intangible asset balance, as incurred.

As part of the agreement to acquire the intellectual property from AFC, the Company shall pay AFC milestone payments not to exceed $2.9 million in total, if certain milestones associated with the production of components related to the acquired technology are met before April 2021. As of September 30, 2020, the Company paid $1.6 million and accrued $0.9 million in relation to the aforementioned milestones.translation.

Amortization expense for acquired identifiable intangible assets ~~was $0.3 million~~ for the three months ended September 30, 2021 and 2020 was $0.4 million and ~~$0.8~~$0.3 million, respectively. Amortization expense for acquired identifiable intangible assets for the nine months ended September 30, ~~2020. Amortization expense for the acquired identifiable assets~~2021 and 2020 was ~~$0.2~~$1.1 million ~~for the three months ended September 30, 2019~~ and ~~$0.5~~$0.8 million, ~~for the nine months ended September 30, 2019.~~respectively.

~~Estimated~~The estimated amortization expense for subsequent years ~~was~~is as follows (in thousands):


Remainder of 2020	$	366
2021		1,464
Remainder of 2021			$	363
2022		1,464		1,453
2023		1,464		1,453
2024 and thereafter		5,411
2024				1,431
2025 and thereafter				3,944
Total	$	10,169	$	8,644

Goodwill was $71.9 million and $72.4 million as of September 30, 2021 and December 31, 2020, respectively, which decreased $531 thousand due to currency translation loss for HyPulsion S.A.S., our French subsidiary. There were 0 impairments during the nine months ended September 30, 2021 or the year ended December 31, 2020.

8.9. Long-Term Debt

In March 2019, the Company ~~and its subsidiaries Emerging Power Inc. and Emergent Power Inc.,~~ entered into a loan and security agreement, as amended (the ~~Loan Agreement)~~“Loan Agreement”), with Generate Lending, LLC ~~(Generate Capital)~~(“Generate Capital”), providing for a secured term loan facility in the amount of ~~$100.0~~$100 million (the ~~Term~~“Term Loan ~~Facility)~~Facility”). The Company borrowed $85.0 million under the Loan Agreement on the date of closing and borrowed an additional $15.0 million in April 2019 and $20 million in November 2019. A portion of the initial proceeds of the loan was used to pay in full the Company’s long-term debt with NY Green Bank, a Division of the New York State Energy Research & Development Authority, including accrued interest of $17.6 million (the Green Bank Loan), and terminate approximately $50.3 million of certain equipment leases with Generate Plug Power SLB II, LLC and repurchase the associated leased equipment. In connection with this transaction, the Company recognized a loss on extinguishment of debt of approximately $0.5 million during the nine months ended September 30, 2019. This loss was recorded in gain (loss) on extinguishment of debt, in the Company’s unaudited interim condensed consolidated statement of operations. Additionally, $1.7 million was paid to an escrow account related to additional fees due in connection with the Green Bank Loan if the Company does not meet certain New York State employment and fuel cell deployment targets by March 2021. Amount escrowed is recorded in short-term other assets on the Company’s unaudited interim condensed consolidated balance sheets as of September 30, 2020. The Company presently expects to meet the targets as required under the arrangement. During the nine months

~~ended September 30, 2020, the Company received $250 thousand from escrow related to the New York state employment targets.~~

~~Additionally, on May 6,~~During the year ended December 31, 2020, the Company, ~~and its subsidiaries, Emerging Power, Inc. and Emergent Power, Inc., entered into a Fifth Amendment (the Amendment)~~under another series of amendments to the Loan Agreement, ~~and Security Agreement, dated as~~borrowed an incremental $100.0 million. As part of ~~March 29, 2019, as amended (the Loan Agreement) with Generate Lending, LLC (Generate Capital). The Amendment amends~~the amendment to the Loan Agreement, ~~to, among other things, (i) provide for an incremental term loan in~~ the amount of $50.0 million, (ii) provide for additional, uncommitted incremental term loans in an aggregate amount not to exceed $50.0 million, which may become available to the Company in Generate Capital’s sole discretion, (iii) reduce theCompany’s interest rate on ~~all loans~~the secured term loan facility was reduced to 9.50% from 12.00% per annum, and ~~(iv) extend~~ the maturity date was extended to October 31, 2025 from October 6, 2022. The $50 million incremental term loan has been fully funded. In connection with the restructuring, the Company capitalized $1.0 million of origination fees and expensed $300 thousand in legal fees. In the third quarter of 2020, the Company borrowed an additional $50.0 million, under the amended Loan Agreement.

On September 30, ~~2020,~~2021, the outstanding balance under the Term Loan Facility was ~~$185.0~~$137.7 million. In addition to the Term Loan Facility, on September 30, 2021, there was approximately $9.5 million ~~with a 9.5% annual interest rate.~~of debt outstanding related to the United Hydrogen Group, Inc. acquisition.

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The Loan Agreement includes covenants, limitations, and events of default customary for similar facilities. Interest and a portion of the principal amount is payable on a quarterly basis. Principal payments ~~will be~~are funded in part by releases of restricted cash, as described in Note ~~16, Commitments~~19, “Commitments and Contingencies.” Based on the amortization schedule as of September 30, ~~2020,~~2021, the ~~outstanding~~aforementioned loan balance ~~of $185.0 million~~ under the Term Loan Facility ~~must~~will be fully paid by October 31, 2025. The Company is in compliance with, or has obtained waivers for, all debt covenants.

~~All obligations under the Loan Agreement are unconditionally guaranteed by Emerging Power Inc. and Emergent Power Inc.~~ The Term Loan Facility is secured by substantially all of the Company’s and the guarantor subsidiaries’ assets, including, among other assets, all intellectual property, all securities in domestic subsidiaries and 65% of the securities in foreign subsidiaries, subject to certain exceptions and exclusions.

The Loan Agreement contains covenants, including, among others, (i) the provision of annual and quarterly financial statements, management rights and insurance policies and (ii) restrictions on incurring debt, granting liens, making acquisitions, making loans, paying dividends, dissolving, and entering into leases and asset sales and (iii) compliance with a collateral coverage covenant. The Loan Agreement also provides for events of default, including, among others, payment, bankruptcy, covenant, representation and warranty, change of control, judgment and material adverse effect defaults at the discretion of the lender. As of September 30, 2020, the Company was in compliance with all the covenants.

The Loan Agreement provides that if there is an event of default due to the Company’s insolvency or if the Company fails to perform in any material respect the servicing requirements for fuel cell systems under certain customer agreements, which failure would entitle the customer to terminate such customer agreement, replace the Company or withhold the payment of any material amount to the Company under such customer agreement, then Generate Capital has the right to cause Proton Services Inc., a wholly owned subsidiary of the Company, to replace the Company in performing the maintenance services under such customer agreement.

As of September 30, ~~2020,~~2021, the Term Loan Facility requires the principal balance as of each of the following dates not to exceed the following (in thousands):


December 31, 2020	$	164,017
December 31, 2021		127,317	$	127,317
December 31, 2022		93,321		93,321
December 31, 2023		62,920		62,920
December 31, 2024		33,692		33,692
December 31, 2025		—		—

9.10. Convertible Senior Notes

3.75% Convertible Senior Notes

On May 18, 2020, the Company issued $200.0 million in aggregate principal amount of 3.75% Convertible Senior Notes due June 1, 2025, ~~which is referred to herein as the 3.75% Convertible Senior Notes,~~ in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended ~~or the Securities Act.~~(the “Securities Act”). On May 29, 2020, the Company issued an additional $12.5 million in aggregate principal amount of 3.75% Convertible Senior Notes.

At issuance in May 2020, the total net proceeds from the 3.75% Convertible Senior Notes were as follows:


	Amount
	(in thousands)
Principal amount	$	212,463
Less initial purchasers' discount		(6,374)
Less cost of related capped calls		(16,253)
Less other issuance costs		(617)
Net proceeds	$	189,219

The 3.75% Convertible Senior Notes bear interest at a rate of 3.75% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. The notes will mature on June 1, 2025, unless earlier converted, redeemed or repurchased in accordance with their terms.

The 3.75% Convertible Senior Notes are senior, unsecured obligations of the Company and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the notes, equal in right of payment to any of the Company’s existing and future liabilities that are not so subordinated, including the

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Company’s $100 million in aggregate principal amount of ~~5.5% Convertible Senior Notes due 2023, which is referred to herein as~~ the 5.5% Convertible Senior Notes, effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the collateral securing such indebtedness, and structurally subordinated to all indebtedness and other liabilities, including trade payables, of its current or future subsidiaries.

Holders of the 3.75% Convertible Senior Notes may convert their notes at their option at any time prior to the close of the business day immediately preceding December 1, 2024 in the following circumstances:

during any calendar quarter commencing after ~~September 30, 2020,~~March 31, 2021 if the last reported sale price of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

during the five business days after any five consecutive trading day period (such five consecutive trading day period, the measurement period) in which the trading price per $1,000 principal amount of the 3.75% Convertible Senior Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

if the Company calls any or all of the 3.75% Convertible Senior Notes for redemption, any such notes that have been called for redemption may be converted at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or

upon the occurrence of specified corporate events, as described in the indenture governing the 3.75% Convertible Senior Notes.

On or after December 1, 2024, the holders of the 3.75% Convertible Senior Notes may convert all or any portion of their notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions.

The initial conversion rate for the 3.75% Convertible Senior Notes ~~will be~~is 198.6196 shares of the Company’s common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $5.03 per share of the Company’s common stock, subject to adjustment upon the occurrence of specified events. Upon conversion, the Company will pay or deliver, as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. During the three months ended September 30, 2021, certain conditions allowing holders of the 3.75% Convertible Senior Notes to convert were met. The 3.75% Convertible Senior Notes are therefore convertible during the calendar quarter ending September 30, 2021 at the conversion rate discussed above. During the nine months ended September 30, 2021, $15.2 million of the 3.75% Convertible Senior Notes were converted and the Company issued approximately 3.0 million shares of common stock in conjunction with these conversions.

In addition, following certain corporate events or following issuance of a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event or convert its notes called for redemption during the related redemption period in certain circumstances.

The 3.75% Convertible Senior Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after June 5, 2023 and before the 41^st scheduled trading day immediately before the maturity date, at a cash redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the three trading days immediately preceding the date the Company sends the related redemption notice, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company sends such redemption notice.

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If the Company undergoes a “fundamental change” (as defined in the Indenture), holders may require the Company to repurchase their notes for cash all or any portion of their notes at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, to, but excluding, the fundamental change repurchase date.

~~In accounting~~The Company accounts for ~~the issuance of~~ the 3.75% Convertible Senior Notes the Company separated the notes into liability and equity components. The initial carrying amount of the liability component of approximately $75.2 million, net of costs incurred, was calculated by measuring the fair value ofas a similar liability that does not have an associated convertible feature. The carrying amount of the equity component of approximately $130.3 million, net of costs incurred, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the 3.75% Convertible Senior Notes. The difference between the principal amount of the 3.75% Convertible Senior Notes and the liability component (the debt discount) is amortized to interest expense using the effective interest method over the term of the 3.75% Convertible Senior Notes. The effective interest rate is approximately 29.0%. The equity component of the 3.75% Convertible Senior Notes is included in additional paid-in capital in the unaudited interim condensed consolidated balance sheets and is not remeasured as long as it continues to meet the conditions for equity classification.

liability. We incurred transaction costs related to the issuance of the 3.75% Convertible Senior Notes of approximately $7.0 million, consisting of initial purchasers’ discount of approximately $6.4 million and other issuance costs of $0.6 million. In accounting for the transaction costs, we allocated the total amount incurred to the liability and equity components using the same proportions as the proceeds from the 3.75% Convertible Senior Notes. Transaction costs attributable to the liability component were approximately $2.6 million which were recorded as debt issuance cost (presented as contra debt in the unaudited interim condensed consolidated balance sheets) and are being amortized to interest expense over the term of the 3.75% Convertible Senior Notes. ~~The transaction costs attributable to the equity component were approximately $4.4 million and were netted with the equity component in stockholders’ equity.~~

The 3.75% Convertible Senior Notes consisted of the following (in thousands):


	September 30,		September 30,
	2020		2021
Principal amounts:
Principal	$	212,463	$	197,278
Unamortized debt discount (1)		(129,101)
Unamortized debt issuance costs (1)		(2,425)		(4,958)
Net carrying amount	$	80,937	$	192,320
Carrying amount of the equity component (2)	$	130,249

Included in the unaudited interim condensed consolidated balance sheets within the 3.75% Convertible Senior Notes, net and amortized over the remaining life of the notes using the effective interest rate method.

Included in the unaudited interim condensed consolidated balance sheets within additional paid-in capital, net of $4.4 million in equity issuance costs and associated income tax benefit of $19.0 million.

The following table summarizes the total interest expense and effective interest rate related to the 3.75% Convertible Senior Notes (in thousands, except for effective interest rate):


	September 30,
	2021
Interest expense	$	1,849
Amortization of debt issuance costs		306
Total		2,155

Effective interest rate		4.50%

Based on the closing price of the Company’s common stock of ~~$13.41~~$25.54 on September 30, ~~2020,~~2021, the if-converted value of the notes was greater than the principal amount. The estimated fair value of the note at September 30, ~~2020~~2021 was approximately ~~$532.3 million.~~$1.0 billion. The ~~Company utilized~~fair value estimation was primarily based on an active stock exchange trade on September 30, 2021 of the 3.75% Convertible Senior Notes. See Note 15, “Fair Value Measurements,” for a ~~Monte Carlo simulation model to estimate~~description of the fair value of the convertible debt. The simulation model is designed to capture the potential settlement features of the convertible debt, in conjunction with simulated changes in the Company’s stock price over the term of the note, incorporating a volatility assumption of 75%. This is considered a Level 3 fair value measurement.hierarchy.

Capped Call

In conjunction with the pricing of the 3.75% Convertible Senior Notes, the Company entered into privately negotiated capped call transactions ~~(3.75%~~(the “3.75% Notes Capped ~~Call)~~Call”) with certain counterparties at a price of $16.2 million. The 3.75% Notes Capped Call ~~cover,~~covers, subject to anti-dilution adjustments, the aggregate number of shares of the Company’s common stock that underlie the initial 3.75% Convertible Senior Notes and is generally expected to reduce potential dilution to the Company’s common stock upon any conversion of the 3.75% Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the 3.75% Notes Capped Call is initially $6.7560 per share, which represents a premium of approximately 60%over the last then-reported sale price of the Company’s common stock of $4.11 per share on the date of the transaction and is subject to certain adjustments under the terms of the 3.75% Notes Capped Call. The 3.75% Notes Capped Call becomes exercisable if the conversion option is exercised.

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The net cost incurred in connection with the 3.75% Notes Capped Call ~~has been~~were recorded as a reduction to additional paid-in capital in the unaudited interim condensed consolidated balance ~~sheet.~~

~~7.5% Convertible Senior Note~~

In September 2019, the Company issued $40.0 million aggregate principal amount of 7.5% Convertible Senior Note due on January 5, 2023, which is referred to herein as the 7.5% Convertible Senior Note, in exchange for net proceeds of $39.1 million, in a private placement to an accredited investor pursuant to Rule 144A under the Securities Act. There were no required principal payments prior to the maturity of the 7.5% Convertible Senior Note. Upon maturity of the 7.5% Convertible Senior Note, the Company was required to repay 120% of $40.0 million, or $48.0 million. The 7.5% Convertible Senior Note bore interest at 7.5% per year, payable quarterly in arrears on January 5, April 5, July 5 and October 5 of each year beginning on October 5, 2019 and was to mature on January 5, 2023 unless earlier converted or repurchased in accordance with its terms. The 7.5% Convertible Senior Note was unsecured and did not contain any financial covenants or any restrictions on the payment of dividends, or the issuance or repurchase of common stock by the Company.

~~On July 1, 2020, the 7.5% Convertible Senior Note automatically converted into 16.0 million shares of common stock.~~sheets.

5.5% Convertible Senior Notes

In March 2018, the Company issued $100.0 million in aggregate principal amount of the 5.5% Convertible Senior Notes due on March 15, 2023, ~~which is referred to herein as the 5.5% Convertible Senior Notes~~ in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

In May 2020, the Company used a portion of the net proceeds from the issuance of the 3.75% Convertible Senior Notes to finance the cash portion of the partial repurchase of the 5.5% Convertible Senior Notes, which consisted of a repurchase of approximately $66.3 million in aggregate principal amount of the 5.5% Convertible Senior Notes in privately-negotiated transactions for aggregate consideration of $128.9 million, consisting of approximately $90.2 million in cash and approximately 9.4 million shares of the Company’s common stock. ~~Of the $128.9 million in aggregate consideration~~, $35.5 million and $93.4 million were allocated to the debt and equity components, respectively, utilizing an effective discount rate of 29.8% to determine the fair value of the liability component. As of the repurchase date, the carrying value of the 5.5% Convertible Senior Notes that were repurchased, net of unamortized debt discount and issuance costs, was $48.7 million. The partial repurchase of the 5.5% Convertible Senior Notes resulted in a $13.2 million gain on early debt extinguishment. AsIn the fourth quarter of ~~September 30,~~ 2020, $33.5 million of the remaining 5.5% Convertible Senior Notes were converted into 14.6 million shares of common stock which resulted in a gain of approximately ~~$33.7~~$4.5 million which was recorded on the consolidated statement of operations on the gain (loss) on extinguishment of debt line.

On January 7, 2021, the remaining aggregate principal of $160 thousand aggregate principal amount of the 5.5% Convertible Senior Notes ~~remained outstanding. In October 2020, $28.0 million of the remaining 5.5% Convertible Senior Notes~~were converted into ~~12.2 million~~69,808 shares of common stock.

~~At issuance in March 2018, the total net proceeds from the 5.5% Convertible Senior Notes were as follows:~~

Amount

(in thousands)
Principal amount
$
100,000
Less initial purchasers' discount

(3,250)
Less cost of related capped call and common stock forward

(43,500)
Less other issuance costs

(894)
Net proceeds
$
52,356

~~The 5.5% Convertible Senior Notes bear interest at 5.5%, payable semi-annually in cash on March 15~~ Interest expense and September 15 of each year. The 5.5% Convertible Senior Notes will mature on March 15, 2023, unless earlier converted or repurchased in accordance with their terms. The 5.5% Convertible Senior Notes are unsecured and do not contain any financial covenants or any restrictions on the payment of dividends, or the issuance or repurchase of common stock by the Company.

Each $1,000 principal amount of the 5.5% Convertible Senior Notes is convertible into 436.3002 shares of the Company’s common stock, which is equivalent to a conversion price of approximately $2.29 per share, subject to adjustment upon the occurrence of specified events. Holders of these 5.5% Convertible Senior Notes may convert their 5.5% Convertible Senior Notes at their option at any time prior to the close of the last business day immediately preceding September 15, 2022, only under the following circumstances:

during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

~~during the~~ ~~five~~ ~~business day period after any~~ ~~five~~ consecutive trading day period (the measurement period) in which the trading price (as defined in the indenture governing the 5.5% Convertible Senior Notes) per $1,000 principal amount of 5.5% Convertible Senior Notes for each trading day of the measurement period was less

~~than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate for the 5.5% Convertible Senior Notes on each such trading day;~~

if the Company calls any or all of the 5.5% Convertible Senior Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or

upon the occurrence of certain specified corporate events, such as a beneficial owner acquiring more than 50% of the total voting power of the Company’s common stock, recapitalization of the Company, dissolution or liquidation of the Company, or the Company’s common stock ceases to be listed on an active market exchange.

On or after September 15, 2022, holders may convert all or any portion of their 5.5% Convertible Senior Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions.

Upon conversion of the 5.5% Convertible Senior Notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. While the Company plans to settle the principal amount of the 5.5% Convertible Senior Notes in cash subject to available funding at time of settlement, we currently use the if-converted method for calculating any potential dilutive effect of the conversion option on diluted net income per share, subject to meeting the criteria for using the treasury stock method in future periods.

The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued or unpaid interest. Holders who convert their 5.5% Convertible Senior Notes in connection with certain corporate events that constitute a “make-whole fundamental change” per the indenture governing the 5.5% Convertible Senior Notes or in connection with a redemption will be, under certain circumstances, entitled to an increase in the conversion rate. In addition, if the Company undergoes a fundamental change prior to the maturity date, holders may require the Company to repurchase for cash all or a portion of its 5.5% Convertible Senior Notes at a repurchase price equal to 100% of the principal amount of the repurchased 5.5% Convertible Senior Notes, plus accrued and unpaid interest.

The Company may not redeem the 5.5% Convertible Senior Notes prior to March 20, 2021. The Company may redeem for cash all or any portion of the 5.5% Convertible Senior Notes, at the Company’s option, on or after March 20, 2021 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least ~~one~~ ~~of the~~ ~~three~~ trading days immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 5.5% Convertible Senior Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

~~In accounting~~amortization for the issuance of the notes, the Company separated the 5.5% Convertible Senior Notes into liability and equity components. The initial carrying amount of the liability component of approximately $58.2 million, net of costs incurred, was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component of approximately $37.7 million, net of costs incurred, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the 5.5% Convertible Senior Notes. The difference between the principal amount of the 5.5% Convertible Senior Notes and the liability component (the debt discount) is amortized to interest expense using the effective interest method over the term of the 5.5% Convertible Senior Notes. The effective interest rate is approximately 16.0%. The equity component of the 5.5% Convertible Senior Notes is included in additional paid-in capital in the unaudited interim condensed consolidated balance sheets and is not remeasured as long as it continues to meet the conditions for equity classification.

~~component~~period were approximately $2.4 million, were recorded as debt issuance cost (presented as contra debt in the unaudited interim condensed consolidated balance sheets) and are being amortized to interest expense over the term of the 5.5% Convertible Senior Notes. The transaction costs attributable to the equity component were approximately $1.7 million and were netted with the equity component in stockholders’ equity.

~~The 5.5% Convertible Senior Notes consisted of the following (in thousands):~~

September 30,

December 31,

2020

2019
Principal amounts:

Principal
$
33,660

$
100,000
Unamortized debt discount (1)

(7,477)

(27,818)
Unamortized debt issuance costs (1)

(403)

(1,567)
Net carrying amount
$
25,780

$
70,615
Carrying amount of the equity component (2)
$
—

$
37,702

Included in the unaudited interim condensed consolidated balance sheets within the 5.5% Convertible Senior Notes, net and amortized over the remaining life of the 5.5% Convertible Senior Notes using the effective interest rate method.

Included in the unaudited interim condensed consolidated balance sheets within additional paid-in capital, net of $1.7 million in equity issuance costs and associated income tax benefit of $9.2 million, at December 31, 2019.

Based on the closing price of the Company’s common stock of $13.41 on September 30, 2020, the if-converted value of the 5.5% Convertible Senior Notes was greater than the principal amount. The estimated fair value of the 5.5% Convertible Senior Notes at September 30, 2020 and December 31, 2019 was approximately $195.3 million and $135.3 million, respectively. The Company utilized a Monte Carlo simulation model to estimate the fair value of the convertible debt. The simulation model is designed to capture the potential settlement features of the convertible debt, in conjunction with simulated changes in the Company’s stock price over the term of the 5.5% Convertible Senior Notes, incorporating a volatility assumption of 75%. This is considered a Level 3 fair value measurement.immaterial.

Capped Call

In conjunction with the pricing of the 5.5% Convertible Senior Notes, the Company entered into privately negotiated capped call transactions ~~(5.5%~~(the “5.5% Notes Capped ~~Call)~~Call”) with certain counterparties at a price of $16.0 million. The 5.5% Notes Capped Call cover, subject to anti-dilution adjustments, the aggregate number of shares of the Company’s common stock that underlie the initial 5.5% Convertible Senior Notes and is generally expectedmillion to reduce the potential dilution to the Company’s common stock upon any conversion of the 5.5% Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 5.5% Convertible Senior Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the 5.5% Notes Capped Call is initially $3.82 per share, which represents a premium of 100% over the last then-reported sale price of the Company’s common stock of $1.91 per share on the date of the transaction and is subject to certain adjustments under the terms of the 5.5% Notes Capped Call. The 5.5% Notes Capped Call becomes exercisable if the conversion option is exercised.

be. The net cost incurred in connection with the 5.5% Notes Capped Call has been recorded as a reduction to additional paid-in capital in the unaudited interim condensed consolidated balance sheets.

In conjunction with the pricing of the partial repurchase of the 5.5% Convertible Senior Notes, the Company terminated 100% of the 5.5% Notes Capped Call on June 5, 2020. As a result of the termination, the Company received $24.2 million, which iswas recorded in additional paid-in ~~capital.~~capital in the unaudited interim condensed consolidated balance sheets.

