EXHIBIT 99.2
On April 2, 2014, Plug Power Inc. (the “Company”) completed the acquisition of ReliOn, Inc. (“ReliOn”). The unaudited pro forma condensed combined financial data presented herein is derived from the historical consolidated financial statements of the Company and the historical financial statements of ReliOn. The unaudited pro forma condensed combined balance sheet information is presented on an as adjusted basis as if the ReliOn acquisition had occurred on March 31, 2014. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2014 and the year ended December 31, 2013 combine the Company’s historical consolidated statements of operations with ReliOn’s historical statements of operations for those periods, and give effect to the acquisition as if it had occurred on January 1, 2013. The Company believes this information is important in evaluating its future operations and the impact of the ReliOn acquisition.
The unaudited pro forma condensed combined financial statements contained in this report use the acquisition method of accounting, with the Company treated as the acquirer. The purchase price for the ReliOn acquisition was approximately $4.0 million, based on the issuance of 530,504 shares of Plug Power common stock at the closing price of the Company’s common stock on April 1, 2014 of $7.54. The pro forma adjustments are based on currently available information and upon assumptions that the Company believes are reasonable under the circumstances. A final determination of the allocation of the purchase price to the assets acquired and the liabilities assumed in the acquisition has not been made, and the allocation reflected in the unaudited pro forma condensed combined financial statements should be considered preliminary and is subject to the completion of a more comprehensive valuation of the assets acquired and liabilities assumed. The final allocation of purchase price could differ from the pro forma allocation included herein. Amounts preliminarily allocated to intangible assets and goodwill may change significantly, and amortization methods and useful lives may differ from the assumptions that have been used in this unaudited pro forma condensed combined financial information, any of which could result in a material change in depreciation and amortization expense.
You should read the following pro forma statements in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the financial statements and related notes contained in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission for the yearended December 31, 2013.
The unaudited pro forma condensed combined financial statements are provided for illustrative purposes only. They do not purport to represent what the results of operations and financial position of the Company would have been had the ReliOn acquisition actually occurred as of the dates indicated, and they do not purport to project or predict the future results of operations or financial position of the Company.
Unaudited Pro Forma Condensed Combined Balance sheet
March 31, 2014
| | | | | | | | | | | |
| | Plug Power Inc. | | | ReliOn Inc. | | | Pro Forma
Adjustments | | | Pro Forma
Combined |
Assets | | | | | | | | | | | |
Current assets: | | | | | | | | | | | |
Cash and cash equivalents | $ | 63,231,651 | $ | 544,081 | $ | (130,000) | (1) | $ | 63,645,732 |
Accounts receivable, net | | 6,342,316 | | | 294,701 | | | - | | | 6,637,017 |
Inventory | | 11,943,724 | | | 5,154,495 | | | - | | | 17,098,219 |
Prepaid expenses and other current assets | | 2,796,505 | | | 72,115 | | | - | | | 2,868,620 |
Total current assets | | 84,314,196 | | | 6,065,392 | | | (130,000) | | | 90,249,588 |
Restricted cash | | 500,000 | | | - | | | - | | | 500,000 |
Property, plant, and equipment, net | | 5,235,504 | | | 644,616 | | | 355,384 | (2) | | 6,235,504 |
Leased property under capital lease, net | | 2,324,191 | | | - | | | - | | | 2,324,191 |
Note receivable | | 494,480 | | | - | | | - | | | 494,480 |
Intangible assets, net | | 2,335,651 | | | 1,803,881 | | | (303,881) | (3) | | 3,835,651 |
Other assets | | - | | | 16,779 | | | - | | | 16,779 |
Total assets | $ | 95,204,022 | | $ | 8,530,668 | | $ | (78,497) | | $ | 103,656,193 |
Liabilities, Redeemable Preferred Stock, and Stockholders’ (Deficit) Equity | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | |
Accounts payable | $ | 2,838,445 | $ | 1,225,801 | $ | (130,000) | (1) | $ | 3,934,246 |
Accrued expenses | | 2,249,776 | | | 310,692 | | | - | | | 2,560,468 |
Note payable | | - | | | 5,388,942 | | | (5,388,942) | (4) | | - |
Product warranty reserve | | 1,478,171 | | | - | | | - | | | 1,478,171 |
Deferred revenue | | 3,614,686 | | | - | | | - | | | 3,614,686 |
Obligations under capital lease | | 735,809 | | | - | | | - | | | 735,809 |