Common Stock Forward

In connection with the issuance of the 5.5% Convertible Senior Notes, the Company also entered into a forward stock purchase transaction ~~or the Common~~(the “Common Stock ~~Forward,~~Forward”), pursuant to which the Company agreed to purchase 14,397,906 shares of its common stock for settlement on or about March 15, 2023. In connection with the issuance of the 3.75% Convertible Senior Notes and the partial repurchase of the 5.5% Convertible Senior Notes, the Company amended and extended the maturity of the Common Stock Forward to June 1, 2025. The number of shares of common stock that the Company will ultimately repurchase under the Common Stock Forward is subject to customary anti-dilution adjustments. The Common Stock Forward is subject to early settlement or settlement with alternative consideration in the event of certain corporate transactions.

The net cost incurred in connection with the Common Stock Forward of $27.5 million ~~has been~~was recorded as an increase in treasury stock in the unaudited interim condensed consolidated balance sheets. The related shares were accounted for as a repurchase of common stock.

~~In conjunction with the partial payoff of the 5.5% Convertible Senior Notes, the Common Stock Forward’s expiration date was extended to June 1, 2025.~~

The book ~~values~~value of the 5.5% Notes Capped Call and Common Stock Forward are not remeasured.

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During ~~October~~the fourth quarter of 2020, the Common Stock Forward was partially settled and, as a result, the Company received ~~3.5~~4.4 million shares of its common stock. During the three months ended September 30, 2021, 0 shares were settled and received by the Company. During the nine months ended September 30, 2021, 8.1 million shares were settled and received by the Company.

~~10.~~11. Stockholders’ Equity

Preferred Stock

The Company has authorized 5.0 million shares of preferred stock, par value $0.01 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 authorized Series A Junior Participating Cumulative Preferred Stock, par value $0.01 per share. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were 0 shares of Series A Junior Participating Cumulative Preferred Stock issued and outstanding. ~~See Note 11, Redeemable Convertible Preferred Stock, for a description of the Company’s Series C Preferred Stock and Series E Preferred Stock.~~

Common Stock and Warrants

The Company has one class of common stock, par value ~~$.01~~$0.01 per share. Each share of the Company’s common stock is entitled to 1 vote on all matters submitted to stockholders.

In February 2021, the Company completed the previously announced sale of its common stock in connection with a strategic partnership with SK Holdings Co., Ltd. (“SK Holdings”) to accelerate the use of hydrogen as an alternative energy source in Asian markets. The Company sold 54,966,188 shares of its common stock to a subsidiary of SK Holdings at a purchase price of $29.2893 per share, or an aggregate purchase price of approximately $1.6 billion.

In January and February 2021, the Company issued and sold in a registered equity offering an aggregate of 32.2 million shares of its common stock at a purchase price of $65.00 per share for net proceeds of approximately $2.0 billion.

In November 2020, the Company issued and sold in a registered equity offering an aggregate of 43,700,000 shares of its common stock at a purchase price of $22.25 per share for net proceeds of approximately $927.3 million.

In August 2020, the Company issued and sold in a registered ~~direct~~equity offering an aggregate of 35,276,250 shares of its common stock at a purchase price of $10.25 per share for net proceeds of approximately $344.4 million.

In March 2019, the Company issued and sold in a registered direct offering an aggregate of 10 million shares of the Company’s common stock at a purchase price of $2.35 per share. The net proceeds to the Company were approximately $23.5 million.

~~There were 390,197,748 and 303,378,515 shares of common stock outstanding as of September 30, 2020 and December 31, 2019, respectively.~~

During 2017, warrants to purchase up to 110,573,392 shares of common stock were issued in connection with transaction agreements with Amazon and Walmart, as discussed in Note 12, ~~Warrant~~“Warrant Transaction Agreements.” At both September 30, ~~2020~~2021 and December 31, ~~2019, 40,737,564~~2020, a total of 68,380,913 warrants had vested. Warrants were exercised with respect to 5,819,652 shares during the fourth quarter of 2020. For the three and ~~26,188,434~~nine months ended September 30, 2021, warrants were exercised with respect to 3,501,640 and 24,736,559 shares of ~~the warrant shares had vested, respectively, and are therefore exercisable.~~common stock, respectively. These warrants are measured at fair value asat the time of ~~January 1, 2019~~grant or modification and are classified as equity instruments on the unaudited interim condensed consolidated balance sheets.

At Market Issuance Sales Agreement

On April 13, 2020, the Company entered into the At Market Issuance Sales Agreement with ~~FBR~~B. Riley Financial (“B. Riley”), as sales agent, pursuant to which the Company may offer and sell, from time to time through ~~FBR,~~B. Riley, shares of Company common stock having an aggregate offering price of up to $75.0 million. As of the date of this filing, the Company has not issued any shares of common stock pursuant to the At Market Issuance Sales Agreement.

~~11. Redeemable Convertible Preferred Stock~~

~~Series E Preferred Stock~~

In November 2018, the Company issued an aggregate of 35,000 shares of the Company’s Series E Preferred Stock in a private placement to certain accredited investors in reliance on Section 4(a)(2) of the Securities Act. The Company received net proceeds of approximately $30.9 million, after deducting placement agent fees and expenses payable by the Company. The Company is required to redeem the Series E Preferred Stock in 13 monthly installments in the amount of $2.7 million each from May 2019 through May 2020. The Company had 0 and 500 shares of Series E Preferred Stock outstanding at September 30, 2020 and 2019, respectively. The remaining 500 shares were converted to common stock in January 2020.

~~Series C Preferred Stock~~

In April 2020, 870 shares of Series C Preferred Stock were converted to 923,819 shares of common stock. In May 2020, the remaining the 1,750 shares of Series C Preferred Stock were converted into 1,858,256 shares of common stock.

12. Warrant Transaction Agreements

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Amazon Transaction Agreement

On April 4, 2017, the Company and Amazon entered into a Transaction Agreement (the ~~Amazon~~“Amazon Transaction ~~Agreement)~~Agreement”), pursuant to which the Company agreed to issue to Amazon.com NV Investment Holdings LLC, a wholly owned subsidiary of Amazon, ~~warrants~~a warrant (the “Amazon Warrant”) to acquire up to 55,286,696 shares of the Company’s common stock (the ~~Amazon~~“Amazon Warrant ~~Shares)~~Shares”), subject to certain vesting events described below. The Company and Amazon entered into the Amazon Transaction Agreement in connection with existing commercial agreements between the Company and Amazon with respect to the deployment of the Company’s GenKey fuel cell technology at Amazon distribution centers. The existing commercial agreements contemplate, but do not guarantee, future purchase orders for the Company’s fuel cell technology. The vesting of the Amazon Warrant Shares ~~is linked to~~was conditioned upon payments made by Amazon or its affiliates (directly or indirectly through third parties) pursuant to the existing commercial agreements.

~~The majority~~Under the terms of the original Amazon Warrant, the first tranche of the 5,819,652 Amazon Warrant Shares vested upon execution of the Amazon Warrant, and the remaining Amazon Warrant Shares ~~will~~ vest based on Amazon’s payment of up to $600.0 million to the Company in connection with Amazon’s purchase of goods and services from the Company. The ~~first tranche of 5,819,652 Amazon Warrant Shares vested upon the execution of the Amazon Transaction Agreement. Accordingly,~~ $6.7 million ~~the~~ fair value of the first tranche of the Amazon Warrant Shares was recognized as selling, general and administrative expense ~~during 2017. All future provision~~upon execution of the Amazon Warrant.

Provision for ~~common stock warrants~~the second and third tranches of Amazon Warrant Shares is ~~measured based on their grant-date fair value and~~ recorded as a ~~charge against revenue.~~reduction of revenue because they represent consideration payable to a customer.

The fair value of the second tranche of Amazon Warrant Shares was measured at January 1, 2019, upon adoption of ASU 2019-08. The second tranche of 29,098,260 Amazon Warrant Shares vested in 4 equal installments, ~~of 7,274,565 Amazon Warrant Shares each time~~as Amazon or its affiliates, directly or indirectly through third parties, ~~make~~made an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $200.0 million in the aggregate. The ~~exercise price for~~last installment of the ~~first~~second tranche vested on November 2, 2020. Revenue reductions of $9.0 million, $4.1 million and $9.8 million associated with the second ~~tranches~~tranche of Amazon Warrant Shares ~~is $1.1893 per share. The~~were recorded in 2020, 2019 and 2018, respectively, under the terms of the original Amazon Warrant.

Under the terms of the original Amazon Warrant, the third tranche of 20,368,784 Amazon Warrant Shares ~~will vest~~vests in 8 equal installments, ~~of 2,546,098 Amazon~~ ~~Warrant Shares~~

~~each time~~as Amazon or its affiliates, directly or indirectly through third parties, ~~make~~made an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $400.0 million in the aggregate. The measurement date for the third tranche of Amazon Warrant Shares was November 2, 2020, when their exercise price was determined, as discussed further below. The fair value of the third tranche of Amazon Warrant Shares was determined to be $10.57 each. During 2020, revenue reductions of $24.1 million associated with the third tranche Amazon Warrant Shares were recorded under the terms of the original Amazon Warrant, prior to the December 31, 2020 waiver described below.

On December 31, 2020, the Company waived the remaining vesting conditions under the Amazon Warrant, which resulted in the immediate vesting of all the third tranche of the Amazon Warrant Shares and recognition of an additional $399.7 million reduction to revenue.

The $399.7 million reduction to revenue resulting from the December 31, 2020 waiver was determined based upon a probability assessment of whether the underlying shares would have vested under the terms of the original Amazon Warrant. Based upon the Company’s projections of probable future cash collections from Amazon (i.e., a Type I share based payment modification), a reduction of revenue associated with 5,354,905 Amazon Warrant Shares was recognized at their previously measured November 2, 2020 fair value of $10.57 per warrant. A reduction of revenue associated with the remaining 12,730,490 Amazon Warrant Shares was recognized at their December 31, 2020 fair value of $26.95 each, based upon the Company’s assessment that associated future cash collections from Amazon were not deemed probable (i.e., a Type III share based payment modification).

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31, 2020 waiver. Additionally, for the year ended December 31, 2020, the Company recorded a reduction to the provision for warrants of $12.8 million in connection with the release of the service loss accrual.

At December 31, 2020, all 55,286,696 of the Amazon Warrant Shares had vested. For service contracts entered into prior to December 31, 2020, the warrant charge associated with that revenue was capitalized and is subsequently amortized over the life of the service contract. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Amazon Warrant during the three months ended September 30, 2021 and 2020 was $106thousand and $17.3 million, respectively. The amount of provision for common stock warrants recorded as a reduction of revenue for the Amazon Warrant during the nine months ended September 30, 2021 and 2020 was $315 thousand and $22.0 million, respectively. During the three and nine months ended September 30, 2021, the Amazon Warrant was exercised with respect to 3,501,640 and 17,461,994 shares of common stock, respectively.

The exercise price for the first and second tranches of Amazon Warrant Shares was $1.1893 per share. The exercise price of the third tranche of Amazon Warrant Shares iswas $13.81 per share, which iswas determined pursuant to the terms of the Amazon Warrant as an amount ~~per share~~ equal to ~~ninety~~90 percent (90%) of the 30-day volume weighted average share price of the Company’s common stock as of November 2, 2020, the final vesting date of the second tranche of Amazon Warrant Shares. The Amazon Warrant ~~Shares are~~is exercisable through April 4, 2027. The Amazon Warrant ~~Shares provide~~provides for net share settlement that, if elected by the ~~holders,~~holder, will reduce the number of shares issued upon exercise to reflect net settlement of the exercise price. The Amazon Warrant ~~Shares provide~~provides for certain adjustments that may be made to the exercise price and the number of shares of common stock issuable upon exercise due to customary anti-dilution provisions based on future events. ~~These warrants are~~The Amazon Warrant is classified as an equity ~~instruments.~~instrument.

~~At September 30, 2020 and December 31, 2019, 27,643,347 and 20,368,782~~Fair value of the Amazon Warrant ~~Shares had vested, respectively. The amount of provision for common stock warrants recorded as a reduction of revenue for the Amazon Warrant during the three months ended September 30,~~at December 31, 2020 and 2019 was $17.3 million and $1.0 million, respectively. The amount of provision for common stock warrants recorded as a reduction of revenue for the Amazon Warrant during the nine months ended September 30, 2020 and 2019 was $22.0 million and $2.0 million, respectively.

During the third quarter of 2020, approximately $23.8 million of recorded revenue from Amazon was constrained by the tranche 3 of the Amazon Warrant Shares. An additional 7,274,565 Amazon Warrant Shares vested on November 2, 2020 representing the final vesting of tranche 2, resulting in cumulative vesting in 34,917,912 Warrant Shares since the execution of the Amazon Transaction Agreement. In accordance with terms of the Amazon Transaction Agreement as described above, upon final vesting of tranche 2, the tranche 3 Amazon Warrant Shares exercise price was ~~determined to be $13.81 per share. Based~~based on the ~~exercise price of~~Black Scholes Option Pricing Model, which is based, in part, upon level 3 unobservable inputs for which there is little or no market data, requiring the ~~third tranche of the Amazon Warrant Shares, among other things, the fair value of the 20,368,784 tranche 3 Amazon Warrant Shares is estimated~~Company to ~~be $10.60 each, compared to the fair value of tranche 2 Amazon Warrant Shares of $1.05 each.~~develop its own assumptions.

The Company ~~also recorded a provision~~used the following assumptions for ~~losses of $4.3 million in the third quarter of 2020 related to~~its Amazon ~~service contracts, caused primarily by the increase in the value of the tranche 3 warrants, driven by recent increases in the Company’s stock price.~~Warrant:


	December 31, 2020	November 2, 2020
Risk-free interest rate	0.58%	0.58%
Volatility	75.00%	75.00%
Expected average term	6.26	6.42
Exercise price	$13.81	$13.81
Stock price	$33.91	$15.47

Walmart Transaction Agreement

On July 20, 2017, the Company and Walmart entered into a Transaction Agreement (the ~~Walmart~~“Walmart Transaction ~~Agreement)~~Agreement”), pursuant to which the Company agreed to issue to Walmart a warrant (the “Walmart Warrant”) to acquire up to 55,286,696 shares of the Company’s common stock, subject to certain vesting events (the ~~Walmart~~“Walmart Warrant ~~Shares)~~Shares”). The Company and Walmart entered into the Walmart Transaction Agreement in connection with existing commercial agreements between the Company and Walmart with respect to the deployment of the Company’s GenKey fuel cell technology across various Walmart distribution centers. The existing commercial agreements contemplate, but do not guarantee, future purchase orders for the Company’s fuel cell technology. The vesting of the warrant shares ~~is linked to~~conditioned upon payments made by Walmart or its affiliates (directly or indirectly through third parties) pursuant to transactions entered into after January 1, 2017 under existing commercial agreements.

The majority of the Walmart Warrant Shares will vest based on Walmart’s payment of up to $600.0 million to the Company in connection with Walmart’s purchase of goods and services from the Company. The first tranche of 5,819,652 Walmart Warrant Shares vested upon the execution of the Walmart ~~Transaction Agreement.~~Warrant and was fully exercised as of December 31, 2020. Accordingly, $10.9 million, the fair value of the first tranche of Walmart Warrant Shares, was recorded as a provision for common stock warrants and presented as a reduction to revenue on the ~~unaudited interim condensed~~ consolidated statements

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of operations during 2017. All future provision for common stock warrants is measured based on their grant-date fair value and recorded as a charge against revenue. The second tranche of 29,098,260 Walmart Warrant Shares ~~will vest~~vests in 4 installments of 7,274,565 Walmart Warrant Shares each time Walmart or its affiliates, directly or indirectly through third parties, make an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $200.0 million in the aggregate. The exercise price for the first and second tranches of Walmart Warrant Shares is $2.1231 per share. After Walmart has made payments to the Company totaling $200.0 million, the third tranche of 20,368,784 Walmart Warrant Shares will vest in 8 installments of 2,546,098 Walmart Warrant Shares each time Walmart or its affiliates, directly or indirectly through third parties, make an aggregate of $50.0 million in payments for goods and services to the

Company, up to payments totaling $400.0 million in the aggregate. The exercise price of the third tranche of Walmart Warrant Shares will be an amount per share equal to ninety percent (90%) of the 30-day volume weighted average share price of the common stock as of the final vesting date of the second tranche of Walmart Warrant Shares, provided that, with limited exceptions, the exercise price for the third tranche will be no lower than $1.1893. The Walmart Warrant ~~Shares are~~is exercisable through July 20, 2027.

The Walmart Warrant ~~Shares provide~~provides for net share settlement that, if elected by the ~~holders,~~holder, will reduce the number of shares issued upon exercise to reflect net settlement of the exercise price. The Walmart Warrant ~~Shares provide~~provides for certain adjustments that may be made to the exercise price and the number of shares of common stock issuable upon exercise due to customary anti-dilution provisions based on future events. ~~These warrants are~~The Walmart Warrant is classified as an equity ~~instruments.~~instrument.

At both September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 13,094,217 ~~and 5,819,652~~ of the Walmart Warrant Shares had ~~vested, respectively.~~vested. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Walmart Warrant during the three months ended September 30, 2021 and 2020 ~~and 2019~~ was ~~$1.3~~$1.2 million and ~~$0.5~~$1.3 million, respectively. The amount of provision for common stock warrants recorded as a reduction of revenue for the Walmart Warrant during the nine months ended September 30, 2021 and 2020 was $4.4 million and ~~2019 was~~ $3.2 million, respectively. During the three months ended March 31, 2021, the Walmart Warrant had been exercised with respect to 7,274,565 shares of common stock. There were 0 exercises during the second or third quarter of 2021.

13. Revenue

Disaggregation of revenue

The following table provides information about disaggregation of revenue (in thousands):


Major products/services lines
	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Sales of fuel cell systems	$	67,032	$	51,998	$	152,620	$	107,515
Sale of hydrogen installations and other infrastructure		48,967		31,664		109,429		44,361
Services performed on fuel cell systems and related infrastructure		6,677		6,829		18,397		19,586
Power Purchase Agreements		9,321		6,629		25,508		19,629
Fuel delivered to customers		11,556		9,831		33,804		24,536
Other		369		97		679		235
Net revenue	$	143,922	$	107,048	$	340,437	$	215,862

Contract balances

The following table provides information about receivables, contract assets and ~~$1.7 million, respectively.~~contract liabilities from contracts with customers (in thousands):

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~~13. Revenue~~

~~Disaggregation of revenue~~

~~The following table provides information about disaggregation of revenue (in thousands):~~

Major products/services lines

Three months ended September 30,

Nine months ended September 30,

2020

2019

2020

2019
Sales of fuel cell systems

$
51,864

$
29,775

$
107,779

$
67,566
Sale of hydrogen installations and other infrastructure

31,664

9,102

43,882

12,551
Services performed on fuel cell systems and related infrastructure

6,829

6,205

19,586

17,889
Power Purchase Agreements

6,704

6,595

19,854

19,114
Fuel delivered to customers

9,831

7,649

24,536

21,320
Other

97

135

235

135
Net revenue

$
106,989

$
59,461

$
215,872

$
138,575

~~Contract balances~~

~~The following table provides information about receivables, contract assets and contract liabilities from contracts with customers (in thousands):~~

September 30,

December 31,

2020

2019
Accounts receivable

$
113,133

$
25,448
Contract assets

12,029

13,251
Contract liabilities

76,526

43,480


	September 30,		December 31,
	2021		2020
Accounts receivable	$	132,370	$	43,041
Contract assets		9,284		18,189
Contract liabilities		115,595		76,285

Contract assets relate to contracts for which revenue is recognized on a straight-line ~~basis,~~basis; however, billings escalate over the life of a contract. Contract assets also include amounts recognized as revenue in advance of billings to customers, which are dependent upon the satisfaction of another performance obligation. These amounts are included within prepaid expenses and other current assets on the accompanying unaudited interim condensed consolidated balance sheets.

The contract liabilities relate to the advance consideration received from customers for services that will be recognized over time (primarily fuel cell and related infrastructure services)~~. Contract liabilities also include~~ and advance consideration received from customers prior to delivery of products. ~~These amounts are~~As of September 30, 2021, the amount of contract liabilities included within deferred revenue was $98.9 million and the amount of contract liabilities within other current liabilities was $16.7 million on the accompanying unaudited interim condensed consolidated ~~interim~~ balance sheets. As of December 31, 2020, the amount of contract liabilities included within deferred revenue was $56.2 million and the amount of contract liabilities within other current liabilities was $20.1 million.

Significant changes in the contract assets and the contract liabilities balances during the period are as follows (in thousands):



Contract assets	Nine months ended
	September 30, ~~2020~~2021
Transferred to receivables from contract assets recognized at the beginning of the period	$	~~(10,249)~~(13,344)
Revenue recognized and not billed as of the end of the period		~~9,027~~4,439
Net change in contract assets		~~(1,222)~~(8,905)


Contract liabilities	Nine months ended		Nine months ended
	September 30, 2020		September 30, 2021
Increases due to cash received, net of amounts recognized as revenue during the period	$	58,732	$	91,985
Contract liabilities assumed as part of acquisitions		18,107
Revenue recognized that was included in the contract liability balance as of the beginning of the period		(43,793)		(52,675)
Net change in contract liabilities	$	33,046	$	39,310

Estimated future revenue

~~The following table includes estimated revenue expected to be recognized in the future (sales~~Sales of fuel cell systems and hydrogen installations are expected to be recognized as revenue within one ~~year;~~year and sales of services and PPAs are expected to be recognized as revenue over five to seven ~~years)~~years. The following table includes estimated revenue included in the backlog expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period, ~~excluding~~including provision for common stock warrants ~~as it is not readily estimable as it depends on the valuation of the common stock warrants when revenue is recognized~~ (in thousands):

September 30,

2020
Sales of fuel cell systems

$
50,285
Sale of hydrogen installations and other infrastructure

62,705
Services performed on fuel cell systems and related infrastructure

86,536
Power Purchase Agreements

177,721
UHG molecule

20,680
Other rental income

3,705
Total estimated future revenue

$
401,632



	September 30,
	2021
Sales of fuel cell systems	$	23,819
Sale of hydrogen installations and other infrastructure		58,429
Services performed on fuel cell systems and related infrastructure		105,548
Power Purchase Agreements		212,360
Fuel delivered to customers		62,609
Other rental income		2,116

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Total estimated future revenue

464,881

Contract costs

Contract costs consist of capitalized commission fees and other expenses related to obtaining or fulfilling a contract.

Capitalized contract costs at September 30, ~~2020~~2021 and December 31, ~~2019~~2020 were $807 thousand and $1.3 million, ~~and $0.5,~~ respectively. ~~Expense related to the amortization of capitalized contract costs was not significant~~

14. Income Taxes

The Company did 0t record any income tax expense or benefit for the three or nine months ended September 30, ~~2020 and 2019.~~

~~14. Income Taxes~~

2021. The Company recognized an income tax benefit for the three and nine months ended September 30, 2020 of ~~$6.5 million~~$6.6 and ~~$24.2 million, respectively. Income tax benefit for the three and nine months ended September 30, 2020 included $6.5 million and $19.0~~$19.0 million, respectively, resulting from the intraperiod tax allocation rules under ASC Topic 740-20, Intraperiod Tax Allocation, under which the Company recognized an income tax benefit resulting from a source of future taxable income attributable to the net credit to additional paid-in capital related to the issuance of the 3.75% Convertible Senior Notes, offset by the partial extinguishment of the 5.5% Convertible Senior Notes. In addition, the Company recorded ~~$5.2~~$5.0 million of income tax benefit for the nine months ended September 30, 2020 related to the recognition of net deferred tax liabilities in connection with the Giner, ELX Inc. acquisition, which resulted in a corresponding reduction in our deferred tax asset valuation allowance. The Company has not changed its overall conclusion with respect to the need for a valuation allowance against its net deferred tax assets, which remain fully reserved.

The ~~remaining~~ net deferred tax asset generated from the Company’s ~~current period~~ 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. The Company ~~also~~ recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.

15. Fair Value Measurements

~~During 2020,~~

The Company records the ~~Company had no financial instruments measured at~~ fair value of assets and liabilities in accordance with ASC 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on ~~a recurring basis.~~assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.

In addition to defining fair value, ASC 820 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The ~~following table summarizes~~hierarchy prioritizes the ~~amounts recorded~~inputs into three levels based on the ~~unaudited interim condensed consolidated statement of operations for financial instruments measured at~~extent to which inputs used in measuring fair value ~~on a recurring basis for the three and nine months ended September 30, 2019 (in thousands):~~

Quoted Prices

Significant

Significant

in Active

Other

Other

Markets for

Observable

Unobservable

Identical Items

Inputs

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

Common stock warrant liability

$
7

$
—

$
—

$
7

~~The Company’s common stock warrant liability represents the only asset or liability classified financial instrument measured at fair value on a recurring basis~~are observable in the ~~unaudited interim condensed consolidated balance sheets. The~~market. Each fair value measurement is reported in one of the three levels, which is determined by ~~using Level 3 inputs due~~the lowest level input that is significant to the ~~lack of active and observable markets that can be used to price identical assets. Level 3 inputs are unobservable inputs and 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~~measurement in ~~the circumstances, which might include internally generated data and assumptions being used to price the asset or liability.~~its entirety.

~~Fair value~~These levels are:

●

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities.

●

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

●

Level 3 — unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability at fair value.

The fair values of the ~~common stock warrant liability~~Company’s investments are based upon prices provided by an independent pricing service. Management has assessed and concluded that these prices are reasonable and has not adjusted any prices received from the independent provider. Securities reported at fair value utilizing Level 1 inputs represent assets whose fair value is determined based ~~on the Black-Scholes pricing model which~~upon observable unadjusted quoted market prices for identical assets in active markets. Level 2 securities represent assets whose fair value is ~~based, in part, upon unobservable inputs for which there is little or no~~determined using observable market ~~data, requiring the Company to develop its own assumptions.~~

information such as previous day trade prices,

~~The Company used the following assumptions to measure the fair value~~Table of ~~its liability-classified common stock warrants:~~

Contents


	~~Nine months ended~~
	~~September 30, 2019~~
~~Risk-free interest rate~~	~~1.99% - 2.51%~~
~~Volatility~~	~~22.62% - 74.93%~~
~~Expected average term~~	~~0.03 - 0.53~~

~~There was 0 expected dividend yield for the warrants granted.~~

~~16. Commitments and Contingencies~~

~~Lessor Obligations~~

~~As of September 30, 2020, the Company had noncancelable operating leases (as lessor), primarily associated with assets deployed at customer sites. These leases expire over the next~~ ~~one~~ ~~to nine years. Leases contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote.~~

~~Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of September 30, 2020 were as follows (in thousands):~~

Remainder of 2020

$
8,272
2021

34,436
2022

32,665
2023

30,043
2024

26,660
2025 and thereafter

$
49,351
Total future minimum lease payments

$
181,427

~~Lessee Obligations~~

As of September 30, 2020, the Company had operating and finance leases, as lessee, primarily associated with sale/leaseback transactions that are partially secured by restricted cash, security deposits and pledged escrows (see also Note 1, Nature of Operations) as summarized below. These leases expire over the next ~~one~~ to eight years. Minimum rent payments under operating and finance leases are recognized on a straight-line basis over the term of the lease. Leases contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote.

In prior periods, the Company entered into sale/leaseback transactions that were accounted for as finance leases and reported as part of finance obligations. The outstanding balance of finance obligations related to sale/leaseback transactions at September 30, 2020 and December 31, 2019 was $25.9 million and $31.7 million, respectively. The fair value of the finance obligation approximated the carrying value as of both September 30, 2020 and December 31, 2019.

The Company has sold future services to be performed associated with certain sale/leaseback transactions and recorded the balance as a finance obligation. The outstanding balance of this obligation at September 30, 2020 was $144.3 million, of which $22.2 million and $122.1 million were classified as short-term and long-term, respectively, on the unaudited interim condensed consolidated balance sheets. The outstanding balance of this obligation at December 31, 2019 was $109.4 million, of which $15.5 million and $93.9 million were classified as short-term and long-term, respectively. The amount is amortized using the effective interest method. The fair value of this finance obligation approximated the carrying value as of September 30, 2020.

The Company has a finance lease associated with its property and equipment in Latham, New York. A liability relating to this lease of $2.8 million has been recorded as a finance obligation in the unaudited interim condensed

~~consolidated balance sheet~~quotes from less active markets or quoted prices of securities with similar characteristics. There were 0 transfers betweenLevel1, Level2, or Level 3 during the nine months ended September 30, 2021.

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):


		As of September 30, 2021
		Carrying		Fair		Fair Value Measurements
		Amount		Value		Level 1		Level 2		Level 3
Assets
Cash equivalents (1)	$	610,651	$	610,651	$	140,574	$	470,077	$	—
Corporate bonds		530,089		530,089		—		530,089		—
Commercial paper		35,795		35,795		—		35,795		—
U.S. Treasuries		169,878		169,878		169,878		—		—
Certificates of deposit		17,004		17,004		—		17,004		—
Equity securities		147,649		147,649		147,649		—		—

Liabilities
Contingent consideration		18,520		18,520		—		—		18,520
Convertible senior notes		192,320		1,006,639		—		1,006,639		—
Long-term debt		147,255		147,255		—		—		147,255
Finance obligations		207,837		207,837		—		—		207,837


		As of December 31, 2020
		Carrying		Fair		Fair Value Measurements
		Amount		Value		Level 1		Level 2		Level 3
Liabilities
Contingent consideration		9,760		9,760		—		—		9,760
Convertible senior notes		85,640		1,272,766		—		1,272,766		—
Long-term debt		175,402		175,402		—		—		175,402
Finance obligations		181,553		181,553		—		—		181,553

(1)

Included in “Cash and cash equivalents” in our unaudited interim condensed consolidated balance sheets as of September 30, 2021.

The fair values for available-for-sale and equity securities are based on prices obtained from independent pricing services. Available-for-sale securities are characterized as Level 2 assets, as their fair values are determined using observable market inputs. Equity securities are characterized as Level 1 assets, as their fair values are determined using active markets for identical assets.

Financial instruments not recorded at fair value on a recurring basis include equity method investments that have not been remeasured or impaired in the current period, such as our investment in HyVia.

16. Operating and Finance Lease Liabilities

As of September 30, ~~2020.~~2021, the Company had operating leases, as lessee, primarily associated with sale/leaseback transactions that are partially secured by restricted cash, security deposits and pledged escrows (see also Note 1, “Nature of Operations”) as summarized below. These leases expire over the next one to nine years. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease.

Leases contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote. At the end of the lease term, the leased assets may be returned to the lessor by the Company, the Company may negotiate with the lessor to purchase the assets at fair market value, or the Company may negotiate with the lessor to renew the lease at market rental rates. No residual value guarantees are contained in the leases. No financial covenants are contained within the lease; however there are customary operational covenants such as assurance the Company properly maintains the leased assets and carries appropriate insurance, etc. The leases include credit support in the form of either cash, collateral or letters of credit. See Note 19, “Commitments and Contingencies” for a description of cash held as security associated with the leases.

The Company has finance leases associated with its property and equipment in Latham, New York and at fueling customer locations. The fair value of this finance obligation approximated the carrying value as of September 30, ~~2020.~~

~~Future minimum lease payments under operating and finance leases (with initial or remaining lease terms in excess of one year) as of September 30, 2020 were as follows (in thousands):~~

Other

Total

Operating

Finance

Leased

Finance

Leases

Leases

Property

Obligations
Remainder of 2020

$
14,639

$
2,546

$
186

$
17,371
2021

58,505

9,276

590

68,371
2022

58,480

4,975

573

64,028
2023

55,655

3,149

549

59,353
2024

54,203

16,154

632

70,989
2025 and thereafter

71,304

—

1,174

72,478
Total future minimum lease payments

312,786

36,100

3,704

352,590
Less imputed lease interest

(84,903)

(10,190)

(947)

(96,040)
Sale of future services

144,292

—

—

144,292
Total lease liabilities

$
372,175

$
25,910

$
2,757

$
400,842

Rental expense for all operating leases was $14.6 million and $7.8 million for the three months ended September 30, 2020 and 2019, respectively. Rental expense for all operating leases was $40.1 million and $19.9 million for the nine months ended September 30, 2020 and 2019, respectively.

The gross profit on sale/leaseback transactions for all operating leases was $24.5 million and $44.2 million for the three and nine months ended September 30, 2020, respectively, and $14.8 million and $30.9 million for the three and nine months ended September 30, 2019, respectively. Right of use assets obtained in exchange for new operating lease liabilities was $41.1 million and $86.5 million for the three and nine months ended September 30, 2020, respectively, and $38.4 million and $72.9 million for the three and nine months ended September 30, 2019.

At both September 30, 2020 and December 31, 2019, security deposits associated with sale/leaseback transactions were $5.8 million and were included in other assets in the unaudited interim condensed consolidated balance sheets.

~~Other information related to the operating leases are presented in the following tables:~~

Nine months ended

Nine months ended

September 30, 2020

September 30, 2019
Cash payments (in thousands)
$
40,500

$
19,222

September 30,

2020

2019
Weighted average remaining lease term (years)

5.5

5.25
Weighted average discount rate

12.1%

12.1%

2021.

Table of Contents

~~Finance~~Future minimum lease ~~costs include amortization~~payments under operating and finance leases (with initial or remaining lease terms in excess of one year) as of September 30, 2021 were as follows (in thousands):


			Finance		Total
		Operating Lease	Lease		Lease
		Liability	Liability		Liabilities
Remainder of 2021	$	9,929	$	1,019	$	10,948
2022		39,932		4,012		43,944
2023		39,989		3,989		43,978
2024		39,957		3,996		43,953
2025 and thereafter		90,241		10,843		101,084
Total future minimum payments		220,048		23,859		243,907
Less imputed interest		(57,364)		(4,074)		(61,438)
Total	$	162,684	$	19,785	$	182,469

Rental expense for all operating leases was $9.6 million and $8.1 million for the three months ended September 30, 2021 and 2020, respectively. Rental expense for all operating leases was $25.8 million and $20.6 million for the nine months ended September 30, 2021 and 2020, respectively.

The gross profit on sale/leaseback transactions for all operating leases was $30.7 million and $25.2 million for the three months ended September 30, 2021 and 2020, respectively. The gross profit on sale/leaseback transactions for all operating leases was $66.1 million and $44.9 million for the nine months ended September 30, 2021 and 2020, respectively.

Right of use assets for sale/leaseback transactions obtained in exchange for new operating lease liabilities was $26.6 million and $24.6 million for the three months ended September 30, 2021 and 2020, respectively. Right of use assets for sale/leaseback transactions obtained in exchange for new operating lease liabilities was $62.5 million and $32.7 million for the nine months ended September 30, 2021 and 2020, respectively.

At September 30, 2021 and December 31, 2020, the right of use assets ~~(i.e.,~~associated with operating leases was $200.2 million and $136.9 million, respectively. The accumulated depreciation ~~expense)~~for these right of use assets was $32.3 million and ~~interest on lease liabilities (i.e., interest~~$19.9 million at September 30, 2021 and ~~other expense, net in the unaudited interim consolidated statement of operations). Finance lease costs were as follows (in thousands):~~December 31, 2020, respectively.

Nine months ended

Nine months ended

September 30, 2020

September 30, 2019
Amortization of right of use asset
$
2,655

$
2,308
Interest on finance obligations

1,778

3,194
Total finance lease cost
$
4,433

$
5,502

At September 30, 2021 and December 31, 2020, the right of use assets associated with finance leases was $22.8 million and $5.7 million, respectively. The accumulated depreciation for these right of use assets was $757 thousand and $102 thousand at September 30, 2021 and December 31, 2020, respectively.

At September 30, 2021 and December 31, 2020, security deposits associated with sale/leaseback transactions were $3.3 million and $5.8 million, respectively, and were included in other assets in the consolidated balance sheets.

Other information related to the operating leases are presented in the following table:


	Nine months ended		Nine months ended
	September 30, 2021		September 30, 2020
Cash payments (in thousands)	$	25,726	$	14,954
Weighted average remaining lease term (years)		5.72		4.55
Weighted average discount rate		11.2%		11.8%

Right of use assets obtained in exchange for new finance lease liabilities ~~was $41.1~~were $5.8 million and ~~$86.5 million~~$0 for the three months ended September 30, 2021 and 2020, respectively. Right of use assets obtained in exchange for new finance lease liabilities were $17.9 million and $686 thousand for the nine months ended September 30, ~~2020, respectively,~~2021 and ~~$38.4 million and $72.9 million for the three and nine months ended September 30, 2019,~~2020, respectively.

Table of Contents

Other information related to the finance leases are presented in the following ~~tables:~~table:


		Nine months ended		Nine months ended	Nine months ended		Nine months ended
		September 30, 2020		September 30, 2019	September 30, 2021		September 30, 2020
Cash payments (in thousands)	$	7,847	$	57,659	$	2,128	$	252
Weighted average remaining lease term (years)						4.57		6.51
Weighted average discount rate						6.9%		9.6%

As of September 30,

2020

2019
Weighted average remaining lease term (years)

3.36

3.09
Weighted average discount rate

7.8%

11.1%

17. Finance Obligation

The Company has sold future services to be performed associated with certain sale/leaseback transactions and recorded the balance as a finance obligation. The outstanding balance of this obligation at September 30, 2021 was $190.5million, $30.5 million and $160.0 million of which was classified as short-term and long-term, respectively, on the accompanying consolidated balance sheet. The outstanding balance of this obligation at December 31, 2020 was $157.7 million, $24.2 million and $133.5 million of which was classified as short-term and long-term, respectively. The amount is amortized using the effective interest method. The fair value of this finance obligation approximated the carrying value as of September 30, 2021 and December 31, 2020.

In prior periods, the Company entered into sale/leaseback transactions that were accounted for as financing transactions and reported as part of finance obligations. The outstanding balance of finance obligations related to sale/leaseback transactions at September 30, 2021 was $17.3 million, $5.1 million and $12.2 million of which was classified as short-term and long-term, respectively on the accompanying consolidated balance sheet. The outstanding balance of this obligation at December 31, 2020 was $23.9 million, $8.0 million and $15.9 million of which was classified as short-term and long-term, respectively on the accompanying consolidated balance sheets. The fair value of this finance obligation approximated the carrying value as of both September 30, 2021 and December 31, 2020.

Future minimum payments under finance obligations notes above as of September 30, 2021 were as follows (in thousands):


					Total
		Sale of Future		Sale/leaseback	Finance
		revenue - debt		financings	Obligations
Remainder of 2021	$	12,788	$	1,680	$	14,468
2022		50,632		4,975		55,607
2023		50,632		3,148		53,780
2024		50,632		16,154		66,786
2025 and thereafter		86,614		—		86,614
Total future minimum payments		251,298		25,957		277,255
Less imputed interest		(60,760)		(8,658)		(69,418)
Total	$	190,538	$	17,299	$	207,837

Other information related to the above finance obligations are presented in the following table:


		Nine months ended		Nine months ended
		September 30, 2021		September 30, 2020
Cash payments (in thousands)	$	41,325	$	31,693
Weighted average remaining term (years)		4.88		4.74
Weighted average discount rate		11.3%		11.3%

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18. Investments

The amortized cost, gross unrealized gains and losses, fair value of those investments classified as available-for-sale, and allowance for credit losses at September 30, 2021 are summarized as follows (in thousands):


	Amortized		Gross		Gross		Fair		Allowance for
	Cost		Unrealized Gains		Unrealized Losses		Value		Credit Losses
Corporate bonds	$	533,691	$	93	$	(3,695)	$	530,089		—
Commercial paper		35,719		76		—		35,795		—
Certificates of deposit		17,017		—		(13)		17,004		—
U.S. Treasuries		170,414		1		(537)		169,878		—
Total	$	756,841	$	170	$	(4,245)	$	752,766	$	—

The cost, gross unrealized gains and losses, and fair value of those investments classified as equity securities at September 30, 2021 are summarized as follows (in thousands):


	September 30, 2021
			Gross		Gross		Fair
		Cost	Unrealized Gains		Unrealized Losses		Value
Fixed income mutual funds	$	77,766	$	—	$	(132)	$	77,634
Exchange traded mutual funds		70,167		—		(152)		70,015
Total	$	147,933	$	—	$	(284)	$	147,649

A summary of the amortized cost and fair value of investments classified as available-for-sale, by contractual maturity, as of September 30, 2021 is as follows (in thousands):


	September 30, 2021
		Amortized	Fair
Maturity:		Cost	Value
Within one year	$	447,479	$	446,011
After one through five years		309,362		306,755
Total	$	756,841	$	752,766

Accrued interest income was $4.9 million at September 30, 2021 and is included within the balance for prepaid expenses and other current assets in the unaudited interim condensed consolidated balance sheets.

19. Commitments and Contingencies

Restricted Cash

~~As security for~~In connection with certain of the above noted sale/leaseback agreements, cash of ~~$133.4~~$301.3 million was required to be restricted as security as of September 30, ~~2020,~~2021, which restricted cash will be released over the lease term. As of September 30, ~~2020,~~2021, the Company also had certain letters of credit backed by ~~security deposits~~restricted cash totaling ~~$149.3~~$137.7 million that are security for the above noted sale/leaseback agreements.

In addition, as of September 30, 2020, the Company also had letters of credit in the aggregate amount of $0.5 million associated with a finance obligation from the sale/leaseback of its building. We consider cash collateralizing this letter of credit as restricted cash.

Litigation

Legal matters are defended and handled in the ordinary course of business. Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company has ~~established~~not recorded any accruals ~~for matters for which management considers a loss~~related to be probable and reasonably estimable. It is the opinion of management that facts known at the present time do not indicate that such litigation, after taking into account insurance coverage and the aforementioned accruals, will have a material adverse impact on our results of operations, financial position, or cash flows.any legal matters.

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Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist principally of cash, cash equivalents, restricted cash, accounts receivable and marketable securities. Cash and restricted cash are maintained in accounts with financial institutions, which, at times may exceed the Federal depository insurance coverage of $0.25 million. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. The Company’s available-for-sale securities consists primarily of investments in commercial paper, U.S. Treasury securities, and short-term high credit quality corporate debt securities. Equity securities are comprised of fixed income and equity market index mutual funds.

Concentrations of credit risk with respect to receivables exist due to the limited number of select customers with whom the Company has ~~initial~~ commercial sales arrangements. To mitigate credit risk, the Company performs appropriate evaluation of a prospective customer’s financial condition.

At September 30, ~~2020,~~2021, 1 customer comprised ~~approximately 84.5%~~79.6% of the total accounts receivable balance. At December 31, ~~2019, 2~~2020, 3 customers comprised ~~approximately 63.4%~~73.9% of the total accounts receivable balance.

For the nine months ended September 30, 2020, 71.8% of total consolidated revenues were associated primarily with two customers. For the nine months ended September 30, 2019, 62.3% of total consolidated revenues were associated primarily with 3 customers. For purposes of assigning a customer to a sale/leaseback transaction completed with a financial institution, the Company considers the end user of the assets to be the ultimate customer. For the three and nine months ended September 30, 2021, 80.1% and 80.6%, of total consolidated revenues were associated with two and three customers, respectively. For the three and nine months ended September 30, 2020, 83.0% and 71.8% of total consolidated revenues were associated primarily with three and two customers, respectively.

20. Employee Benefit Plans

2011 and 2021 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 provided 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 were 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. NaN further grants may be made under the 2011 Plan after May 12, 2021. Through various amendments to the 2011 Plan approved by the Company’s stockholders, the number of shares of the Company’s common stock authorized for issuance under the 2011 Plan had been increased to 42.4 million. The Company recorded expenses of approximately $12.7 million and $2.3 million, for the three months ended September 30, 2021 and 2020, respectively, in connection with the 2011 Plan. The Company recorded expense of approximately $32.3 million and $7.3 million, for the nine months ended September 30, 2021 and 2020, respectively, in connection with the 2011 Plan. In July 2021, the 2021 Stock Option Incentive Plan (the “2021 Plan”) was approved by the Company’s stockholders. The 2021 Plan provides for the issuance of up to a maximum number of shares of common stock equal to the sum of (i) 22,500,000 shares, plus 473,491 shares remaining under the 2011 Plan that were rolled into the 2021 Plan, plus (iii) shares underlying any awards under the 2011 Plan that are forfeited, canceled, cash-settled or otherwise terminated, other than by exercise.

Option Awards

The Company issues options that are time and performance-based awards. All option awards are determined to be classified as equity awards.

Service Stock Options Awards

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To date, options granted under the 2011 and 2021 Plans have vesting provisions ranging from one to three years in duration and expire ten years after issuance. 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. The Company estimates the fair value of the service 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 the service 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 1,870,835 and 3,429,549 service stock options granted during the nine months ended September 30, 2021 and 2020, respectively, were as follows:


	September 30,	September 30,
	2021	2020
Expected term of options (years)	3-5	6
Risk free interest rate	0.61% - 1.05%	0.37% - 1.37%
Volatility	72.46% - 75.52%	64.19% - 66.94%

There was 0 expected dividend yield for the service stock options granted.

The Company has historically used the simplified method in determining its expected term of all its service stock option grants in all periods presented. The simplified method was used because the Company did not believe historical exercise data provided a reasonable basis for the expected term of its grants, primarily as a result of the limited number of service stock option exercises that have historically occurred. Due to the recent increase in exercise activity at the Company, beginning in the second quarter of 2021, the expected term is based on the Company’s historical experience with employee early exercise behavior. The estimated stock price volatility was derived from the Company’s actual historic stock prices over the past five years, which represents the Company’s best estimate of expected volatility.

The following table reflects the service stock option activity for the nine months ended September 30, 2021:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
		Exercise		Contractual	Intrinsic
	Shares	Price		Terms	Value
Options outstanding at December 31, 2020	10,284,498	$	5.78	7.8	$	289,316
Granted	1,870,835		32.48	—		—
Exercised	(1,911,112)		2.78	—		—
Forfeited	(15,833)		21.35	—		—
Expired	(4,100)		6.10	—		—
Options outstanding at September 30, 2021	10,224,288	$	11.21	7.9	$	146,581
Options exercisable at September 30, 2021	5,045,168		4.46	6.7		106,360
Options unvested at September 30, 2021	5,179,120	$	17.77	9.0	$	40,221

The weighted average grant-date fair value of the service stock options granted during the three months ended September 30, 2021 and 2020 was $15.82 and $7.45, respectively. The weighted average grant-date fair value of the service stock options granted during the nine months ended September 30, 2021 and 2020 was $19.76 and $7.21, respectively. The total fair value of the service stock options that vested during the three months ended September 30, 2021 and 2020 was approximately $10.4 million and $5.2 million, respectively. The total fair value of the service stock options that vested during the nine months ended September 30, 2021 and 2020 was approximately $10.9 million and $5.9 million, respectively.

Compensation cost associated with service stock options represented approximately $4.2 million and $1.1 million of the total share-based payment expense recorded for the three months ended September 30, 2021 and September 30,

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2020, respectively. Compensation cost associated with service stock options represented approximately $11.9 million and 4.1 million of the total share-based payment expense recorded for the nine months ended September 30, 2021 and September 30, 2020, respectively. As of September 30, 2021 and 2020 there was approximately $50.2 million and $8.2 million of unrecognized compensation cost related to service stock option awards to be recognized over the next three years.

Performance Stock Option Awards

In September 2021, the Compensation Committee approved the grant of performance stock options to the Company’s Chief Executive Officer and certain other executive officers. These performance stock options are subject to both performance-based conditions tied to the achievement of stock price hurdles and time-based vesting; therefore, a Monte Carlo Simulation was utilized to determine the grant date fair value with the associated expense recognized over the requisite service period. Up to one-third (1/3) the performance stock options will vest and become exercisable on each of the first three anniversaries of the grant date, provided that the volume weighted average price of the Company’s common stock during any 30 consecutive trading day period in the three year performance period following the grant date of the stock options (“VWAP”) equals or exceeds certain levels. For the Company’s Chief Executive Officer, 25% of his performance stock options will be deemed to have satisfied the performance-based conditions and will be eligible to be exercised over time if the VWAP equals or exceeds $35; an additional 25% of his options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals or exceeds $50; an additional 16.675% of the options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals or exceeds $65; an additional 16.65% of the options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals or exceeds $80; and the remaining 16.675% of the options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals or exceeds $100. There will be no interpolation for the Chief Executive Officer’s performance stock option if the VWAP falls between any two stock price hurdles, unless in the event of a change in control. For executive officers other than the Chief Executive Officer, 25% of the performance stock options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals $35; an additional 25% of the options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals $50; and the remaining 50% of the options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals or exceeds $100. If the VWAP falls between two of the stock price hurdles, an incremental number of options will become exercisable based on linear interpolation in $1 increments. Failure to achieve any of the stock price hurdles applicable to a performance stock option during the three-year performance period will result in the applicable options not becoming exercisable. The performance-based stock options have a maximum term of seven years from the grant date.

Key inputs and assumptions used to estimate the fair value of performance stock options include the grant price of the awards, the expected option term, VWAP hurdle rates, 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 following table presents key assumptions used to estimate the fair value of the performance stock option awards granted in 2021:


		September 30,
		2021
Remaining VWAP performance period (years)		3
Risk- free interest rate		1.12%
Expected volatility		70.00%
Closing stock price on grant date		$ 26.92

The following table reflects the performance stock option award activity for the nine months ended September 30, 2021. Solely for the purposes of this table, the number of performance options is based on participants earning the maximum number of performance options (i.e 200% of the target number of performance options).

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				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
		Exercise		Contractual	Intrinsic
	Shares	Price		Terms	Value
Granted	14,560,000		26.92	—		—
Options outstanding at September 30, 2021	14,560,000	$	26.92	6.98	$	—
Options unvested at September 30, 2021	14,560,000	$	26.92	6.98	$	—

The weighted average grant-date fair value of performance stock options granted during the three months and nine months ended September 30, 2021 was $12.78. There were 0 performance stock options that were exercised during the three months and nine months ended September 30, 2021.

Compensation cost associated with performance stock options represented approximately $2.0 million of the total share-based payment expense recorded for the three months and nine months ended September 30, 2021. As of September, 30, 2021, there was approximately $183.7 million of unrecognized compensation cost related to performance stock option awards to be recognized over the next three years.

Restricted Stock Awards

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 associated with its restricted stock awards of approximately $6.5 million and $1.2 million, for the three months ended September 30, 2021 and 2020, respectively. The Company recorded expense associated with its restricted stock awards of approximately $18.5 million and $3.2 million, for the nine months ended September 30, 2021 and 2020, respectively. Additionally, for the nine months ended September 30, 2021 and 2020, there was $81.2 million and $6.2 million, respectively, 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 September 30, 2021 is as follows (in thousands except share amounts):


		Aggregate
		Intrinsic
	Shares	Value
Unvested restricted stock at December 31, 2020	5,874,642	$	—
Granted	1,812,856		—
Vested	(2,713,789)		—
Forfeited	(13,333)		—
Unvested restricted stock at September 30, 2021	4,960,376	$	126,688

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 2018, the Company began funding its matching contribution in a combination of cash and common stock. The Company issued 54,531 shares of common stock and 368,903 shares of common stock pursuant to the Plug Power Inc. 401(k) Savings & Retirement Plan during the nine months ended September 30, 2021 and 2020, respectively.

The Company’s expense for this plan was approximately $1.1 million, and $0.6 million for the three months ended September 30, 2021 and 2020, respectively. The Company’s expense for this plan was approximately $3.4 million, and $1.9 million for the nine months ended September 30, 2021 and 2020, respectively.

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Non-Employee Director Compensation

Each non-employee director is paid an annual retainer for his or her service, in the form of either cash or stock compensation. The Company granted 3,685 shares of common stock and 4,146 shares of common stock to non-employee directors as compensation for the three months ended September 30, 2021 and 2020, respectively. The Company granted 8,923 shares of common stock and 26,636 shares of common stock to non-employee directors as compensation for the nine months ended September 30, 2021 and 2020, respectively. All common stock issued is fully vested at the time of issuance and is valued at fair value on the date of issuance. The Company’s share-based compensation expense in connection with non-employee director compensation was approximately $99 thousand and $56 thousand for the three months ended September 30, 2021 and 2020, respectively. The Company’s share-based compensation expense in connection with non-employee director compensation was approximately $277 thousand and $167 thousand for the nine months ended September 30, 2021 and 2020, respectively.

21. Subsequent Events

In November 2021, the Company entered into a signing protocol to acquire Frames Group (“Frames”), a leader in engineering, process and systems integration serving the energy sector. The purchase price is approximately €115 million, of which €30 million is based on future earnouts over the next four years from the completion date. Plug Power will leverage Frames’ capabilities as well as its existing network of suppliers and contract manufacturing facilities to deliver electrolyzer solutions of all sizes, from one megawatt (MW) containerized solutions to solutions for 100 MW-1,000 MW standalone plants or integrated into customers’ processes. The acquisition is expected to be completed by the end of the year, and is subject to customary closing conditions, including receipt of Dutch works council advice.

On October 14, 2021, the Company and its wholly-owned subsidiary Plug Power Hydrogen Holdings, Inc. entered into a definitive agreement for the acquisition of Applied Cryo Technologies, Inc. for a purchase price of approximately $170 million, of which $40 million will be in stock and $30 million will be based on future earnouts over the next two and half years. Applied Cryo Technologies, Inc. is a leading provider of technology, equipment and services for the transportation, storage and distribution of liquified hydrogen, oxygen, argon, nitrogen and other cryogenic gases. The acquisition is expected to close during the fourth quarter of 2021 and is subject to customary closing conditions, including receipt of all approvals or the termination or expiration of all waiting periods required under applicable antitrust laws.

In October 2021, the Company and SK E&S Co., Ltd., an energy company affiliated with SK Holdings Co., Ltd., formed H2A, which is a joint venture designed to accelerate the use of hydrogen as an alternative energy source in Asian markets.

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 interim condensed consolidated financial statements and notes thereto included within this report, and our audited ~~consolidated financial statements~~ and notes thereto included in our ~~Annual Report on Form 10-K, filed for the fiscal year ended December 31, 2019.~~2020 19-K. In addition to historical information, this Quarterly Report on 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 of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~Exchange Act)~~“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;

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●

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 of dilution to our stockholders and/or stock price should we need to raise additional capital;

●

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 may 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, or if one of our major customers delays payment of or is unable to pay its receivables, a material adverse effect could result 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 our convertible senior notes, if settled in cash, could have a material effect on our financial results;

●

the risk that our convertible note hedges may affect the value of our convertible senior notes and 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 or contract disputes;

●

the risk of loss related to an inability to remediate the material weakness identified in internal control over financial reporting as of December 31, 2020, or inability to otherwise maintain an effective system of internal control;

●

the risk that the determination to restate the prior period financial statements could negatively affect investor confidence and raise reputational issues;

●

the risk of loss related to an inability to maintain an effective system of internal controls;

●

our ability to attract and maintain key personnel;

●

the 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;

●

the risks of delays in or not completing our product development goals;

●

the risks involved with participating in joint ventures;

●

our ability to obtain financing arrangements to support the sale or leasing of our products and services to customers;

●

our ability to successfully pursue new business ventures;

●

our ability to achieve the forecasted gross margin on the sale of our products;

●

the cost and availability of fuel and fueling infrastructures for our products;

●

the risks, liabilities, and costs related to environmental, health and safety matters;

●

the risk of elimination of government subsidies and economic incentives for alternative energy products;

●

market acceptance of our products and services, including GenDrive, GenSure and GenKey systems;

●

our ability to establish and maintain relationships with third parties with respect to product development, manufacturing, distribution and servicing, and the supply of key product components;

●

the cost and availability of components and parts for our products;

●

the risk that possible new tariffs could have a material adverse effect on our business;

●

our ability to develop commercially viable products;

●

our ability to reduce product and manufacturing costs;

●

our ability to successfully market, distribute and service our products and services internationally;

●

our ability to improve system reliability for our products;

●

competitive factors, such as price competition and competition from other traditional and alternative energy companies;

●

our ability to protect our intellectual property;

●

the risk of dependency on information technology on our operations and the failure of such technology;

●

the cost of complying with current and future federal, state and international governmental regulations;

●

our subjectivity to legal proceedings and legal compliance;

●

the risks associated with past and potential future acquisitions; and

●

the volatility of our stock ~~price~~price.

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The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks discussed in the section titled “Risk Factors” included under Part I, Item 1A, below. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from these contained in any forward-looking statements. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. These forward-looking statements speak only as of the date on which the statements were made. 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 Quarterly Report on Form 10-Q.

References in this Quarterly Report on Form 10-Q to “Plug Power,” the “Company,” “we,” “our” or “us” refer to Plug Power Inc., including as the context requires, its subsidiaries.

Overview

~~As a leading provider of comprehensive hydrogen fuel cell turnkey solutions,~~ Plug Power ~~Inc., or~~is facilitating the ~~Company, is seeking~~paradigm shift to ~~build a green hydrogen economy. The Company is focused on~~an increasingly electrified world by innovating cutting-edge hydrogen and fuel cell ~~systems that are used~~solutions. In our core business, we provide and continue to power electric motors primarily in the electric mobility and stationary power markets, given the ongoing paradigm shift in the power, energy, and transportation industries to address climate change, energy security, and meet sustainability goals. Plug Power created the firstdevelop commercially viable ~~market for~~ hydrogen and fuel cell orproduct solutions to replace lead-acid batteries in electric material handling vehicles and industrial trucks for some of the ~~HFC technology. As a result, the Company has deployed over 38,000 fuel cell systems,~~world’s largest retail-distribution and ~~has become the largest buyer of liquid hydrogen, having built and operated a hydrogen network across North America.~~

We provide and continue to develop commercially-viable hydrogen and fuel cell solutions for industrial mobility applications (including electric forklifts and electric industrial vehicles) at multi-shift high volume manufacturing and high throughput distribution sites where we believePart of our ~~products and services provide a unique combination of productivity, flexibility and environmental benefits. In June of 2020,~~long-term plan includes Plug Power ~~completed~~penetrating the ~~acquisitions of United Hydrogen Group, Inc.~~on-road vehicle market and Giner ELX, Inc. in line with the Company’s hydrogen vertical integration strategy, with plans to have more than 50% of the hydrogen used by the Company to be green by 2024. These acquisitions further enhancelarge-scale stationary market. Plug Power’s ~~position~~formation of a joint venture with Renault in Europe and the ~~hydrogen industry~~announced future joint venture with ~~capabilities~~SK Group in ~~generation, liquefaction~~Asia not only support this goal but are expected to provide us with a more global footprint. Plug has been successful with acquisitions, strategic partnerships, and ~~distribution of hydrogen fuel complementing its~~

~~industry-leading position in the design, construction,~~joint ventures, and ~~operation of customer-facing hydrogen fueling stations. These acquisitions establish a pathway for Plug Power~~we plan to ~~transition from low-carbon~~continue this mix. For example, we expect our relationships with Brookfield and Apex to ~~zero-carbon hydrogen solutions.~~provide us access to low-cost renewable energy, which is critical to produce low-cost green hydrogen.

Our current products and services include:

GenDrive: GenDrive is our hydrogen fueled PEM fuel cell system providing power to material handling electric vehicles, including class 1, 2, 3 and 6 electric forklifts, Automated Guided Vehicles (“AGVs”) and ground support equipment;

GenFuel: GenFuel is our liquid hydrogen fueling delivery, generation, storage, and dispensing system;

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ProGen: ProGen is our fuel cell stack and engine technology currently used globally in mobility and stationary fuel cell systems, and as engines in electric delivery vans. This includes the Plug ~~Power MEA (membrane electrode assembly)~~“MEA”, a critical component of the fuel cell stack used in zero-emission fuel cell electric vehicle ~~engines, in which Plug Power~~engines; and

We provide our products worldwide through our direct product sales force, and by leveraging relationships with ~~original equipment manufacturers~~“OEMs” and their dealer networks. Plug Power is targeting Asia and Europe for expansion in adoption. Europe has rolled out ambitious targets for the hydrogen economy and Plug Power is executing on its strategy to become one of the European leaders. This includes a targeted account strategy for material handling as well as securing strategic partnerships with European OEMs, energy companies, utility leaders and accelerating our electrolyzer business. We manufacture our ~~commercially-viable~~commercially viable products in Latham, ~~NY,~~New York, Rochester, NYNew York and Spokane, WAWashington and support liquid hydrogen generation and logistics in Charleston, ~~TN.~~Tennessee.

Our wholly-owned subsidiary, Plug Power France, created a joint venture with Renault SAS (“Renault”) named HyVia, a French société par actions simplifiée (“HyVia”) in the second quarter of 2021. HyVia plans to manufacture and sell fuel cell powered electric light commercial vehicles (“FCELCVs”) and to supply hydrogen fuel and fueling stations to support the FCE-LCV market, in each case primarily in Europe. HyVia is owned 50% by Plug Power France and 50% by Renault.

Recent Developments

COVID-19 Update

As a result of the COVID-19 pandemic outbreak in March 2020, state governments—including those in New York and Washington, where our manufacturing facilities are located—~~have~~ issued orders requiring businesses that do not conduct essential services to temporarily close their physical workplaces to employees and customers. ~~We are currently deemed an essential business and, as~~As a result, ~~are exempt from these state orders, in their current form. In March 2020,~~ we had put in place a number of protective measures in response to the COVID-19 ~~outbreak. These measures include~~outbreak, which included the canceling of all commercial air travel and all other non-critical travel, requesting that employees limit non-essential personal travel, eliminating all but essential third-party access to our facilities, enhancing our facilities’ janitorial and sanitary procedures, encouraging employees to work from home to the extent their job function ~~enables~~enabled them to do so, encouraging the use of virtual employee meetings, and providing staggered shifts and social distancing measures for those employees associated with manufacturing and service operations.

In June 2021, in accordance with revised CDC guidelines and where permitted by state law, employees who were fully vaccinated against COVID-19 and have been through Plug Power’s certification process, were permitted to enter Plug Power facilities without a face covering. Individuals inside Plug Power facilities who did not wish to go through the certification process were required to wear proper face coverings and continued to maintain social distancing of six feet or greater. In states where the guidelines for face coverings was still government mandated, Plug Power complied with the state and local jurisdictions and enforced face mask usage, as well as social distancing at our sites. In early August 2021, we adjusted our guidance as a result of an influx of COVID-19 cases and began requiring all employees and visitors regardless of vaccination status to wear a face-covering at all times while within a Plug Power facility, and strongly encouraged social distancing. We continue to provide enhanced janitorial and sanitary procedures, encourage employees to work from home to the extent their job function enables them to do so, and encourage the use of virtual employee meetings.

We cannot predict at this time the full extent to which COVID-19 will impact our business, results, and financial condition, which will depend on many factors. We are staying in close communication with our manufacturing facilities, employees, customers, suppliers, and partners, and acting to mitigate the impact of this dynamic and evolving situation, but there is no guarantee that we will be able to do so. ~~Although as of the date hereof, we have not observed any material impacts to our supply of components, the situation is fluid.~~ Many of the parts for our products are sourced from suppliers in China and the manufacturing situation in China remains variable. Supply chain disruptions could reduce the availability

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of key components, increase prices or ~~both. Some~~both, as the COVID-19 pandemic has caused significant challenges for global supply chains resulting primarily in transportation delays. These transportation delays have caused incremental freight charges, which have negatively impacted our results of ~~our customers, such as certain automotive manufacturers, have suspended operations at their facilities due to COVID-19. Accordingly, while those customers~~operations. We expect that these challenges will continue to ~~pay~~have an impact on our businesses for the ~~leasing~~foreseeable future.

We continue to take proactive steps to limit the impact of these challenges and ~~servicing~~are working closely with our suppliers and transportation vendors to ensure availability of products and implement other cost savings initiatives. In addition, we continue to invest in our supply chain to improve its resilience with a focus on automation, dual sourcing of critical components and localized manufacturing when feasible. To date, there has been limited disruption to the availability of our products, ~~they are not purchasing hydrogen fuel. Other customers are essential businesses and remain in operation. Certain of~~though it is possible that more significant disruptions could occur if these customers, such as Walmart, significantly increased their use of units and hydrogen fuel consumption as a result of COVID-19. In the nine months ended September 30, 2020, our services and power purchase agreement margins were negatively impacted by incremental service costs associated with increased usage of units at some of our primary customer sites. In addition, future changes in applicable government orders or regulations, or changes in the interpretation of existing orders or regulations, could result in further disruptions to our business that may materially and adversely affect our financial condition and results of operations.supply chain challenges continue.

~~Borrowings/August 2020 Equity Raise~~Strategic and Other Activities

~~In the third quarter of 2020, the Company borrowed an additional $50.0 million, under an amended loan agreement with Generate Lending, LLC.~~

~~Also, in August 2020,~~Entry into Definitive Agreement

In November 2021, the Company ~~issued~~entered into a signing protocol to acquire Frames Group (“Frames”), a leader in engineering, process and ~~sold in~~systems integration serving the energy sector. The purchase price is approximately €115 million, of which €30 million is based on future earnouts over the next four years from the completion date. Plug Power will leverage Frames’ capabilities as well as its existing network of suppliers and contract manufacturing facilities to deliver electrolyzer solutions of all sizes, from one megawatt (MW) containerized solutions to solutions for 100 MW-1,000 MW standalone plants or integrated into customers’ processes. The acquisition is expected to be completed by the end of the year, and is subject to customary closing conditions, including receipt of Dutch works council advice.

On October 14, 2021, the Company and its wholly-owned subsidiary Plug Power Hydrogen Holdings, Inc. entered into a ~~registered direct offering an aggregate~~definitive agreement for the acquisition of ~~35,276,250 shares of its common stock at~~Applied Cryo Technologies, Inc. for a purchase price of ~~$10.25 per share~~approximately $170 million, of which $40 million will be in stock and $30 million will be based on future earnouts over the next two and half years. Applied Cryo Technologies, Inc. is a leading provider of technology, equipment and services for ~~net proceeds~~the transportation, storage and distribution of ~~approximately $344.4 million.~~liquified hydrogen, oxygen, argon, nitrogen and other cryogenic gases. The acquisition is expected to close during the fourth quarter of 2021 and is subject to customary closing conditions, including receipt of all approvals or the termination or expiration of all waiting periods required under applicable antitrust laws.

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Performance Stock Option Awards

In September 2021, the Compensation Committee approved the grant of performance stock options to the Company’s Chief Executive Officer and certain other executive officers. These performance stock options are subject to both performance-based conditions tied to the achievement of stock price hurdles and time-based vesting; therefore, a Monte Carlo Simulation was utilized to determine the grant date fair value with the associated expense recognized over the requisite service period. The design of the performance options was developed with input from the Company’s independent compensation consultant. The performance stock options are strongly aligned with the Company’s culture of pay for performance and will ensure the executive team’s commitment and focus on delivering significant increases in stockholder value over the three-year performance period. Up to one-third (1/3) the performance stock options will vest and become exercisable on each of the first three anniversaries of the grant date, provided that the volume weighted average price of the Company’s common stock during any 30 consecutive trading day period in the three year performance period following the grant date of the stock options (“VWAP”) equals or exceeds certain levels. For the Company’s Chief Executive Officer, 25% of his performance stock options will be deemed to have satisfied the performance-based conditions and will be eligible to be exercised over time if the VWAP equals or exceeds $35; an additional 25% of his options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals or exceeds $50; an additional 16.675% of the options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals or exceeds $65; an additional 16.65% of the options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals or exceeds $80; and the remaining 16.675% of the options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals or exceeds $100. There will be no interpolation for the Chief Executive Officer’s performance stock option if the VWAP falls between any two stock price hurdles, unless in the event of a change in control. For executive officers other than the Chief Executive Officer, 25% of the performance stock options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals $35; an additional 25% of the options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals $50; and the remaining 50% of the options will be deemed to have satisfied the performance-based condition and will be eligible to be exercised if the VWAP equals or exceeds $100. If the VWAP falls between two of the stock price hurdles, an incremental number of options will become exercisable based on linear interpolation in $1 increments. Failure to achieve any of the stock price hurdles applicable to a performance stock option during the three-year performance period will result in the applicable options not becoming exercisable. The performance-based stock options have a maximum term of seven years from the grant date.

~~Amazon Warrants~~Explanatory Note

~~At September~~As previously disclosed in the Explanatory Note to the 2020 10-K, the Company restated its previously issued audited consolidated financial statements as of and for the years ended December 31, 2019 and 2018 and its unaudited interim condensed consolidated quarterly financial statements of and for each of the quarterly periods ended March 31, 2020, June 30, 2020 and ~~December 31,~~ 2019, 27,643,347 and 20,368,782 of the Amazon Warrant Shares had vested, respectively. The amount of provision for common stock warrants recorded as a reduction of revenue for the Amazon Warrant during the three months ended September 30, 2020 and 2019 ~~was $17.3 million~~ and $1.0 million, respectively. The amount of provision for common stock warrants recorded as a reduction of revenue for the Amazon Warrant during the nine months ended September 30, 2020 and 2019 was $22.0 million and $2.0 million, respectively.December 31, 2019.

~~During~~Previously filed annual reports on Form 10-K and quarterly reports on Form 10-Q for the ~~third quarter of 2020, approximately $23.8 million of recorded revenue from Amazon was constrained~~periods affected by the ~~tranche 3 of~~restatement have not been amended. Accordingly, investors should not rely upon the Amazon Warrant Shares. An additional 7,274,565 Amazon Warrant Shares vested on November 2, 2020, representing the final vesting of tranche 2, resulting in cumulative vesting in 34,917,912 Warrant Shares since the execution of the Amazon Transaction Agreement. In accordance with terms of the Amazon Transaction Agreement as described above, upon final vesting of tranche 2, the tranche 3 Amazon Warrant Shares exercise price was determinedCompany’s previously released financial statements for these periods and any earnings releases or other communications relating to ~~be $13.81 per share. Based~~these periods, and, for these periods, investors should rely solely on the ~~exercise price of~~financial statements and other financial data for the third tranche of the Amazon Warrant Shares, among other things, the fair value of the 20,368,784 tranche 3 Amazon Warrant Shares is estimated to be $10.60 each, compared to the fair value of tranche 2 Amazon Warrant Shares of $1.05 each.

~~The Company also recorded a provision for losses of $4.3 million~~relevant periods included in the ~~third quarter~~2020 10-K. Commencing with our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, we are including in our quarterly reports for fiscal 2021 restated results for the corresponding interim periods of ~~2020 related to Amazon service contracts, caused primarily by the increase in the value of the tranche 3 warrants, driven by recent increases in the Company’s stock price.~~fiscal 2020.

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Results of Operations

Our primary sources of revenue are from sales of fuel cell systems and related infrastructure, services performed on fuel cell systems and related infrastructure, Power Purchase Agreements (PPAs), and fuel delivered to customers. Revenue from sales of fuel cell systems and related infrastructure represents sales of our GenDrive units, GenSure stationary backup power units, as well as hydrogen fueling infrastructure. Revenue from services performed on fuel cell systems and related infrastructure represents revenue earned on our service and maintenance contracts and sales of spare parts. Revenue from PPAs primarily represents payments received from customers who make monthly payments to access the Company’s GenKey solution. Revenue associated with fuel delivered to customers represents the sale of hydrogen to customers that has been purchased by the Company from a third party or generated on site.

In 2017, in separate transactions, the Company issued to each of Amazon and Walmart warrants to purchase shares of the Company’s common stock. The Company recorded a portion of the estimated fair value of the warrants as a reductionNet revenue, cost of revenue, ~~based upon the projected number of shares of common stock expected to vest under the warrants, the proportion of purchases by Amazon, Walmart~~gross profit (loss) and their affiliates within the period relative to the aggregate purchase levels required for vesting of the respective warrants, and the then-current fair value of the warrants. During the fourth quarter of 2019, the Company adopted ASU 2019-08, with retrospective adoption as of January 1, 2019. As a result, the amount recorded as a reduction of revenue was measured based on the grant-date fair value of the warrants. Previously, this amount was measured based on vesting date fair value with estimates of fair value determined at each financial reporting date for unvested warrant shares considered to be probable of vesting. Exceptgross margin for the ~~third tranche, all existing unvested warrants are using a measurement date of January 1, 2019, the adoption date, in accordance ASU 2019-08.~~three and nine months ended September 30, 2021 and 2020, were as follows (in thousands):



	Three Months Ended								Nine Months Ended
	September 30,								September 30,
			Cost of		Gross		Gross				Cost of		Gross		Gross
	Net Revenue		Revenue		Profit/(Loss)		Margin		Net Revenue		Revenue		Profit/(Loss)		Margin
For the period ended September 30, 2021:
Sales of fuel cell systems and related infrastructure	$	115,999	$	89,235	$	26,764	23.1	%	$	262,049	$	198,122	$	63,927	24.4	%
Services performed on fuel cell systems and related infrastructure		6,677		18,697		(12,020)	(180.0)	%		18,397		47,258		(28,861)	(156.9)	%
Provision for loss contracts related to service		—		7,462		(7,462)	N/A			—		15,641		(15,641)	N/A
Power Purchase Agreements		9,321		31,199		(21,878)	(234.7)	%		25,508		71,776		(46,268)	(181.4)	%
Fuel delivered to customers		11,556		27,857		(16,301)	(141.1)	%		33,804		90,331		(56,527)	(167.2)	%
Other		369		550		(181)	(49.1)	%		679		856		(177)	(26.1)	%
Total	$	143,922	$	175,000	$	(31,078)	(21.6)	%	$	340,437	$	423,984	$	(83,547)	(24.5)	%
For the period ended September 30, 2020:
Sales of fuel cell systems and related infrastructure	$	83,662	$	69,428	$	14,234	17.0	%	$	151,876	$	117,290	$	34,586	22.8	%
Services performed on fuel cell systems and related infrastructure		6,829		9,180		(2,351)	(34.4)	%		19,586		27,300		(7,714)	(39.4)	%
Provision for loss contracts related to service		—		25,147		(25,147)	N/A			—		25,948		(25,948)	N/A
Power Purchase Agreements		6,629		14,744		(8,115)	(122.4)	%		19,629		44,019		(24,390)	(124.3)	%
Fuel delivered to customers		9,831		17,002		(7,171)	(72.9)	%		24,536		39,332		(14,796)	(60.3)	%
Other		97		131		(34)	(35.1)	%		235		275		(40)	(17.0)	%
Total	$	107,048	$	135,632	$	(28,584)	(26.7)	%	$	215,862	$	254,164	$	(38,302)	(17.7)	%

The amount of provision for common stock warrants recorded as a reduction of revenue during the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, is shown in the table below (in thousands):

Three months ended September 30,
Nine months ended September 30,

2020

2019

2020

2019

Sales of fuel cell systems and related infrastructure

$
(16,146)

$
(478)

$
(19,287)

$
(993)

Services performed on fuel cell systems and related infrastructure

(688)

(191)

(1,412)

(397)

Power Purchase Agreements

(758)

(325)

(1,887)

(1,032)

Fuel delivered to customers

(1,034)

(503)

(2,612)

(1,284)

Total

$
(18,626)

$
(1,497)

$
(25,198)

$
(3,706)

~~Net revenue, cost of revenue, gross profit (loss) and gross margin for the three and nine months ended September 30, 2020 and 2019, were as follows (in thousands):~~


	Three Months Ended									Nine Months Ended								Three months ended September 30,				Nine months ended September 30,
	September 30,									September 30,								2021		2020		2021		2020
			Cost of			Gross		Gross				Cost of		Gross		Gross
	Net Revenue		Revenue			Profit/(Loss)		Margin		Net Revenue		Revenue		Profit/(Loss)		Margin
For the period ended September 30, 2020:
Sales of fuel cell systems and related infrastructure	$	83,528	$	68,509		$	15,019	18.0	%	$	151,661	$	115,929	$	35,732	23.6	%	$	—	$	(16,146)	$	(27)	$	(19,287)
Services performed on fuel cell systems and related infrastructure		6,829		7,074			(245)	(3.6)	%		19,586		21,746		(2,160)	(11.0)	%		(69)		(688)		(340)		(1,412)
Power Purchase Agreements		6,704		14,087			(7,383)	(110.1)	%		19,854		42,034		(22,180)	(111.7)	%		(652)		(758)		(2,454)		(1,887)
Fuel delivered to customers		9,831		14,172			(4,341)	(44.2)	%		24,536		32,267		(7,731)	(31.5)	%		(573)		(1,034)		(1,925)		(2,612)
Other		97		131			(34)	(35.1)	%		235		275		(40)	(17.0)	%
Total	$	106,989	$	103,973		$	3,016	2.8	%	$	215,872	$	212,251	$	3,621	1.7	%	$	(1,294)	$	(18,626)	$	(4,746)	$	(25,198)
For the period ended September 30, 2019:
Sales of fuel cell systems and related infrastructure	$	38,877	$	24,990		$	13,887	35.7	%	$	80,117	$	50,440	$	29,677	37.0	%
Services performed on fuel cell systems and related infrastructure		6,205		6,461			(256)	(4.1)	%		17,889		18,802		(913)	(5.1)	%
Power Purchase Agreements		6,595		10,353			(3,758)	(57.0)	%		19,114		28,064		(8,950)	(46.8)	%
Fuel delivered to customers		7,649		9,160			(1,511)	(19.8)	%		21,320		25,935		(4,615)	(21.6)	%
Other		135		150	��		(15)	(11.1)	%		135		150		(15)	(11.1)	%
Total	$	59,461	$	51,114		$	8,347	14.0	%	$	138,575	$	123,391	$	15,184	11.0	%

Net Revenue

Revenue – sales of fuel cell systems and related infrastructure. Revenue from sales of fuel cell systems and related infrastructure represents revenue from the sale of our fuel cells, such as GenDrive units and GenSure stationary backup power units, as well as hydrogen fueling infrastructure referred to at the site level as hydrogen installations.

Revenue from sales of fuel cell systems and related infrastructure for the three months ended September 30, ~~2020~~2021 increased ~~$44.7~~$32.3 million, or ~~114.9%~~38.7%, to ~~$83.5~~$116.0 million from ~~$38.9~~$83.7 million for the three months ended September 30, ~~2019.~~2020. Included within revenue was a provision for common stock warrants of ~~$16.1 million~~$0 and ~~$0.5~~$16.1 million for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The main drivers for the increase in revenue were the increase in GenDrive units recognized as revenue, ~~change in product mix, variations in customer programs, and~~

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an increase in hydrogen installations ~~offset partially by the increase~~and a decrease in the provision for common stock warrants. There were ~~3,709~~4,559 GenDrive units recognized as revenue during the three months ended September 30, ~~2020,~~2021, compared to ~~1,513~~3,709 for the three months ended September 30, ~~2019.~~2020. There was hydrogen infrastructure revenue associated with 1316 hydrogen sites during the three months ended September 30, ~~2020,~~2021, compared to ~~zero~~13 during the three months ended September 30, ~~2019.~~2020.

Revenue from sales of fuel cell systems and related infrastructure for the nine months ended September 30, ~~2020~~2021 increased ~~$71.5~~$110.2 million, or ~~89.3%~~72.5%, to ~~$151.7~~$262.1 million from ~~$80.1~~$151.9 million for the nine months ended September 30, ~~2019.~~2020. Included within revenue was a provision for common stock warrants of ~~$19.3 million~~$27 thousand and ~~$1.0~~$19.3 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The main drivers for the increase in revenue were the increase in GenDrive units recognized as revenue, ~~change in product mix, variations in customer programs, and~~ an increase in hydrogen installations ~~offset partially by the increase~~and a decrease in the provision for common stock warrants. There were ~~7,217~~9,533 GenDrive units recognized as revenue during the nine months ended September 30, ~~2020,~~2021, compared to ~~6,058~~7,217 for the nine months ended September 30, ~~2019.~~2020. There was hydrogen infrastructure revenue associated with 1838 hydrogen sites during the nine months ended September 30, ~~2020,~~2021, compared to ~~two~~18 during the nine months ended September 30, ~~2019.~~2020.

Revenue – services performed on fuel cell systems and related infrastructure. Revenue from services performed on fuel cell systems and related infrastructure represents revenue earned on our service and maintenance contracts and sales of spare parts. At September 30, 2021, there were 18,685 fuel cell units and 78 hydrogen installations under extended maintenance contracts, an increase from 13,421 fuel cell units and 56 hydrogen installations at September 30, 2020. Revenue from services performed on fuel cell systems and related infrastructure for the three months ended September 30, ~~2020 increased $0.6~~2021 decreased $0.2 million, or ~~10.1%~~2.2%, to ~~$6.8~~$6.7 million as compared to ~~$6.2~~$6.8 million for the three months ended September 30, ~~2019.~~2020. Included within revenue was provision for common stock warrants of ~~$0.7 million~~$69 thousand and ~~$0.2 million~~$688 thousand for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The main drivers ~~for the increase~~in decrease in revenue was ~~additional contractual revenue associated with higher utilization of GenDrive units and an increase~~a reduction in ~~units under service maintenance contracts,~~billings for run time hours that exceeded certain levels given certain changes in the overall contract, partially offset by the ~~increase~~decrease in the provision for common stock warrants.Although the number of units and sites grew year over year, many of the units and sites deployed in the third quarter of 2021 were deployed late in the quarter and hence the full impact of associated service revenues will commence in the fourth quarter of 2021.

Revenue from services performed on fuel cell systems and related infrastructure for the nine months ended September 30, ~~2020 increased $1.7~~2021 decreased $1.2 million, or ~~9.5%~~6.1%, to ~~$19.6~~$18.4 million as compared to ~~$17.9~~$19.6 million for the nine months ended September 30, ~~2019.~~2020. Included within revenue was provision for common stock warrants of ~~$1.4 million~~$340 thousand and ~~$0.4~~$1.4 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The main drivers ~~for the increase~~in decrease in revenue was ~~additional contractual revenue associated with higher utilization of GenDrive units and an increase~~a reduction in ~~units under service maintenance contracts,~~billings for run time hours that exceeded certain levels given certain changes in the overall contract, partially offset by the ~~increase~~decrease in the provision for common stock warrants.Although the number of units and sites grew year over year, many of the units and sites deployed in the third quarter of 2021 were deployed late in the quarter and hence the full impact of associated service revenues will commence in the fourth quarter of 2021.

Revenue – Power Purchase Agreements. Revenue from PPAs represents payments received from customers for power generated through the provision of equipment and service. At September 30, 2021, there were 61 GenKey sites associated with PPAs, as compared to 36 at September 30, 2020. Revenue from PPAs for the three months ended September 30, ~~2020~~2021 increased ~~$0.1~~$2.7 million, or ~~1.7%~~40.6%, to ~~$6.7~~$9.3 million from $6.6 million for the three months ended September 30, ~~2019.~~2020. Included within revenue was provision for common stock warrants of ~~$0.8 million~~$652 thousand and ~~$0.3 million~~$758 thousand for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The increase in revenue from PPAs for the three months ended September 30, ~~2020~~2021 as compared to the three months ended September 30, ~~2019~~2020 was primarily attributable to the ~~increase in units associated with PPAs, offset in part by~~new sites for existing customers and new customers accessing the ~~increase~~PPA subscription solution, and a slight decrease in the provision for common stock warrants.

Revenue from PPAs for the nine months ended September 30, ~~2020~~2021 increased ~~$0.8~~$5.9 million, or ~~3.9%~~30.0%, to ~~$19.9~~$25.5 million from ~~$19.1~~$19.6 million for the nine months ended September 30, ~~2019.~~2020. Included within revenue was provision for common stock warrants of ~~$1.9~~$2.5 million and ~~$1.0~~$1.9 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The increase in revenue from PPAs for the nine months ended September 30, ~~2020~~2021 as compared to the nine months ended September 30, ~~2019~~2020 was primarily attributable to the ~~increase in units associated with PPAs,~~new sites for existing customers and new customers accessing the PPA subscription solution, offset in part by the increase in the provision for common stock warrants.

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Revenue – fuel delivered to customers. Revenue associated with fuel delivered to customers represents the sale of hydrogen to customers that has been purchased by the Company from a third party or generated on site. Revenue associated with fuel delivered to customers for the three months ended September 30, ~~2020~~2021 increased ~~$2.2~~$1.7 million, or

~~28.5%~~ 17.5%, to ~~$9.8~~$11.6 million from ~~$7.6~~$9.8 million for the three months ended September 30, ~~2019.~~2020. Included within revenue was provision for common stock warrants of ~~$1.0 million~~$573 thousand and ~~$0.5~~$1.0 million for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The increase in revenue was due to an increase in the number of sites with fuel contracts infrom 94 as of September 30, 2020 ~~compared~~ to ~~2019,~~141 as of September 30, 2021, and ~~an increase in the price of fuel, partially offset by the increase~~a slight decrease in the provision for common stock warrants. A number of the new sites had not received fuel as of September 30, 2021, and therefore the increase in revenue from the third quarter of 2021 was not proportionate to the increase in new sites.

Revenue associated with fuel delivered to customers for the nine months ended September 30, ~~2020~~2021 increased ~~$3.2~~$9.3 million, or ~~15.1%~~37.8%, to ~~$24.5~~$33.8 million from ~~$21.3~~$24.5 million for the nine months ended September 30, ~~2019.~~2020. Included within revenue was provision for common stock warrants of ~~$2.6~~$1.9 million and ~~$1.3~~$2.6 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The increase in revenue was due to an increase in the number of sites with fuel contracts infrom 94 as of September 30, 2020 ~~compared~~ to ~~2019, an increase in the price~~141 as of ~~fuel~~September 30, 2021, and ~~an increase~~a slight decrease in the provision for common stock warrants.

A number of the new sites had not received fuel as of September 30, 2021, and therefore the increase in revenue from the third quarter of 2021 was not proportionate to the increase in new sites.

Cost of Revenue

Cost of revenue – sales of fuel cell systems and related infrastructure. Cost of revenue from sales of fuel cell systems and related infrastructure includes direct materials, labor costs, and allocated overhead costs related to the manufacture of our fuel cells such as GenDrive units and GenSure stationary backup power units, ~~as well as~~and hydrogen fueling infrastructure referred to at the site level as hydrogen installations.

Cost of revenue from sales of fuel cell systems and related infrastructure for the three months ended September 30, ~~2020~~2021 increased ~~174.1%~~28.5%, or ~~$43.5~~$19.8 million, to ~~$68.5~~$89.2 million, compared to ~~$25.0~~$69.4 million for the three months ended September 30, ~~2019.~~2020. This increase was driven by the increase in GenDrive deployment volume and increase in hydrogen ~~installations.~~installations, as well as certain unexpected costs, including varied COVID related issues such as increased freight and material costs and higher labor costs given staffing and coverage issues. There were ~~3,709~~4,559 GenDrive units recognized as revenue during the three months ended September 30, ~~2020,~~2021, compared to ~~1,513~~3,709 for the three months ended September 30, ~~2019.~~2020. Revenue associated with 1316 hydrogen installations was recognized during the three months ended September 30, ~~2020,~~2021, compared to ~~zero~~13 during the three months ended September 30, ~~2019.~~2020. Gross ~~margin~~profit generated from sales of fuel cell systems and related infrastructure ~~decreased~~increased to ~~18.0%~~23.1% for the three months ended September 30, 2021, compared to 17.0% for the three months ended September 30, 2020 ~~compared~~primarily due to ~~35.7%~~a decrease in the reduction of revenue for warrants for sales of fuel cell systems and related infrastructure of $16.1 million. For the three months ended September 30, ~~2019, primarily due~~2021 and 2020, the reduction of revenue for warrants was $0 and $16.1 million, respectively. We expect these cost trends will continue into the end of 2021, but begin to abate once the ~~increase in the provision for common stock warrants.~~global supply chain has normalized.

Cost of revenue from sales of fuel cell systems and related infrastructure for the nine months ended September 30, ~~2020~~2021 increased ~~129.8%~~68.9%, or ~~$65.5~~$80.8 million, to ~~$115.9~~$198.1 million, compared to ~~$50.4~~$117.3 million for the nine months ended September 30, ~~2019.~~2020. This increase was driven by the increase in GenDrive deployment volume and increase in hydrogen ~~installations.~~installations, as well as certain unexpected costs, including varied COVID related issues such as increased freight and material costs and higher labor costs given staffing and coverage issues. There were ~~7,217~~9,533 GenDrive units recognized as revenue during the nine months ended September 30, ~~2020,~~2021, compared to ~~6,058~~7,217 for the nine months ended September 30, ~~2019.~~2020. Revenue associated with 1338 hydrogen installations was recognized during the nine months ended September 30, ~~2020,~~2021, compared to ~~zero~~18 during the nine months ended September 30, ~~2019.~~2020. Gross ~~margin~~profit generated from sales of fuel cell systems and related infrastructure ~~decreased~~increased to ~~23.6%~~24.4% for the nine months ended September 30, 2021, compared to 22.8% for the nine months ended September 30, 2020 ~~compared~~primarily due to ~~37.0%~~a decrease in the reduction of revenue for warrants for sales of fuel cell systems and related infrastructure of $19.3 million. For the nine months ended September 30, ~~2019, primarily due~~2021 and 2020, the reduction of revenue for warrants was $0 and $19.3 million, respectively. We expect these cost trends will continue into the end of 2021, but begin to abate once the ~~increase in the provision for common stock warrants.~~global supply chain has normalized.

Cost of revenue – services performed on fuel cell systems and related infrastructure. Cost of revenue from services performed on fuel cell systems and related infrastructure includes the labor, material costs and allocated overhead

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costs incurred for our product service and hydrogen site maintenance contracts and spare parts. At September 30, 2021, there were 18,685 fuel cell units and 78 hydrogen installations under extended maintenance contracts, an increase from 13,421 fuel cell units and 56 hydrogen installations at September 30, 2020, respectively. Cost of revenue from services performed on fuel cell systems and related infrastructure for the three months ended September 30, ~~2020~~2021 increased ~~9.5%~~103.7%, or ~~$0.6~~$9.5 million, to ~~$7.1~~$18.7 million, compared to ~~$6.5~~$9.2 million for the three months ended September 30, ~~2019.~~2020. The increase in cost of revenue was due primarily to increase in volume and certain unexpected costs, including varied COVID related issues such as increased freight and material costs, higher labor costs given staffing and coverage issues, and scrap charges associated with certain parts. Gross ~~margin~~loss increased to ~~(3.6)~~(180.0)% for the three months ended September 30, 2021, compared to (34.4)% for the three months ended September 30, 2020, ~~compared~~primarily due to ~~(4.1)%~~certain unexpected costs, including varied COVID related issues, scrap charges associated with certain parts as well as a reduction in billings for run time hours that exceeded certain levels given certain changes in the overall contract, partially offset by a change in the release of the previously recorded loss accrual from $314 thousand during the three months ended September 30, ~~2019, primarily due~~2020 to ~~program investments targeting performance improvements, offset by~~$2.3 million during the ~~increase in~~three months ended September 30, 2021. We expect these cost trends will continue into the ~~provision for common stock warrants.~~end of 2021, but begin to abate once the global supply chain has normalized.

Cost of revenue from services performed on fuel cell systems and related infrastructure for the nine months ended September 30, ~~2020~~2021 increased ~~15.7%~~73.1%, or ~~$2.9~~$20.0 million, to ~~$21.7~~$47.3 million, compared to ~~$18.8~~$27.3 million for the nine months ended September 30, ~~2019.~~2020. The increase in cost of revenue was due primarily to certain unexpected costs, including varied COVID related issues such as increased freight costs, certain vendor transition and force majeure issues that impacted hydrogen infrastructure service costs, and scrap charges associated with certain parts. At September 30, 2021, there were 18,685 fuel cell units and 78 hydrogen installations under extended maintenance contracts, an increase from 13,421 fuel cell units and 56 hydrogen installations at September 30, 2020, respectively. Gross ~~margin decreased~~loss increased to ~~(11.0)~~ (156.9)% for the nine months ended September 30, 2021, compared to (39.4)% for the nine months ended September 30, 2020, ~~compared~~

primarily due to ~~(5.1)%~~certain unexpected costs including varied COVID related issues, certain vendor transition and force majeure issues that impacted hydrogen infrastructure service costs, and scrap charges associated with certain parts, as well as a reduction in billings for run time hours that exceeded certain levels given certain changes in the overall contract. This was partially offset by a release of the previously recorded loss accrual from $839 thousand during the nine months ended September 30, ~~2019, primarily due~~2020 to $6.1 million during the ~~increase in~~nine months ended September 30, 2021. We expect these cost trends will continue into the ~~provision for common stock warrants.~~end of 2021, but begin to abate once the global supply chain has normalized.

Cost of revenue – provision for loss contracts related to service. The Company also recorded a provision for loss contracts related to service of ~~$4.3~~$7.5 million for the three months ended September 30, 2021, compared to $25.2 million for the three months ended September 30, 2020. The decrease in the provision for loss contracts related to service was primarily a function of a higher provision in 2020, due to an increase in estimated projected cost to service fuel cell systems and related infrastructure, as the Company determined in the third quarter of 2020 ~~caused~~that certain cost down initiatives were taking longer to achieve than originally estimated. This was offset by the increase in the ~~value~~provision as a result of ~~tranche 3 warrants~~more new sites under service contract during the three months ended September 30, 2021 as compared to number of sites for the ~~value~~three months ended September 30, 2020. In addition, the Company determined during the third quarter of ~~tranche 2 warrants.~~2020 that the projected provision for the Amazon Warrant would be significantly higher than previously estimated.

The Company also recorded a provision for loss contracts related to service of $15.6 million for the nine months ended September 30, 2021, compared to $26.0 million for the nine months ended September 30, 2020. The decrease in the provision for loss contracts related to service was primarily a function of a higher provision in 2020, due to an increase in estimated projected cost to service fuel cell systems and related infrastructure, as the Company determined in the third quarter of 2020 that certain cost down initiatives were taking longer to achieve than originally estimated. This was offset by the increase in the provision as a result of more new sites under service contract during the nine months ended September 30, 2021 as compared to number of sites for the three months ended September 30, 2020. In addition, the Company determined during the third quarter of 2020 that the projected provision for the Amazon Warrant would be significantly higher than previously estimated.

Cost of revenue – Power Purchase Agreements. Cost of revenue from PPAs includes depreciation of assets utilized and service costs to fulfill PPA obligations and interest costs associated with certain financial institutions for leased equipment. At September 30, 2021, there were 61 GenKey sites associated with PPAs, as compared to 36 at September 30, 2020. Cost of revenue from PPAs for the three months ended September 30, ~~2020~~2021 increased ~~36.1%~~111.6%, or ~~$3.7~~$16.5 million,

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to ~~$14.1~~$31.2 million from ~~$10.4~~$14.7 million for the three months ended September 30, ~~2019.~~2020 due to the increase in units and sites under PPA contract as well as certain COVID related issues such as increased freight costs, scrap charges associated with certain parts and an impairment charge of $1.3 million. Gross ~~margin decreased~~loss increased to ~~(110.1)~~(234.7)% for the three months ended September 30, 2021, as compared to (122.4)% for the three months ended September 30, 2020 ~~as compared to (57.0)% for the three months ended September 30, 2019,~~ primarily due to ~~program investments targeting performance improvements, as well as incremental service costs during the quarter~~certain COVID related issues, scrap charges associated with ~~increased usage of units at some of our primary customer sites caused by the COVID-19 pandemic~~certain parts, and an ~~increase in the provision for common stock warrants.~~impairment charge of $1.3 million.

Cost of revenue from PPAs for the nine months ended September 30, ~~2020~~2021 increased ~~49.8%~~63.1%, or ~~$14.0~~$27.8 million, to ~~$42.0~~$71.8 million from ~~$28.1~~$44.0 million for the nine months ended September 30, ~~2019.~~2020 primarily due to the increase in units and sites under PPA contract as well as certain COVID related issues such as increased freights costs, certain force majeure issues that impacted hydrogen infrastructure service costs, scrap charges associated with certain parts and an impairment charge of $1.3 million. Gross ~~margin decreased~~loss increased to ~~(111.7)~~(181.4)% for the nine months ended September 30, 2021, as compared to (124.3)% for the nine months ended September 30, 2020 ~~as compared to (46.8)% for the nine months ended September 30, 2019,~~ primarily due to ~~program investments targeting performance improvements, as well as incremental~~certain COVID related issues, certain force majeure issues that impacted hydrogen infrastructure service costs, ~~during the nine months ended September 30, 2020~~scrap charges associated with ~~increased usage of units at some of our primary customer sites caused by the COVID-19 pandemic~~certain parts, and an ~~increase in the provision for common stock warrants.~~impairment charge of $1.3 million.

Cost of revenue – fuel delivered to customers. Cost of revenue from fuel delivered to customers represents the purchase of hydrogen from suppliers that ultimately is sold to customers and costs for onsite generation. Cost of revenue from fuel delivered to customers for the three months ended September 30, ~~2020~~2021 increased ~~54.7%~~63.8%, or ~~$5.0~~$10.9 million, to ~~$14.2~~$27.9 million from ~~$9.2~~$17.0 million for the three months ended September 30, ~~2019.~~2020. The increase was primarily due to higher volume of hydrogen delivered to customer sites as a result of an increase in the number of hydrogen installations completed under GenKey agreements, costs associated with managing availability of molecule in the supply chain as well as a shortage of delivery capability (both drivers and delivery assets), and higher fuel costs. As a result of these higher costs, gross loss increased to (141.1)% during the three months ended September 30, 2021, compared to (72.9)% during the three months ended September 30, 2020. We expect higher hydrogen molecule costs to continue at least through 2021.

Cost of revenue from fuel delivered to customers for the nine months ended September 30, 2021 increased 129.7%, or $51.0 million, to $90.3 million from $39.3 million for the nine months ended September 30, 2020. The increase was primarily due to higher volume of hydrogen delivered to customer sites as a result of an increase in the number of hydrogen installations completed under GenKey agreements, and higher fuel costs. ~~Gross margin decreased to (44.2)% during~~Also significantly impacting the ~~three months ended September 30, 2020, compared to (19.8)% during the three months ended September 30, 2019, primarily due to an increase in~~ cost of fuel ~~paid to suppliers and an increase in the provision for common stock warrants.~~

~~Cost of revenue from fuel delivered to customers~~ for the nine months ended September 30, ~~2020~~2021 was a vendor transition and force majeure events primarily related to hydrogen plant shutdowns. Gross loss increased ~~24.4%, or $6.3 million,~~ to ~~$32.3 million from $25.9~~(167.2)% during the nine months ended September 30, 2021, compared to (60.3)% during the nine months ended September 30, 2020. The increased gross loss is primarily due to the vendor transition and force majeure issues mentioned above. The cost associated with the vendor transition amounted to approximately $16.3 million for the nine months ended September 30, ~~2019. The increase was primarily due to higher volume~~2021, which were recorded in the Company’s unaudited interim condensed consolidated statement of ~~hydrogen~~operations as cost of revenue – fuel delivered to ~~customer sites as a result of an increase in~~customers. The Company also purchased certain fuel tanks from the ~~number of hydrogen installations completed under GenKey agreements and higher~~ fuel ~~costs. Gross margin decreased to (31.5)%~~provider during the nine months ended September 30, ~~2020, compared~~2021. We expect higher hydrogen molecule costs to ~~(21.6)% during the nine months ended September 30, 2019, primarily due to an increase in cost of fuel paid to suppliers and an increase in the provision for common stock warrants.~~continue at least through 2021.

Expenses

Research and development expense. Research and development (“R&D”) 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 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 September 30, ~~2020~~2021 increased ~~$4.0~~$9.2 million, or ~~49.0%~~125.2%, to ~~$12.0~~$16.6 million, from ~~$8.0~~$7.4 million for the three months ended September 30, ~~2019.~~2020. The ~~increase was primarily due to additional~~overall growth in R&D ~~program investments such as programs associated~~investment is commensurate with ~~improvement of fuel efficiency, GenDrive unit performance and~~the Company’s future expansion into new markets, new product ~~development such as on-road delivery trucks, drone applications,~~lines, and ~~increase in headcount.~~varied vertical integrations. The average number of R&D employees was 139 at September 30, 2020 compared to 264 at September 30, 2021.

Research and development expense for the nine months ended September 30, ~~2020~~2021 increased ~~$7.8~~$20.6 million, or ~~32.0%~~120.9%, to ~~$32.1~~$37.6 million, from ~~$24.3~~$17.0 million for the nine months ended September 30, ~~2019.~~2020. The ~~increase was primarily~~overall growth in R&D

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~~due to additional R&D program investments such as programs associated~~investment is commensurate with ~~improvement of fuel efficiency, GenDrive unit performance and~~the Company’s future expansion into new markets, new product ~~development such as on-road delivery trucks, drone applications,~~lines, and ~~increase in headcount.~~varied vertical integrations. The average number of R&D employees was 132 at September 30, 2020 compared to 227 at September 30, 2021.

Selling, general and administrative expenses. Selling, general and administrative expenses includes cash and non-cash compensation, benefits, amortization of intangible assets 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 September 30, ~~2020,~~2021, increased ~~$3.9~~$25.2 million, or ~~37.3%~~146.5%, to ~~$14.3~~$42.4 million from ~~$10.4~~$17.2 million for the three months ended September 30, ~~2019.~~2020. This increase was primarily related to ~~acquisition and debt restructuring charges in addition to~~ increases in salaries ~~employee bonuses,~~and stock-based compensation due to increased headcount and ~~headcount.~~

branding expenses.

Selling, general and administrative expenses for the nine months ended September 30, ~~2020,~~2021, increased ~~$13.6~~$56.7 million, or ~~40.8%~~113.5%, to ~~$46.9~~$106.7 million from ~~$33.4~~$50.0 million for the nine months ended September 30, ~~2019.~~2020. This increase was primarily related to ~~acquisition~~increases in salaries and ~~debt restructuring charges~~stock-based compensation due to increased headcount and branding expenses, in addition to ~~increases in salaries, employee bonuses, stock-based compensation and headcount.~~costs associated with the restatement of our previous years’ financial statements.

~~Interest~~Contingent Consideration. The fair value of the contingent consideration related to the Giner ELX, Inc. and ~~other expense,~~United Hydrogen Group Inc. acquisitions was remeasured as of September 30, 2021, which resulted in a $8.5 million charge for the three months ended September 30, 2021 and a $8.8 million charge for the nine months ended September 30, 2021, both of which are reflected in the unaudited interim condensed consolidated statement of operations for the three and nine months ended September 30, 2021, respectively, primarily due to an increase in projected revenues associated with electrolyzers.

Interest, net. Interest, ~~and other expense,~~ net consists of interest ~~and other expenses~~expense related to our long-term debt, convertible senior notes, obligations under finance leases and our finance obligations, as well as interest income. Interest decreased $11.9 million, or (68.9)%, from $17.2 million for the three months ended September 30, 2020 to $5.4 million for the three months ended September 30, 2021. Interest decreased $14.5 million, or (34.2)%, from $42.4 million for the nine months ended September 30, 2020 to $27.9 million for the nine months ended September 30, 2021. This decrease was primarily driven by the exchange and conversion during both 2020 and 2021 of the 7.5% Convertible Senior Note and 5.5% Convertible Senior Notes, and the adoption of ASU 2020-06 which reduced the noncash interest expense on convertible notes.

Other expense, net. Other expense, net consists of other expenses related to our foreign currency exchange losses, offset by interest and other income consisting primarily of interest earned on our cash and cash equivalents, restricted cash ~~foreign currency exchange gains~~ and other income. Since September 30, 2019, the Company assumed approximately $170.0 million of additional long-term debt at 12% interest (which interest was reduced to 9.5% on May 6, 2020), issued a 7.5% Convertible Senior Note at 7.5% interest, issued $212.5 million convertible senior notes at 3.75% interest, and entered into additional sale/leaseback finance obligation arrangements.

~~Net interest and other~~available-for-sale securities. Other expense, net decreased $253 thousand for the three months ended September 30, ~~2020 increased $9.3 million, or 116.3%, as compared~~2021 in comparison to the three months ended September 30, ~~2019. This increase was attributable to an increase in interest expense associated with the Company’s finance obligations, long-term debt~~2020 and ~~the issuance of the convertible senior note, as mentioned above.~~

~~Net interest and other expense~~decreased $134 thousand for the nine months ended September 30, ~~2020 increased $17.8 million, or 73.8%, as compared~~2021 in comparison to the ~~nine months ended September 30, 2019. This increase was attributable to an increase in finance obligations, long-term debt and the issuance of the convertible senior note, as mentioned above.~~

~~Common Stock Warrant Liability~~

The Company accounts for common stock warrants as common stock warrant liability with changes in the fair value reflected in the unaudited interim condensed consolidated statement of operations as change in the fair value of common stock warrant liability.

~~All remaining common stock warrants were fully exercised in the fourth quarter of 2019. As such, there was no change in fair value as of September 30, 2020.~~

~~Contingent Consideration~~

In the second quarter of 2020 the Company recorded a provisional amount of $7.8 million in contingent consideration, related to the valuation of Giner ELX’s earnout payments that the sellers are eligible to receive. In the third quarter of 2020, the Company assessed the fair value of the contingent consideration to be $8.9 million. The $1.1 million change in fair value of the contingent consideration is reflected in the unaudited interim condensed consolidated statement of operations for the three and nine months ended September 30, 2020.

Realized loss on investments, net. Realized loss on investments, net consists of the sales and maturities related to available-for-sale debt securities. For the three months and nine months ended September 30, 2021, the Company had $254 thousand and $236 thousand, respectively, of net realized loss on investments. The Company did not have an investment portfolio in 2020, and as such there were no realized gains or losses.

Change in fair value of equity securities. Change in fair value of equity securities consists of the changes in fair value for equity securities from the purchase date to the end of the period. For the three months and nine months ended September 30, 2021, the Company had $607 thousand and $284 thousand, respectively, of change in the fair value of equity securities. The Company did not have an investment portfolio in 2020, and as such there were no realized gains or losses.

Loss on equity method investments. Loss on equity method investments consists of our interest in Hyvia, which is our 50/50 joint venture with Renault. For both the three and nine months ended September 30, 2021, the Company recorded a loss of $1.7 million on equity method investments as HyVia had not yet started commercial operations. The Company did not have any equity method investments in 2020, and as such there were no realized gains or losses.

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~~Gain (Loss) on Extinguishment of Debt~~

In May 2020, the Company used a portion of the net proceeds from the issuance of the 3.75% Convertible Senior Notes to repurchase approximately $66.3 million of the 5.5% Convertible Senior Notes which resulted in a $13.2 million gain on early debt extinguishment.

~~In March of 2019, the Company restructured its long-term debt with New York Green Bank, which resulted in a loss on early debt extinguishment of $0.5 million.~~

Income Tax

The Company did not record any income tax expense or benefit for the three or nine months ended September 30, 2021. The Company recognized an income tax benefit for the three and nine months ended September 30, 2020 of ~~$6.5~~$6.6 million and ~~$24.2~~$24.0 million, respectively. Income tax benefit for the three and nine months ended September 30, 2020 included ~~$6.5~~$6.6 million and $19.0, million, respectively, resulting from the intraperiod tax allocation rules under ASC Topic 740-20, Intraperiod Tax Allocation, under which the Company recognized an income tax benefit resulting from a source of future taxable income attributable to the net credit to additional paid-in capital related to the issuance of the 3.75% Convertible Senior Notes, offset by the partial extinguishment of the 5.5% Convertible Senior Notes. In addition, the Company recorded ~~$5.2~~$5.0 million of income tax benefit for the three and nine months ended September 30, 2020 related to the recognition of net deferred tax liabilities in connection with the Giner ELX, Inc. acquisition, which resulted in a corresponding reduction in our deferred tax asset valuation allowance. The Company has not changed its overall conclusion with respect to the need for a valuation allowance against its net deferred tax assets, which remain fully reserved.

Liquidity and Capital Resources

Liquidity

~~Our~~As of September 30, 2021 and December 31, 2020, the Company had $3.4 billion and $1.3 billion of cash ~~requirements relate primarily~~and cash equivalents and $481.2 million and $321.9 million of restricted cash, respectively. In January and February 2021, the Company issued and sold in a registered equity offering an aggregate of 32.2 million shares of its common stock at a purchase price of $65.00 per share for net proceeds of approximately $2.0 billion. Furthermore, in February 2021, the Company completed the previously announced sale of its common stock in connection with a strategic partnership with SK Holdings to ~~working capital needed~~accelerate the use of hydrogen as an alternative energy source in Asian markets. The Company sold 54,996,188 shares of its common stock to ~~operate and grow our business, including funding operating expenses, growth in inventory to support both shipments~~a subsidiary of new units and servicing the installed base, growth in equipment leased to customers under long-term arrangements, funding the growth in our GenKey “turn-key” solution, which includes the installationSK Holdings at a purchase price of ~~our customers’ hydrogen infrastructure as well as production and delivery~~$29.2893 per share, or an aggregate purchase price of the hydrogen fuel, continued development and expansion of our products, payment of lease/financing obligations under sale/leaseback financings, and the repayment or refinancing of our long-term debt. 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; attaining and expanding positive gross margins across all product lines; the timing and amount of our operating expenses; the timing and costs of working capital needs; the timing and costs of developing marketing and distribution channels; the ability of our customers to obtain financing to support commercial transactions; our ability to obtain financing arrangements to support the sale or leasing of our products and services to customers and to repay or refinance our long-term debt, and the terms of such agreements that may require us to pledge or restrict substantial amounts of our cash to support these financing arrangements; 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 timing and costs of product development and introductions; the extent of our ongoing and new research and development programs; and changes in our strategy or our planned activities. If we are unable to fund our operations with positive cash flows and cannot obtain external financing, we may not be able to sustain future operations. As a result, we may be required to delay, reduce and/or cease our operations and/or seek bankruptcy protection.approximately $1.6 billion.

~~We have experienced and continue~~The Company has continued to experience negative cash flows from operations and net losses. The Company incurred net losses attributable to common stockholders of ~~$85.5~~$267.1 million and ~~$67.2~~$112.1 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and had an accumulated deficit of ~~$1.4~~$2.2 billion at September 30, ~~2020.~~2021.

51The Company’s significant obligations consisted of the following as of September 30, 2021:

(i)

Operating and finance leases totaling $162.7 million and $19.8 million, respectively, of which $23.3 million and $2.8 million, respectively, are due within the next 12 months. These leases are primarily related to sale/leaseback agreements entered into with various financial institutions to facilitate the Company’s commercial transactions with key customers.

(ii)

Finance obligations totaling $207.8 million, of which approximately $35.6 million is due within the next 12 months. Finance obligations consist primarily of debt associated with the sale of future revenues and failed sale/leaseback transactions.

(iii)

Long-term debt, primarily related to the Company’s Loan Agreement with Generate Capital totaling $147.3 million, of which $23.5 million is classified as short term on our consolidated balance sheets. See Note 9, “Long-Term Debt”, for more details.

(iv)

Convertible senior notes totaling $192.3 million at September 30, 2021. See Note 10, “Convertible Senior Notes” for more details.

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~~We have historically funded our operations primarily through public~~The Company’s working capital was $4.5 billion at September 30, 2021, which included unrestricted cash and ~~private offerings~~cash equivalents of ~~equity~~$3.4 billion. The Company plans to invest a portion of its available cash to expand its current production and ~~debt, as well as short-term borrowings, long-term debt~~manufacturing capacity and ~~project financings. The~~to fund strategic acquisitions and partnerships and capital projects. In the fourth quarter of 2021, the Company expects to invest approximately €5 million, of which €2.5 million will be in the form of a shareholder loan. Future use of the Company’s funds is discretionary and the Company believes that its ~~current~~ working capital and cash ~~anticipated~~position will be sufficient to be generated from future operations, as well as borrowings from lending and project financing sources and proceeds from equity and debt offerings, including our at-the-market offering, will provide sufficient liquidity to fund its operations for at least one year after the date the financial statements are issued. There is no guarantee that future funding will be available if and when required or at terms acceptable to the Company. This projection is based on our current expectations regarding new project financing and product sales and service, cost structure, cash burn rate and other operating assumptions.

Net cash used in investing activities for the nine months ended September 30, 2020 totaled $71.7 million and included net cash paid for acquisitions, purchases of intangible assets, purchases of property, plant and equipment, and outflows associated with materials, labor, and overhead necessary to construct new leased property. Cash outflows related to equipment that we lease directly to customers are included in net cash used in investing activities.

Public and Private Offerings of Equity and Debt

Common Stock Issuances

In February 2021, the Company completed the previously announced sale of its common stock in connection with a strategic partnership with SK Holdings to accelerate the use of hydrogen as an alternative energy source in Asian markets. The Company sold 54,966,188 shares of its common stock to a subsidiary of SK Holdings at a purchase price of $29.2893 per share, or an aggregate purchase price of approximately $1.6 billion.

On April 13, 2020, the Company entered into anthe At Market Issuance Sales Agreement ~~(ATM),~~ with B. Riley ~~FBR, Inc.~~Financial (“B. Riley”), as sales agent, ~~or FBR,~~ pursuant to which the Company may offer and sell, from time to time through ~~FBR,~~B. Riley, shares of Company common stock having an aggregate offering price of up to $75.0 million. As of the date of this filing, the Company has not issued any shares of common stock pursuant to the ~~ATM.~~

Convertible Senior Notes

In May 2020, the Company issued ~~$212.8~~$212.5 million in aggregate principal amount of ~~3.75% convertible senior notes due 2025, which we refer to herein as the~~ 3.75% Convertible Senior Notes. The total net proceeds from this offering, after deducting costs of the issuance, were $205.1 million. The Company used $90.2 million of the net proceeds from the offering of the 3.75% Convertible Senior Notes to repurchase $66.3 million of the $100 million in aggregate principal amount of ~~5.5% Convertible Senior Notes due 2023, which we refer to herein as~~ the 5.5% Convertible Senior Notes. In

addition, the Company used approximately $16.3 million of the net proceeds from the offering of the 3.75% Convertible Senior Notes to enter into privately negotiated capped called transactions. In ~~October~~the fourth quarter of 2020, ~~$28.0~~$33.5 million of the remaining 5.5% Convertible Senior Notes were converted into ~~12.2~~14.6 million shares of common ~~stock.~~stock, resulting in a gain of approximately $4.5 million which was recorded on the consolidated statement of operations on the gain (loss) on extinguishment of debt line. As of December 31, 2020, approximately $160 thousand aggregate principal amount of the 5.5% Convertible Senior Notes remained outstanding, all of which were converted to common stock in January 2021.

In September 2019, the Company issued a $40.0 million in aggregate principal amount of ~~7.5% convertible senior note due 2023, which we refer to herein as the~~ 7.5% Convertible Senior Note. The Company’s total obligation, net of interest accretion, due to the holder was $48.0 million. The total net proceeds from this offering, after deducting costs of the issuance, were $39.1 million. On July 1, 2020, the note automatically converted fully into 16.0 million shares of common stock.

~~Operating and Finance Leases~~

The Company enters into sale/leaseback agreements with various financial institutions to facilitate the Company’s commercial transactions with key customers. The Company sells certain fuel cell systems and hydrogen infrastructure to the financial institutions and leases the equipment back to support certain customer locations and to fulfill its varied Power Purchase Agreements (PPAs). Transactions completed under the sale/leaseback arrangements are generally accounted for as operating leases and therefore the sales of the fuel cell systems and hydrogen infrastructure are recognized as revenue. In connection with certain sale/leaseback transactions, the financial institutions require the Company to maintain cash balances in restricted accounts securing the Company’s finance obligations. Cash received from customers under the PPAs is used to make payments against the Company’s finance obligations. As the Company performs under these agreements, the required restricted cash balances are released, according to a set schedule. The total remaining lease payments to financial institutions under these agreements at September 30, 2020 was $332.8 million, $286.2 million of which were secured with restricted cash, security deposits backing letters of credit, and pledged service escrows.

Over recent years, including in 2019, the Company has entered into master lease agreements with multiple institutions such as Key Equipment Finance (KeyBank), SunTrust Equipment Finance & Lease Corp. (now known as Truist Bank), First American Bancorp, Inc. (First American), Crestmark Equipment Finance (Crestmark) and U.S. Bank. During the nine months ended September 30 2020, the Company entered into additional lease agreements with KeyBank, First American, Truist Bank, Crestmark and U.S. Bank. Similar to the Wells Fargo lease agreements, the primary purpose of these agreements is to finance commercial transactions with varied customers. Most of the transactions with these financial institutions required cash collateral for the unguaranteed portions totaling $189.9 million as of September 30, 2020. Similar to the Wells Fargo lease agreements, in many cases the Company has a customer guarantee for a large portion of the transactions. The total remaining lease liabilities owed to these financial institutions were $218.5 million at September 30, 2020.

~~Restricted Cash~~

As security for the above noted sale/leaseback agreements, cash of $133.4 million was required to be restricted as of September 30, 2020, which restricted cash will be released over the lease term. As of September 30, 2020, the Company also had letters of credit backed by security deposits totaling $149.3 million for the above noted sale/leaseback agreements.

Secured Debt

Table of closing and borrowed an additional $15.0 million in April 2019 and $20 million in November 2019. A portion of the initial proceeds of the loan was used to pay in full the Company’s long-term debt with NY Green Bank, a Division of the New York State Energy Research & Development Authority, including accrued interest of $17.6 million (the Green Bank Loan), and terminate approximately $50.3 million of certain equipment leases with Generate Plug Power SLB II, LLC and repurchase the associated leased equipment. In connection with this transaction, the Company recognized a loss on extinguishment of debt of approximately $0.5 million during the nine months ended September 30, 2019. This loss was recorded in gain (loss) on extinguishment of debt, in the Company’s unaudited interim condensed consolidated statement of operations. Additionally, $1.7 million was paid to an escrow account related to additional fees due in connection with the Green Bank Loan if the Company does not meet certain New York State employment and fuel cell deployment targets by March 2021. Amount escrowed is recorded in short-term other assets on the Company’s unaudited interim condensed consolidated balance sheets as of September 30, 2020. The Company presently expects to meet the targets as required under the arrangement. Contents

During the ~~nine months~~year ended ~~September 30,~~December 31, 2020, the Company, ~~received $250 thousand from escrow related to the New York state employment targets.~~

~~Additionally, on May 6, 2020, the Company and its subsidiaries, Emerging Power, Inc. and Emergent Power, Inc., entered into a Fifth Amendment (the Amendment)~~under another series of amendments to the Loan Agreement, ~~and Security Agreement, dated as~~borrowed an incremental $100.0 million. As part of ~~March 29, 2019, as amended (the Loan Agreement) with Generate Lending, LLC (Generate Capital). The Amendment amends~~the amendment to the Loan Agreement, ~~to, among other things, (i) provide for an incremental term loan in~~ the amount of $50.0 million, (ii) provide for additional, uncommitted incremental term loans in an aggregate amount not to exceed $50.0 million, which may become available to the Company in Generate Capital’s sole discretion, (iii) reduce theCompany’s interest rate on ~~all loans~~the secured term loan facility was reduced to 9.50% from 12.00% per annum, and ~~(iv) extend~~ the maturity date was extended to October 31, 2025 from October 6, 2022. The $50 million incremental term loan has been fully funded. In connection with the restructuring, the Company capitalized $1.0 million of origination fees and expensed $300 thousand in legal fees. In the third quarter of 2020, the Company borrowed an additional $50.0 million, under the amended Loan Agreement.

On September 30, ~~2020,~~2021, the outstanding balance under the Term Loan Facility was ~~$185.0~~$137.7 million. In addition to the Term Loan Facility, on September 30, 2021 there was approximately $9.5 million ~~with a 9.5% annual interest rate.~~of debt outstanding related to the United Hydrogen Group, Inc. acquisition.

~~All obligations under the Loan Agreement are unconditionally guaranteed by Emerging Power Inc. and Emergent Power Inc.~~

The Term Loan Facility is secured by substantially all of the Company’s and the guarantor subsidiaries’ assets, including, among other assets, all intellectual property, all securities in domestic subsidiaries and 65% of the securities in foreign subsidiaries, subject to certain exceptions and exclusions.

agreements, which failure would entitle the customer to terminate such customer agreement, replace the Company or withhold the payment of any material amount to the Company under such customer agreement, then Generate Capital has the right to cause Proton Services Inc., a wholly owned subsidiary of the Company, to replace the Company in performing the maintenance services under such customer agreement.

As of September 30, ~~2020,~~2021, the Term Loan Facility requires the principal balance as of each of the following dates not to exceed the following (in thousands):

December 31, 2020
$
164,017
December 31, 2021

127,317
December 31, 2022

93,321
December 31, 2023

62,920
December 31, 2024

33,692
December 31, 2025

—


December 31, 2021	$	127,317
December 31, 2022		93,321
December 31, 2023		62,920
December 31, 2024		33,692
December 31, 2025		—

Several key indicators of liquidity are summarized in the following table (in thousands):


	Nine months		Year		Nine months		Year
	ended or at		ended or at		ended or at		ended or at
	September 30, 2020		December 31, 2019		September 30, 2021		December 31, 2020
Cash and cash equivalents at end of period	$	448,140	$	139,496	$	3,371,962	$	1,312,404
Restricted cash at end of period		283,232		230,004		481,230		321,880
Working capital at end of period		514,163		162,549		4,518,052		1,380,830
Net loss attributable to common stockholders		(85,533)		(85,517)		(267,051)		(596,181)
Net cash used in operating activities		(156,910)		(51,522)		(348,501)		(155,476)
Net cash used in investing activities		(71,715)		(14,244)		(1,014,294)		(95,334)
Net cash provided by financing activities		590,587		325,060		3,581,762		1,515,529

3.75% Convertible Senior Notes

On May 18, 2020, the Company issued $200.0 million in aggregate principal amount of 3.75% Convertible Senior Notes due June 1, 2025, ~~which is referred to herein as the 3.75% Convertible Senior Notes,~~ in a private placement to qualified institutional buyers pursuant to Rule 144A under ~~the Securities Act of 1933, as amended, or~~ the Securities Act. On May 29, 2020, the Company issued an additional $12.5 million in aggregate principal amount of 3.75% Convertible Senior Notes.

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At issuance in May 2020, the total net proceeds from the 3.75% Convertible Senior Notes were as follows:

Amount

(in thousands)
Principal amount
$
212,463
Less initial purchasers' discount

(6,374)
Less cost of related capped calls

(16,253)
Less other issuance costs

(617)
Net proceeds
$
189,219

~~3.75% Convertible Senior Notes~~


	Amount
	(in thousands)
Principal amount	$	212,463
Less initial purchasers' discount		(6,374)
Less cost of related capped calls		(16,253)
Less other issuance costs		(617)
Net proceeds	$	189,219

~~herein as~~ the 5.5% Convertible Senior Notes, effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the collateral securing such indebtedness, and structurally subordinated to all indebtedness and other liabilities, including trade payables, of its current or future subsidiaries.

upon the occurrence of specified corporate events, as described in the indenture governing the 3.75% Convertible Senior Notes.

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2021, certain conditions allowing holders of the 3.75% Convertible Senior Notes to convert were met. The 3.75% Convertible Senior Notes are therefore convertible during the calendar quarter ending September 30, 2021 at the conversion rate discussed above. During the nine months ended September 30, 2021, $15.2 million of the 3.75% Convertible Senior Notes were converted and the Company issued approximately 3.0 million shares of common stock in conjunction with these conversions.

~~In accounting~~The Company accounts for ~~the issuance of~~ the 3.75% Convertible Senior Notes ~~the Company separated the notes into liability and equity components. The initial carrying amount of the liability component of approximately $75.2 million,~~

~~net of costs incurred, was calculated by measuring the fair value of~~as a similar liability that does not have an associated convertible feature. The carrying amount of the equity component of approximately $130.3 million, net of costs incurred, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the 3.75% Convertible Senior Notes. The difference between the principal amount of the 3.75% Convertible Senior Notes and the liability component (the debt discount) is amortized to interest expense using the effective interest method over the term of the 3.75% Convertible Senior Notes. The effective interest rate is approximately 29.0%. The equity component of the 3.75% Convertible Senior Notes is included in additional paid-in capital in the unaudited interim condensed consolidated balance sheets and is not remeasured as long as it continues to meet the conditions for equity classification.

The 3.75% Convertible Senior Notes consisted of the following (in thousands):


	September 30,		September 30,
	2020		2021
Principal amounts:
Principal	$	212,463	$	197,278
Unamortized debt discount (1)		(129,101)
Unamortized debt issuance costs (1)		(2,425)		(4,958)
Net carrying amount	$	80,937	$	192,320
Carrying amount of the equity component (2)	$	130,249

The following table summarizes the total interest expense, the amortization of debt issuance costs and the effective interest rate related to the 3.75% Convertible Senior Notes (in thousands, except for effective interest rate):


	September 30,
	2021
Interest expense	$	1,849
Amortization of debt issuance costs		306
Total		2,155

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	2)	Included in the unaudited interim condensed consolidated balance sheets within additional paid-in capital, net of $4.4 million in equity issuance costs and associated income tax benefit of $19.0 million.
Effective interest rate		4.50%

Capped Call

under the terms of the 3.75% Notes Capped Call. The 3.75% Notes Capped Call becomes exercisable if the conversion option is exercised.

~~7.5% Convertible Senior Note~~

~~On July 1, 2020, the 7.5% Convertible Senior Note automatically converted into 16.0 million shares of common stock.~~sheets.

5.5% Convertible Senior Notes

~~At issuance in March 2018, the total net proceeds from the 5.5% Convertible Senior Notes were as follows:~~

~~The 5.5% Convertible Senior Notes bear interest at 5.5%, payable semi-annually in cash on March 15~~ Interest expense and ~~September 15 of each year. The 5.5% Convertible Senior Notes will mature on March 15, 2023, unless earlier converted~~

or repurchased in accordance with their terms. The 5.5% Convertible Senior Notes are unsecured and do not contain any financial covenants or any restrictions on the payment of dividends, or the issuance or repurchase of common stock by the Company.

during the five business day period after any five consecutive trading day period (the measurement period) in which the trading price (as defined in the indenture governing the 5.5% Convertible Senior Notes) per $1,000 principal amount of 5.5% Convertible Senior Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate for the 5.5% Convertible Senior Notes on each such trading day;

The Company may not redeem the 5.5% Convertible Senior Notes prior to March 20, 2021. The Company may redeem for cash all or any portion of the 5.5% Convertible Senior Notes, at the Company’s option, on or after March 20, 2021 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the three trading days immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides

notice of redemption at a redemption price equal to 100% of the principal amount of the 5.5% Convertible Senior Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

We incurred transaction costs related to the issuance of the 5.5% Convertible Senior Notes of approximately $4.1 million, consisting of initial purchasers’ discount of approximately $3.3 million and other issuance costs of $0.9 million. In accounting for the transaction costs, we allocated the total amount incurred to the liability and equity components using the same proportions as the proceeds from the 5.5% Convertible Senior Notes. Transaction costs attributable to the liability componentperiod were approximately $2.4 million, were recorded as debt issuance cost (presented as contra debt in the unaudited interim condensed consolidated balance sheets) and are being amortized to interest expense over the term of the 5.5% Convertible Senior Notes. The transaction costs attributable to the equity component were approximately $1.7 million and were netted with the equity component in stockholders’ equity.

~~The 5.5% Convertible Senior Notes consisted of the following (in thousands):~~

Capped Call

~~that underlie the initial 5.5% Convertible Senior Notes and is generally expected~~million to reduce the potential dilution to the Company’s common stock upon any conversion of the 5.5% Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 5.5% Convertible Senior Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the 5.5% Notes Capped Call is initially $3.82 per share, which represents a premium of 100% over the last then-reported sale price of the Company’s common stock of $1.91 per share on the date of the transaction and is subject to certain adjustments under the terms of the 5.5% Notes Capped Call. The 5.5% Notes Capped Call becomes exercisable if the conversion option is exercised.

be. The net cost incurred in connection with the 5.5% Notes Capped Call has been recorded as a reduction to additional paid-in capital in the unaudited interim condensed consolidated balance sheets.

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Common Stock Forward

~~In conjunction with the partial payoff of the 5.5% Convertible Senior Notes, the Common Stock Forward’s expiration date was extended to June 1, 2025.~~

The book ~~values~~value of the 5.5% Notes Capped Call and Common Stock Forward are not remeasured.

During ~~October~~the fourth quarter of 2020, the Common Stock Forward was partially settled and, as a result, the Company received ~~3.5~~4.4 million shares of its common stock. During the three 0 shares were settled and received by the Company. During the nine months ended September 30, 2021, 8.1 million shares were settled and received by the Company.

Amazon Transaction Agreement

61 upon execution of the Amazon Warrant.

~~during 2017. All future provision~~Provision for ~~common stock warrants~~the second and third tranches of Amazon Warrant Shares is ~~measured based on their grant-date fair value and~~ recorded as a ~~charge against revenue.~~reduction of revenue because they represent consideration payable to a customer.

The fair value of the second tranche of Amazon Warrant Shares was measured at January 1, 2019, upon adoption of ASU 2019-08. The second tranche of 29,098,260 Amazon Warrant Shares vested in four equal installments, ~~of 7,274,565 Amazon Warrant Shares each time~~as Amazon or its affiliates, directly or indirectly through third parties, ~~make~~made an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $200.0 million in the aggregate. The ~~exercise price for~~last installment of the ~~first~~second tranche vested on November 2, 2020. Revenue reductions of $9.0 million, $4.1 million and $9.8 million associated with

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the second ~~tranches~~tranche of Amazon Warrant Shares ~~is $1.1893 per share. The~~were recorded in 2020, 2019 and 2018, respectively, under the terms of the original Amazon Warrant.

Under the terms of the original Amazon Warrant, the third tranche of 20,368,784 Amazon Warrant Shares ~~will vest~~vests in eight equal installments, ~~of 2,546,098 Amazon Warrant Shares each time~~as Amazon or its affiliates, directly or indirectly through third parties, ~~make~~made an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $400.0 million in the aggregate. The measurement date for the third tranche of Amazon Warrant Shares was November 2, 2020, when their exercise price was determined, as discussed further below. The fair value of the third tranche of Amazon Warrant Shares was determined to be $10.57 each. During 2020, revenue reductions of $24.1 million associated with the third tranche Amazon Warrant Shares were recorded under the terms of the original Amazon Warrant, prior to the December 31, 2020 waiver described below.

The $399.7 million reduction to revenue was recognized during the year ended December 31, 2020 because the Company concluded such amount was not recoverable from the margins expected from future purchases by Amazon under the Amazon Warrant, and no exclusivity or other rights were conferred to the Company in connection with the December 31, 2020 waiver. Additionally, for the year ended December 31, 2020, the Company recorded a reduction to the provision for warrants of $12.8 million in connection with the release of the service loss accrual.

The exercise price for the first and second tranches of Amazon Warrant Shares was $1.1893 per share. The exercise price of the third tranche of Amazon Warrant Shares iswas $13.81 per share, which iswas determined pursuant to the terms of the Amazon Warrant as an amount ~~per share~~ equal to ninety percent (90%) of the 30-day volume weighted average share price of the Company’s common stock as of November 2, 2020, the final vesting date of the second tranche of Amazon Warrant Shares. The Amazon Warrant ~~Shares are~~is exercisable through April 4, 2027. The Amazon Warrant ~~Shares provide~~provides for net share settlement that, if elected by the ~~holders,~~holder, will reduce the number of shares issued upon exercise to reflect net settlement of the exercise price. The Amazon Warrant ~~Shares provide~~provides for certain adjustments that may be made to the exercise price and the number of shares of common stock issuable upon exercise due to customary anti-dilution provisions based on future events. ~~These warrants are~~The Amazon Warrant is classified as an equity ~~instruments.~~instrument.

~~At September 30, 2020 and December 31, 2019, 27,643,347 and 20,368,782~~Fair value of the Amazon Warrant ~~Shares had vested, respectively. The amount of provision for common stock warrants recorded as a reduction of revenue for the Amazon Warrant during the three months ended September 30,~~at December 31, 2020 and ~~2019~~November 2, 2020 was ~~$17.3 million and $1.0 million, respectively. The amount of provision~~based on the Black Scholes Option Pricing Model, which is based, in part, upon level 3 unobservable inputs for ~~common stock warrants recorded as a reduction of revenue for~~which there is little or no market data, requiring the ~~Amazon Warrant during the nine months ended September 30, 2020 and 2019 was $22.0 million and $2.0 million, respectively.~~Company to develop its own assumptions.

~~During the third quarter~~52

Table of 2020, approximately $23.8 million of recorded revenue from Amazon was constrained by the tranche 3 of the Amazon Warrant Shares. An additional 7,274,565 Amazon Warrant Shares vested on November 2, 2020, representing the final vesting of tranche 2, resulting in cumulative vesting in 34,917,912 Warrant Shares since the execution of the Amazon Transaction Agreement. In accordance with terms of the Amazon Transaction Agreement as described above, upon final vesting of tranche 2, the tranche 3 Amazon Warrant Shares exercise price was determined to be $13.81 per share. Based on the exercise price of the third tranche of the Amazon Warrant Shares, among other things, the fair value of the 20,368,784 tranche 3 Amazon Warrant Shares is estimated to be $10.60 each, compared to the fair value of tranche 2 Amazon Warrant Shares of $1.05 each.Contents



	December 31, 2020	November 2, 2020
Risk-free interest rate	0.58%	0.58%
Volatility	75.00%	75.00%
Expected average term	6.26	6.42
Exercise price	$13.81	$13.81
Stock price	$33.91	$15.47

Walmart Transaction Agreement

7,274,565 Walmart Warrant Shares each time Walmart or its affiliates, directly or indirectly through third parties, make an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $200.0 million in the aggregate. The exercise price for the first and second tranches of Walmart Warrant Shares is $2.1231 per share. After Walmart has made payments to the Company totaling $200.0 million, the third tranche of 20,368,784 Walmart Warrant Shares will vest in eight installments of 2,546,098 Walmart Warrant Shares each time Walmart or its affiliates, directly or indirectly through third parties, make an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $400.0 million in the aggregate. The exercise price of the third tranche of Walmart Warrant Shares will be an amount per share equal to ninety percent (90%) of the 30-day volume weighted average share price of the common stock as of the final vesting date of the second tranche of Walmart Warrant Shares, provided that, with limited exceptions, the exercise price for the third tranche will be no lower than $1.1893. The Walmart Warrant ~~Shares are~~is exercisable through July 20, 2027.

At both September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 13,094,217 ~~and 5,819,652~~ of the Walmart Warrant Shares had ~~vested, respectively.~~vested. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Walmart Warrant during the three months ended September 30, 2021 and 2020 ~~and 2019~~ was ~~$1.3~~$1.2 million and ~~$0.5~~$1.3 million, respectively. The amount of provision for common stock warrants recorded as a reduction of revenue for the Walmart Warrant during the nine months ended September 30, 2021 and 2020 was $4.4 million and ~~2019 was~~ $3.2 million, ~~and $1.7 million,~~ respectively. During the three months ended March

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31, 2021, the Walmart Warrant had been exercised with respect to 7,274,565 shares of common stock. There were no exercises during the second or third quarter of 2021.

~~Lessor Obligations~~Operating and Finance Lease Liabilities

As of September 30, ~~2020,~~2021, the Company had ~~noncancelable~~ operating leases (as lessor), primarily associated with assets deployed at customer sites. These leases expire over the next one to nine years. Leases contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote.

~~Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of September 30, 2020 were as follows (in thousands):~~

Remainder of 2020

$
8,272
2021

34,436
2022

32,665
2023

30,043
2024

26,660
2025 and thereafter

$
49,351
Total future minimum lease payments

$
181,427

~~Lessee Obligations~~

~~As of September 30, 2020, the Company had operating and finance~~ leases, as lessee, primarily associated with sale/leaseback transactions that are partially secured by restricted cash, security deposits and pledged escrows (see also Note 1, ~~Nature~~“Nature of ~~Operations)~~Operations”) as summarized below. These leases expire over the next one to ~~eight~~nine years. Minimum rent payments under operating ~~and finance~~ leases are recognized on a straight-line basis over the term of the lease.

~~In prior periods, the~~The Company ~~entered into sale/leaseback transactions that were accounted for as~~has finance leases associated with its property and ~~reported as part of finance obligations. The outstanding balance of finance obligations related to sale/leaseback~~

~~transactions~~equipment in Latham, New York and at ~~September 30, 2020 and December 31, 2019 was $25.9 million and $31.7 million, respectively.~~fueling customer locations. The fair value of ~~the~~this finance obligation approximated the carrying value as of ~~both~~ September 30, 2021.

Future minimum lease payments under operating and finance leases (with initial or remaining lease terms in excess of one year) as of September 30, 2021 were as follows (in thousands):


			Finance		Total
		Operating Lease	Lease		Lease
		Liability	Liability		Liabilities
Remainder of 2021	$	9,929	$	1,019	$	10,948
2022		39,932		4,012		43,944
2023		39,989		3,989		43,978
2024		39,957		3,996		43,953
2025 and thereafter		90,241		10,843		101,084
Total future minimum payments		220,048		23,859		243,907
Less imputed interest		(57,364)		(4,074)		(61,438)
Total	$	162,684	$	19,785	$	182,469

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At September 30, 2021 and December 31, ~~2019.~~2020, the right of use assets associated with operating leases was $200.2 million and $136.9 million, respectively. The accumulated depreciation for these right of use assets was $32.3 million and $19.9 million at September 30, 2021 and December 31, 2020, respectively.

Other information related to the operating leases are presented in the following table:


	Nine months ended		Nine months ended
	September 30, 2021		September 30, 2020
Cash payments (in thousands)	$	25,726	$	14,954
Weighted average remaining lease term (years)		5.72		4.55
Weighted average discount rate		11.2%		11.8%

Right of use assets obtained in exchange for new finance lease liabilities were $5.8 million and $0 for the three months ended September 30, 2021 and 2020, respectively. Right of use assets obtained in exchange for new finance lease liabilities were $17.9 million and $686 thousand for the nine months ended September 30, 2021 and 2020, respectively.

Other information related to the finance leases are presented in the following table:


	Nine months ended		Nine months ended
	September 30, 2021		September 30, 2020
Cash payments (in thousands)	$	2,128	$	252
Weighted average remaining lease term (years)		4.57		6.51
Weighted average discount rate		6.9%		9.6%

Finance Obligation

The Company has sold future services to be performed associated with certain sale/leaseback transactions and recorded the balance as a finance obligation. The outstanding balance of this obligation at September 30, ~~2020~~2021 was ~~$144.3~~$190.5million, $30.5 million and $160.0 million of which ~~$22.2 million and $122.1 million were~~was classified as short-term and long-term, respectively, on the ~~unaudited interim condensed~~accompanying consolidated balance ~~sheets.~~sheet. The outstanding balance of this obligation at December 31, ~~2019~~2020 was ~~$109.4~~$157.7 million, $24.2 million and $133.5 million of which ~~$15.5 million and $93.9 million were~~was classified as short-term and long-term, respectively. The amount is amortized using the effective interest method. The fair value of this finance obligation approximated the carrying value as of September 30, 2021 and December 31, 2020.

In prior periods, the Company entered into sale/leaseback transactions that were accounted for as financing transactions and reported as part of finance obligations. The ~~Company has a~~outstanding balance of finance ~~lease associated with its property~~obligations related to sale/leaseback transactions at September 30, 2021 was $17.3 million, $5.1 million and ~~equipment in Latham, New York. A liability relating to this lease~~$12.2 million of ~~$2.8 million has been recorded~~which was classified as ~~a finance obligation in~~short-term and long-term, respectively on the ~~unaudited interim condensed~~accompanying consolidated balance ~~sheet~~sheet. The outstanding balance of this obligation at December 31, 2020 was $23.9 million, $8.0 million and $15.9 million of which was classified as ~~of September 30.~~short-term and long-term, respectively on the accompanying consolidated balance sheets. The fair value of this finance obligation approximated the carrying value as of both September 30, 2021 and December 31, 2020.

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Future minimum ~~lease~~ payments under ~~operating and~~ finance ~~leases (with initial or remaining lease terms in excess of one year)~~obligations notes above as of September 30, ~~2020~~2021 were as follows (in thousands):


					Total
		Sale of Future		Sale/leaseback	Finance
		revenue - debt		financings	Obligations
Remainder of 2021	$	12,788	$	1,680	$	14,468
2022		50,632		4,975		55,607
2023		50,632		3,148		53,780
2024		50,632		16,154		66,786
2025 and thereafter		86,614		—		86,614
Total future minimum payments		251,298		25,957		277,255
Less imputed interest		(60,760)		(8,658)		(69,418)
Total	$	190,538	$	17,299	$	207,837

Other information related to the ~~operating leases~~above finance obligations are presented in the following ~~tables:~~table:

Nine months ended

Nine months ended

September 30, 2020

September 30, 2019
Cash payments (in thousands)
$
40,500

$
19,222

September 30,

2020

2019
Weighted average remaining lease term (years)

5.5

5.25
Weighted average discount rate

12.1%

12.1%

Finance lease costs include amortization of the right of use assets (i.e., depreciation expense) and interest on lease liabilities (i.e., interest and other expense, net in the unaudited interim consolidated statement of operations). Finance lease costs were as follows (in thousands):

Right of use assets obtained in exchange for new finance lease liabilities was $41.1 million and $86.5 million for the three and nine months ended September 30, 2020, respectively, and $38.4 million and $72.9 million for the three and nine months ended September 30, 2019, respectively.

~~Other information related to the finance leases are presented in the following tables:~~

Nine months ended

Nine months ended

September 30, 2020

September 30, 2019
Cash payments (in thousands)
$
7,847

$
57,659


	As of September 30,				Nine months ended		Nine months ended
		2020	2019		September 30, 2021		September 30, 2020
Weighted average remaining lease term (years)		3.36	3.09
Cash payments (in thousands)				$	41,325	$	31,693
Weighted average remaining term (years)					4.88		4.74
Weighted average discount rate		7.8%	11.1%		11.3%		11.3%

Restricted Cash

~~Legal matters are defended~~The Company records the fair value of assets and ~~handled~~liabilities in accordance with ASC 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and in the ~~ordinary course of business.~~principal or most advantageous market for that asset or liability. The ~~Company has established accruals for matters for which management considers a loss~~fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to ~~be probable and reasonably estimable. It is~~ the opinion of management that facts known at the present time do not indicate that such litigation, after taking into account insurance coverage and the aforementioned accruals, will have a material adverse impact on our results of operations, financial position, or cash flows.entity.

65In addition to defining fair value, ASC 820 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

These levels are:

●

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities.

●

Level 3 — unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability at fair value.

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~~Concentrations of Credit Risk~~

Concentrations of credit risk with respect to receivables exist due to the limited number of select customers with whom the Company has initial commercial sales arrangements. To mitigate credit risk, the Company performs appropriate evaluation of a prospective customer’s financial condition.

~~At September 30, 2020, one customer comprised approximately 84.5%~~The fair values of the ~~total accounts receivable balance. At December 31, 2019, two customers comprised approximately 63.4%~~Company’s investments are based upon prices provided by an independent pricing service. Management has assessed and concluded that these prices are reasonable and has not adjusted any prices received from the independent provider. Securities reported at fair value utilizing Level 1 inputs represent assets whose fair value is determined based upon observable unadjusted quoted market prices for identical assets in active markets. Level 2 securities represent assets whose fair value is determined using observable market information such as previous day trade prices, quotes from less active markets or quoted prices of ~~the total accounts receivable balance.~~

~~For~~securities with similar characteristics. There were no transfers between Level 1, Level 2, or Level 3 during the nine months ended September 30, ~~2020, 71.8%~~2021.

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):


		As of September 30, 2021
		Carrying		Fair		Fair Value Measurements
		Amount		Value		Level 1		Level 2		Level 3
Assets
Cash equivalents (1)	$	610,651	$	610,651	$	140,574	$	470,077	$	—
Corporate bonds		530,089		530,089		—		530,089		—
Commercial paper		35,795		35,795		—		35,795		—
U.S. Treasuries		169,878		169,878		169,878		—		—
Certificates of deposit		17,004		17,004		—		17,004		—
Equity securities		147,649		147,649		147,649		—		—

Liabilities
Contingent consideration		18,520		18,520		—		—		18,520
Convertible senior notes		192,320		1,006,639		—		1,006,639		—
Long-term debt		147,255		147,255		—		—		147,255
Finance obligations		207,837		207,837		—		—		207,837


		As of December 31, 2020
		Carrying		Fair		Fair Value Measurements
		Amount		Value		Level 1		Level 2		Level 3
Liabilities
Contingent consideration		9,760		9,760		—		—		9,760
Convertible senior notes		85,640		1,272,766		—		1,272,766		—
Long-term debt		175,402		175,402		—		—		175,402
Finance obligations		181,553		181,553		—		—		181,553

(1)

Included in “Cash and cash equivalents” in our consolidated balance sheets as of September 30, 2021.

Available-for-sale securities

The amortized cost, gross unrealized gains and losses, fair value of ~~total consolidated revenues were associated primarily with two customers. For the nine months ended~~those investments classified as available-for-sale securities, and allowance for credit losses at September 30, ~~2019, 62.3%~~2021 are summarized as follows (in thousands):


	Amortized		Gross		Gross		Fair		Allowance for
	Cost		Unrealized Gains		Unrealized Losses		Value		Credit Losses
Corporate bonds	$	533,691	$	93	$	(3,695)	$	530,089		—
Commercial paper		35,719		76		—		35,795		—
Certificates of deposit		17,017		—		(13)		17,004		—
U.S. Treasuries		170,414		1		(537)		169,878		—
Total	$	756,841	$	170	$	(4,245)	$	752,766	$	—

Table of ~~total~~Contents

A summary of the amortized cost and fair value of investments classified as available-for-sale, by contractual maturity, at September 30, 2021 is as follows (in thousands):


	September 30, 2021
		Amortized	Fair
Maturity:		Cost	Value
Within one year	$	447,479	$	446,011
After one through five years		309,362		306,755
Total	$	756,841	$	752,766

The cost, gross unrealized gains, gross unrealized losses, and fair value of those investments classified as equity securities at September 30, 2021 are summarized as follows (in thousands):


	September 30, 2021
			Gross		Gross		Fair
		Cost	Unrealized Gains		Unrealized Losses		Value
Fixed income mutual funds	$	77,766	$	—	$	(132)	$	77,634
Exchange traded mutual funds		70,167		—		(152)		70,015
Total	$	147,933	$	—	$	(284)	$	147,649

Extended Maintenance Contracts

On a quarterly basis, we evaluate any potential losses related to our extended maintenance contracts for fuel cell systems and related infrastructure that has been sold. We measure loss accruals at the customer contract level. The expected revenues and expenses for these contracts include all applicable expected costs of providing services over the remaining term of the contracts and the related unearned net revenue. A loss is recognized if the sum of expected costs of providing services under the remaining term of the contract exceeds related unearned net revenue and is recorded as a provision for loss contracts related to service in the consolidated ~~revenues were associated primarily with three customers. For purposes~~statements of ~~assigning a customer to a sale/leaseback transaction completed with a financial institution,~~operations. A key component of these estimates is the expected future service costs. In estimating the expected future costs, the Company considers its current service cost level and applies significant judgment related to expected cost saving initiatives. The expected future cost savings will be primarily dependent upon the ~~end user~~success of the ~~assets~~Company’s initiatives related to increasing stack life, achieving better economies of scale for service labor, and improvements in design and operations of infrastructure. If the expected cost saving initiatives are not realized, this will increase the estimated costs of providing services and will adversely affect our estimated contract loss accrual. Further, we continue to work to improve quality and reliability; however, unanticipated additional quality issues or warranty claims may arise and additional material charges may be incurred in the ~~ultimate customer.~~future. These quality issues could also adversely affect our contract loss accrual. Service costs during 2021 have been higher than previously estimated. The Company has undertaken or will soon undertake several initiatives to extend the life and improve the reliability of its equipment. As a result of these initiatives and our additional expectation that the increase in certain costs attributable to the global pandemic will abate, the Company believes that its contract loss accrual is sufficient. However, if elevated service costs persist, the Company will adjust its estimated future service costs and increase its contract loss accrual estimate.

Off-Balance Sheet Arrangements

~~As of September 30, 2020, the~~The Company does not have off-balance sheet arrangements that are likely to have a current or future significant effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our ~~unaudited interim condensed~~ consolidated financial statements, which have been prepared in accordance with ~~U.S.~~ GAAP. The preparation of these ~~unaudited interim condensed~~ consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets,

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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 revenue recognition, ~~for~~ bad debts, inventories, intangible assets, ~~valuation~~impairment of long-lived assets and PPA executory contract consideration, accrual for loss ~~contracts~~ on ~~service,~~extended maintenance contracts, operating and finance leases, product warranty ~~reserves,~~accruals, unbilled revenue, common stock warrants, income taxes, stock-based compensation, ~~contingencies,~~ and ~~purchase accounting.~~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 (1) the carrying values of assets and liabilities and (2) the amount of revenue and expenses realized that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~We refer~~

There have been no changes in our critical accounting estimates from those reported in our 2020 10-K, other than the addition of stock-based compensation.

Stock-based compensation

Stock-based compensation represents the cost related to stock-based awards granted to employees and directors. In September 2021, the ~~policies~~Company issued performance stock option awards that include a market condition for certain executives. The Company uses the Monte Carlo simulation model to determine the fair value of performance stock option awards that include a market condition. In estimating fair value, management is required to make certain assumptions and estimates ~~set forth in~~such as the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates”, as well as a discussion of significant accounting policies included in Note 2, Summary of Significant Accounting Policies,expected term, volatility of the ~~consolidated financial statements, both of which are included~~Company’s future share price, risk-free rate, and future dividend yield. Changes in ~~our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.~~assumptions used to estimate fair value could result in materially different results.

Recent Accounting Pronouncements

Recently Adopted Accounting ~~Pronouncements~~Guidance

66new accounting pronouncements.

~~are classified as current. The Company adopted these standards effective~~On January 1, ~~2020 and determined the impact of the standards to be immaterial to the consolidated financial statements.~~

~~Recently Issued and Not Yet Adopted Accounting Pronouncements~~

~~In August 2020,~~ ~~Accounting Standards~~ ~~Update (ASU) 2020-06~~~~, Debt – Debt With~~ Conversion and Other Options (Subtopic 470-20) and Derivatives and ~~Hedging –~~ Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)~~: Accounting~~ using the modified retrospective approach. Consequently, the Company’s 3.75% Convertible Senior Notes is now accounted for ~~Convertible Instruments~~as a single liability measured at its amortized cost. This accounting change removed the impact of recognizing the equity component of the Company’s convertible notes at issuance and ~~Contracts in an Entity’s Own Equity,~~ ~~was issued to address issues identified~~the subsequent accounting impact of additional interest expense from debt discount amortization. Future interest expense of the convertible notes will be lower as a result of adoption of this guidance and net loss per share will be computed using the ~~complexity associated with applying GAAP~~if-converted method for ~~certain financial instruments with characteristics~~convertible instruments. The cumulative effect of ~~liabilities~~the accounting change upon adoption on January 1, 2021 increased the carrying amount of the 3.75% Convertible Senior Notes by $120.6 million, reduced accumulated deficit by $9.6 million and ~~equity. This update is effective after December 15,~~reduced additional paid-in capital by $130.2 million as of September 30, 2021. ~~The Company is evaluating the adoption method as well as the impact this update will have on the consolidated financial statements.~~

~~In March 2020,~~ Recent Accounting ~~Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848): Facilitation~~Guidance Not Yet Effective

All issued but not yet effective accounting and reporting standards as of ~~the Effects of Reference Rate Reform on Financial Reporting, was issued to provide temporary optional expedients and exceptions~~September 30, 2021 are either not applicable to the ~~GAAP guidance on contract modifications and hedge accounting~~Company or are not expected to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This update is effective starting March 12, 2020 and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is evaluating the adoption method as well as thehave a material impact ~~this update will have~~ on the ~~consolidated financial statements.~~

Company.

Item 3 — Quantitative and Qualitative Disclosures about Market Risk

~~From time to time, we may invest our cash~~There has been no material change from the information provided in ~~government, government backed~~the 2020 10-K “Item 7A: Quantitative and ~~interest-bearing investment-grade~~Qualitative Disclosures About Market Risk,” other than those described below.

During the first nine months of 2021, the Company purchased U.S. Treasury securities, ~~that we generally hold for~~corporate bonds, commercial paper, certificates of deposit and money market funds, in which the ~~duration~~major components of ~~the term of the respective instrument. We do not utilize derivative financial instruments, derivative commodity instruments or other~~ market risk ~~sensitive instruments, positions or~~

67affecting us are credit risk and interest rate risk. We also purchased equity securities, in which the major component of market risk affecting us is equity risk.

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transactions in any material fashion, except for the 5.5% Notes Capped Call and Common Stock Forward purchased in March 2018 related to the issuance of 5.5% Convertible Senior Notes and the 3.75% Notes Capped Call purchased in May 2020 related to the issuance of 3.75% Convertible Senior Notes. We are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments.

Our exposure to changes in foreign currency rates is primarily related to sourcing inventory from foreign locations and operations of HyPulsion, S.A.S., our French subsidiary that develops and sells hydrogen fuel cell systems for the European material handling market. In addition, we also have an investment in HyVia, a joint venture with Renault that plans to manufacture and sell FCE-LCVs and to supply hydrogen fuel and fueling stations to support the FCE-LCV market~~. This practice~~ primarily in Europe. Our exposure to foreign currency can give rise to foreign exchange risk resulting from ~~the varying cost of inventory to the receiving location.~~our equity method investment with HyVia, which operates in Europe. The Company reviews the level of foreign content as part of its ongoing evaluation of overall sourcing strategies and considers the exposure to be not significant. Our HyPulsion exposure presently is mitigated by low levels of operations and its sourcing is primarily intercompany in nature and denominated in U.S. dollars. Our HyVia exposure presently is immaterial as we have not yet commenced commercial activities.

Item 4 — Controls and Procedures

(a) Disclosure controls and procedures.

~~The chief executive officer and chief financial officer, based on their evaluation of~~We maintain disclosure controls and procedures ~~(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded~~ that ~~the Company’s disclosure controls and procedures~~ are ~~effective for ensuring~~designed to ensure that information required to be disclosed in ~~the~~our reports that ~~it files~~we file or ~~submits~~submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in ~~the Commission’s~~SEC rules and ~~forms. Disclosure controls~~forms, and ~~procedures include, without limitation, controls and procedures designed to ensure~~ that such information ~~required to be disclosed in filed or submitted reports~~ is accumulated and communicated to ~~the Company’s~~our management, including ~~its~~our Chief Executive Officer (our principal executive ~~officer~~officer) and Chief Financial Officer (our principal financial ~~officer~~officer) as appropriate, to allow for timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective in 2018, 2019 and 2020 because of the material weakness in internal control over financial reporting described in Part II, Item 9A “Controls and Procedures” of our 2020 10-K. The material weakness has not been remediated as of September 30, 2021.

Material Weakness

Management identified that the following deficiency existed in internal control over financial reporting in 2018, 2019 and 2020: the Company did not maintain a sufficient complement of trained, knowledgeable resources to execute its responsibilities with respect to internal control over financial reporting for certain financial statement accounts and disclosures. As a consequence, the Company did not conduct an effective risk assessment process that was responsive to changes in the Company's operating environment and did not design and implement effective process-level controls activities in the following areas:

(a)

Presentation of operating expenses;

(b)

Accounting for lease-related transactions;

(c)

Identification and evaluation of impairment, accrual for loss contracts, certain expense accruals, and deemed dividends; and

(d)

Timely identification of adjustments to physical inventory in interim periods.

As reported on our 2020 10-K, we continue to take steps to remediate this material weakness and will continue to take further steps until such remediation is complete. These steps include the following:

Hiring additional resources, including third-party resources, with the appropriate technical accounting expertise, and strengthening internal training, to assist us in identifying and addressing any complex technical accounting issues that affect our consolidated financial statements.

We will design and implement a comprehensive and continuous risk assessment process to identify and assess risks of material misstatements and ensure that the impacted financial reporting processes and related internal controls are properly designed, maintained, and documented to respond to those risks in our financial reporting.

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We will implement more structured analysis and review procedures and documentation for the application of GAAP, complex accounting matters, and key accounting policies.

We will augment our current estimation policies and procedures to be more robust and in-line with overall market dynamics including an evaluation of our operating environment in order to ensure operating effectiveness of certain process-level control activities.

We also intend to deploy new tools and tracking mechanisms to help enhance and maintain the appropriate documentation surrounding our classification of operating expenses.

We will report regularly to the Company’s Audit Committee on the progress and results of the remediation plan, including the identification, status, and resolution of internal control deficiencies.

As we work to improve our internal control over financial reporting, we may modify our remediation plan and may implement additional measures as we continue to review, optimize and enhance our financial reporting controls and procedures in the ordinary course. The material weakness will not be considered remediated until the remediated controls have been operating for a sufficient period of time and can be evidenced through testing that they are operating effectively.

(b) Changes in internal control over financial reporting.

~~There~~Exclusive of the steps taken in remediation activities, there were no changes in the Company’s internal control over financial reporting ~~that~~(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the ~~last fiscal~~ quarter ended September 30, 2021 that ~~have~~has materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1 — Legal Proceedings

On August 28, 2018, a lawsuit was filed on behalf of multiple individuals against the Company and five corporate co-defendants in the 9th Judicial District Court, Rapides Parish, Louisiana. The lawsuit relates to the previously disclosed May 2018 accident involving a forklift powered by the Company’s fuel cell at a Procter & Gamble facility in Louisiana. The lawsuit alleges claims against the Company and co-defendants, including Structural Composites Industries, Deep South Equipment Co., Air Products and Chemicals, Inc., and Hyster-Yale Group, Inc. for claims under the Louisiana Product Liability Act ~~or LPLA,~~(“LPLA”) including defect in construction and/or composition, design defect, inadequate warning, breach of express warranty and negligence for wrongful death and personal injuries, among other damages. Procter & Gamble has intervened in that suit to recover worker’s compensation benefits paid to or for the employees/dependents. Procter & Gamble has also filed suit for property damage, business interruption, loss of revenue, expenses, and other damages. Procter & Gamble alleges theories under the LPLA, breach of warranty and quasi-contractual claims under Louisiana law. Defendants include the Company and several of the same co-defendants from the August 2018 lawsuit, including Structural Composites Industries, ~~(“SCI”), an affiliate of Worthington Industries,~~ Deep South Equipment Co., and Hyster-Yale Group, Inc. ~~Fact~~

In March and ~~expert discovery among~~May 2021, Company stockholders, individually and on behalf of all persons who purchased or otherwise acquired Plug securities between November 9, 2020 and March 16, 2021 (the “Class”), filed complaints in the ~~parties is ongoing,~~U.S. District Court for the Southern District of New York and U.S. District Court for the Central District of California against the Company, Plug Chief Executive Officer Andrew Marsh, and Plug Chief Financial Officer Paul Middleton (together, the “Defendants”), captioned Dawn Beverly et al. v. Plug Power Inc. et al., Case No. 1:21-cv-02004 (S.D.N.Y.), Smolíčekv. Plug Power Inc. et al., Case No. 2:21-cv-02402 (C.D. Cal.) and Tank v. Plug Power Inc. et al., Case No. 1:21-cv-03985 (S.D.N.Y.). The complaints include two claims, for (1) violation of Section 10(b) of the Exchange Act and Rule 10b5 promulgated thereunder (against all Defendants); and (2) violation of Section 20(a) of the Exchange Act (against Mr. Marsh and Mr. Middleton). The complaints allege that Defendants failed to disclose that the Company (i) “would be unable to timely file its 2020 annual report due to delays related to the review of classification of certain costs and the ~~former~~recoverability of the ~~two cases was set for mediation for early November 2020 until it was postponed due~~right to ~~further discovery requests by the parties~~use assets with certain leases”; and ~~delays caused by the impact of COVID-19. We continue~~(ii) “was reasonably likely to ~~defend against these lawsuits vigorously. We are unable to estimate the possible loss or range of loss, if any, associated with these lawsuits, but the Company does not expect the~~report material weaknesses

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~~lawsuits to have~~in its internal control over financial reporting[.]” The complaints allege that, a ~~material impact on~~result, “positive statements about the Company’s ~~financial position, liquidity~~ business, operations, and prospects were materially misleading and/or ~~results~~lacked a reasonable basis,” causing Class members losses and damages. The complaints seek compensatory damages “in an amount to be proven at trial, including interest thereon”; “reasonable costs and expenses incurred in th[e] action”; and “[s]uch other and further relief as the [c]ourt may deem just and proper.” On July 22, 2021, the U.S. District Court for the Southern District of ~~operations, or to otherwise have~~New York consolidated the three cases and appointed a ~~material adverse effect~~lead plaintiff. On July 28, 2021, Tank v. Plug Power, et. al., was voluntarily dismissed. An amended complaint was filed in the consolidated action on ~~the Company.~~ October 6, 2021.

On March 31, 2021, Company stockholder Junwei Liu, derivatively and on behalf of nominal defendant Plug, filed a complaint in the U.S. District Court for the Southern District of New York against certain Company directors and officers (the “Derivative Defendants”), captioned Liu v. Marsh et al., Case No. 1:21-cv-02753 (S.D.N.Y.) (the “Liu Derivative Complaint”). The Liu Derivative Complaint alleges that, between November 9, 2020 and March 1, 2021, the Derivative Defendants “made, or caused the Company to make, materially false and misleading statements concerning Plug Power’s business, operations, and prospects” by “issu[ing] positive financial information and optimistic guidance, and made assurances that the Company’s internal controls were effective,” when, “[i]n reality, the Company’s internal controls suffered from material deficiencies that rendered them ineffective.” The Liu Derivative Complaint asserts claims for (1) breach of fiduciary duties, (2) unjust enrichment, (3) abuse of control, (4) gross mismanagement, (5) waste of corporate assets, and (6) contribution under Sections 10(b) and 21D of the Exchange Act (as to the named officer defendants). The Liu Derivative Complaint seeks a judgment “[d]eclaring that Plaintiff may maintain this action on behalf of Plug”; “[d]eclaring that the [Derivative] Defendants have breached and/or aided and abetted the breach of their fiduciary duties”; “awarding to Plug Power the damages sustained by it as a result of the violations” set forth in the Liu Derivative Complaint, “together with pre-judgment and post-judgment interest thereon”; “[d]irecting Plug Power and the [Derivative] Defendants to take all necessary actions to reform and improve Plug Power’s corporate governance and internal procedures to comply with applicable laws”; and “[a]warding Plaintiff the costs and disbursements of this action, including reasonable attorneys’ and experts’ fees, costs, and expenses”; and “[s]uch other and further relief as the [c]ourt may deem just and proper.”

On April 5, 2021, Company stockholders Elias Levy and Camerohn X. Withers, derivatively and on behalf of nominal defendant Plug, filed a complaint in the U.S. District Court for the Southern District of New York against the Derivative Defendants named in the Liu Derivative Complaint, captioned Levy et al. v. McNamee et al., Case No. 1:21-cv-02891 (S.D.N.Y.) (the “Levy Derivative Complaint”). The Levy Derivative Complaint alleges that, from November 9, 2020 to April 5, 2021, the Derivative Defendants “breached their duties of loyalty and good faith” by failing to disclose “(1) that the Company would be unable to timely file its 2020 annual report due to delays related to the review of classification of certain costs and the recoverability of the right to use assets with certain leases; (2) that the Company was reasonably likely to report material weaknesses in its internal control over financial reporting; and (3) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.” The Levy Derivative Complaint asserts claims for (1) breach of fiduciary duty (as to the named director defendants), (2) unjust enrichment (as to certain named director defendants), (3) waste of corporate assets (as to the named director defendants), and (4) violations of Sections 10(b) and 21D of the Exchange Act (as to the named officer defendants). The Levy Derivative Complaint seeks a judgment “declaring that Plaintiffs may maintain this action on behalf of the Company”; finding the Derivative Defendants “liable for breaching their fiduciary duties owed to the Company”; directing the Derivative Defendants “to take all necessary actions to reform and improve the Company’s corporate governance, risk management, and internal operating procedures to comply with applicable laws”; “awarding damages to the Company for the harm the Company suffered as a result of Defendants’ wrongful conduct”; “awarding damages to the Company for [the named officer Derivative Defendants’] violations of Sections 10(b) and 21D of the Exchange Act”; “awarding Plaintiffs the costs and disbursements of this action, including attorneys’, accountants’, and experts’ fees”; and “awarding such other and further relief as is just and equitable.” On April 27, 2021, the U.S. District Court for the Southern District of New York consolidated the Liu Derivative Complaint and the Levy Derivative Complaint under Case No. 1:21-cv-02753-ER (the “Consolidated Action”).

On May 13, 2021, Company stockholder Romario St. Clair, derivatively and on behalf of nominal defendant Plug, filed a complaint in the Supreme Court of the State of New York, County of New York against the Derivative Defendants named in the Liu Derivative Complaint, captioned St. Clair v. Plug Power Inc. et al., Index No. 653167/2021 (N.Y. Sup. Ct., N.Y. Cty.) (the “St. Clair Derivative Complaint”). The St. Clair Derivative Complaint alleges that, for

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approximately two years beginning on March 13, 2019, the Company “failed to disclose and misrepresented the following material, adverse facts, which the [Derivative] Defendants knew, consciously disregarded, or were reckless in not knowing,” including: “(a) that the Company was experiencing known but undisclosed material weaknesses in its internal controls over financial reporting; (b) the Company was overstating the carrying amount of certain right of use assets and finance obligations associated with leases; (c) the Company was understating its loss accrual on certain service contracts; (d) the Company would need to take impairment charges relating to certain long-lived assets; (e) the Company was improperly classifying research [and] development costs versus costs of goods sold; and (f) the Company would be unable to file its Annual Report for the 2020 fiscal year due to these errors.” The St. Clair Derivative Complaint asserts claims for (1) breach of fiduciary and (2) unjust enrichment. The St. Clair Derivative Complaint seeks a judgment “for the amount of damages sustained by the Company” as a result of the Derivative Defendants’ breaches of fiduciary duties and unjust enrichment; “[d]irecting Plug Power to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable laws”; for “equitable and/or injunctive relief as permitted by law, equity, and state statutory provisions”; “awarding to Plug Power restitution” and “ordering disgorgement of all profits, benefits, and other compensation obtained” by the Derivative Defendants; “awarding to plaintiff the costs and disbursements of the action, including reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses”; and “granting such other and further relief as the [c]ourt deems just and proper.”

Item 1A – Risk Factors

The risk factors discussed under the heading “Risk Factors” and elsewhere in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019 and Quarterly Report on Form 10-Q for the quarter ended June 30,~~ 2020 continue to apply to our business.

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b) Not applicable.

Item 3 — Defaults Upon Senior Securities

None.

Item 4 — Mine Safety Disclosures

None.

Item 5 — Other Information

~~(a)~~ None.

~~(b) None.~~

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Item 6 — Exhibits


~~1.1~~3.1	~~Underwriting~~Amended and Restated Certificate of Incorporation of Plug Power Inc. (filed as Exhibit 3.1 to Plug Power Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated by reference herein).
3.2	Certificate of Amendment to Amended and Restated Certificate of Incorporation of Plug Power Inc. (filed as Exhibit 3.3 to Plug Power Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated by reference herein).
3.3	Second Certificate of Amendment of Amended and Restated Certificate of Incorporation of Plug Power Inc. (filed as Exhibit 3.1 to Plug Power Inc.’s Current Report on Form 8-K filed on May 19, 2011 and incorporated by reference herein).
3.4	Third Certificate of Amendment of Amended and Restated Certificate of Incorporation of Plug Power Inc. (filed as Exhibit 3.1 to Plug Power Inc.’s Current Report on Form 8-K filed on July 25, 2014 and incorporated by reference herein).
3.5	Certificate of Correction to Third Certificate of Amendment of Amended and Restated Certificate of Incorporation of Plug Power Inc. (filed as Exhibit 3.9 to Plug Power Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016 and incorporated by reference herein).
3.6	Fourth Certificate of Amendment of Amended and Restated Certificate of Incorporation of Plug Power Inc. (filed as Exhibit 3.1 to Plug Power Inc.’s Current Report on Form 8-K filed on June 30, 2017 and incorporated by reference herein).
3.7	Fifth Certificate of Amendment of Amended and Restated Certificate of Incorporation of Plug Power Inc. (filed as Exhibit 3.7 to Plug Power Inc.’s Quarterly Report on Form 10-Q filed on August 5, 2021 and incorporated by reference herein).
3.8	Certificate of Designations, Preferences and Rights of a Series of Preferred Stock of Plug Power Inc. classifying and designating the Series A Junior Participating Cumulative Preferred Stock. (filed as Exhibit 3.1 to Plug Power Inc.’s Registration Statement on Form 8-A filed on June 24, 2009 and incorporated by reference herein).
3.9	Fourth Amended and Restated By-laws of Plug Power Inc. (filed as Exhibit 3.9 to Plug Power Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020 and incorporated by reference herein).
10.1 (1)	Eleventh Amendment and Waiver to the Loan and Security Agreement, dated ~~August 11, 2020,~~September 30, 2021, by and among Plug Power Inc., Emerging Power Inc., Emergent Power Inc., the other borrowers from time to time party thereto, and ~~Morgan Stanley & Co.~~Generate PPL SPV I, LLC, as ~~representative~~assignee of ~~the several underwriters named in Schedule I thereto~~Generate Lending, LLC.
31.1 (1)	Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 (1)	Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 (1)	Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 (1)	Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*	Inline XBRL Instance Document (1)
101.SCH*	XBRL Taxonomy Extension Schema Document (1)
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document (1)

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document (1)
104	Cover Page Interactive Data File (embedded within the Inline XBRL document) (1)

(1)	Filed herewith.

*	Submitted electronically herewith.

Table of Contents

Signatures

Pursuant to requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PLUG POWER INC.

Date: November ~~09, 2020~~9, 2021	By:	/s/ Andrew Marsh
		Andrew Marsh
		President, Chief Executive Officer and Director (Principal Executive Officer)

Date: November ~~09, 2020~~9, 2021	By:	/s/ Paul B. Middleton
		Paul B. Middleton
		Chief Financial Officer (Principal Financial Officer)


Cash	$	25,820
Plug Power Stock		19,263
Contingent consideration		7,790
Total consideration		52,873


Accounts receivable	$	1,237
Inventory		4,108
Prepaid expenses and other assets, net of deferred tax liability		(4,707)
Property, plant and equipment		596
Identifiable intangibles		29,930
Accounts payable, accrued expenses and other liabilities		(2,136)
Deferred revenue		(2,348)
Total net assets acquired, excluding goodwill		26,680


Consideration paid	$	52,873
Less: net assets acquired		(26,680)
Total goodwill recognized		26,193


Cash	$	19,293
Plug Power Stock		30,410
Contingent consideration		1,110
Total consideration		50,813


Remainder of 2020	$	8,272
2021		34,436
2022		32,665
2023		30,043
2024		26,660
2025 and thereafter	$	49,351
Total future minimum lease payments	$	181,427


					Other		Total
	Operating		Finance		Leased		Finance
	Leases		Leases		Property		Obligations
Remainder of 2020	$	14,639	$	2,546	$	186	$	17,371
2021		58,505		9,276		590		68,371
2022		58,480		4,975		573		64,028
2023		55,655		3,149		549		59,353
2024		54,203		16,154		632		70,989
2025 and thereafter		71,304		—		1,174		72,478
Total future minimum lease payments		312,786		36,100		3,704		352,590
Less imputed lease interest		(84,903)		(10,190)		(947)		(96,040)
Sale of future services		144,292		—		—		144,292
Total lease liabilities	$	372,175	$	25,910	$	2,757	$	400,842