Other current liabilities | | 826,924 | | | - | | | - | | | 826,924 |
Total current liabilities | | 11,743,811 | | | 6,925,435 | | | (5,518,942) | | | 13,150,304 |
Note payable | | - | | | 426,044 | | | - | | | 426,044 |
Obligations under capital lease | | 396,061 | | | - | | | - | | | 396,061 |
Deferred revenue | | 5,759,654 | | | 53,517 | | | - | | | 5,813,171 |
Common stock warrant liability | | 25,742,408 | | | - | | | - | | | 25,742,408 |
Finance obligation | | 2,476,430 | | | - | | | - | | | 2,476,430 |
Other liabilities | | 740,075 | | | - | | | - | | | 740,075 |
Total liabilities | | 46,858,439 | | | 7,404,996 | | | (5,518,942) | | | 48,744,493 |
Redeemable Preferred Stock | | 2,371,080 | | | 111,002,028 | | | (111,002,028) | (5) | | 2,371,080 |
Stockholders’ (deficit) equity: | | | | | | | | | | | |
Common stock | | 1,441,247 | | | 3,862 | | | 1,443 | (5) | | 1,446,552 |
Additional paid-in capital | | 970,533,905 | | | (85,090,265) | | | 89,084,960 | (5) | | 974,528,600 |
Accumulated other comprehensive income | | 897,807 | | | - | | | - | | | 897,807 |
Accumulated deficit | | (925,346,074) | | | (24,789,953) | | | 27,356,070 | (5) | | (922,779,957) |
Less common stock in treasury | | (1,552,382) | | | - | | | - | | | (1,552,382) |
Total stockholders’ (deficit) equity | | 45,974,503 | | | (109,876,356) | | | 116,442,473 | | | 52,540,620 |
Total liabilities, redeemable preferred stock, and stockholders’ (deficit) equity | $ | 95,204,022 | | $ | 8,530,668 | | $ | (78,497) | | $ | 103,656,193 |
Unaudited Pro Forma Condensed Combined Statement of Operations
For the three months ended March 31, 2014
| | | | | | | | Pro Forma | | Pro Forma |
| Plug Power Inc. | | | ReliOn Inc. | | Adjustments | | Combined |
Product revenue | $ | 3,162,327 | $ | 803,244 | $ | - | | $ | 3,965,571 |
Service revenue | | 2,065,715 | | | 328,367 | | | - | | | 2,394,082 |
Research and development contract revenue | | 346,399 | | | - | | | - | | | 346,399 |
Total revenue | | 5,574,441 | | | 1,131,611 | | | - | | | 6,706,052 |
Cost of product revenue | | 3,444,964 | | | 653,470 | | | - | | | 4,098,434 |
Cost of service revenue | | 4,018,382 | | | 249,937 | | | - | | | 4,268,319 |
Cost of research and development contract revenue | | 417,917 | | | - | | | - | | | 417,917 |
Research and development expense | | 1,253,396 | | | 558,235 | | | - | | | 1,811,631 |
Selling, general and administrative expenses | | 3,252,009 | | | 1,090,364 | | | 38,333 | (1) | | 4,380,706 |
Amortization of intangible assets | | 565,944 | | | - | | | 75,000 | (2) | | 640,944 |
Operating loss | | (7,378,171) | | | (1,420,395) | | | (113,333) | | | (8,911,899) |
Interest and other income | | 45,009 | | | 740 | | | | | | 45,749 |
Change in fair value of common stock warrant liability | | (68,433,468) | | | - | | | | | | (68,433,468) |
Interest and other expense and foreign currency gain (loss) | | (90,469) | | | (110,373) | | | 73,973 | (3) | | (126,869) |
Gain on sale of equity interest in joint venture | | | | | - | | | | | | - |
Loss before income taxes | $ | (75,857,099) | $ | (1,530,028) | $ | (39,360) | | $ | (77,426,487) |
Income tax benefit | | - | | | 21 | | | - | | | 21 |
Net loss attributable to the Company | $ | (75,857,099) | $ | (1,530,007) | $ | (39,360) | | $ | (77,426,466) |
Preferred stock dividends declared | | (51,909) | | | - | | | - | | | (51,909) |
Accretion of redeemable preferred stock | | - | | | (19,046,527) | | | 19,046,527 | (4) | | - |
Net loss attributable to common shareholders | $ | (75,909,008) | | $ | (20,576,534) | | $ | 19,007,167 | | $ | (77,478,375) |
Loss per share: | | | | | | | | | | | |
Basic and diluted | $ | (0.57) | | | | | | | | $ | (0.58) |
Weighted average number of common shares outstanding | | 133,750,522 | | | - | | | 530,504 | (5) | | 134,281,026 |
Unaudited Pro Forma Condensed Combined Statement of Operations
For the year ended December 31, 2013
| | | | | | | Pro Forma | | Pro Forma |
| Plug Power Inc. | | | ReliOn Inc. | | Adjustments | | Combined |
Product revenue | $ | 18,446,082 | | $ | 4,030,523 | | $ | - | | $ | 22,476,605 |
Service revenue | | 6,658,816 | | | 558,897 | | | - | | | 7,217,713 |
Research and development contract revenue | | 1,496,530 | | | - | | | - | | | 1,496,530 |
Total revenue | | 26,601,428 | | | 4,589,420 | | | - | | | 31,190,848 |
Cost of product revenue | | 20,414,084 | | | 3,876,677 | | | - | | | 24,290,761 |
Cost of service revenue | | 14,928,595 | | | 364,347 | | | - | | | 15,292,942 |
Cost of research and development contract revenue | | 2,505,989 | | | - | | | - | | | 2,505,989 |
Research and development expense | | 3,121,007 | | | 3,387,374 | | | - | | | 6,508,381 |
Selling, general and administrative expenses | | 12,325,466 | | | 4,262,973 | | | 115,000 | (1) | | 16,703,439 |
Amortization of intangible assets | | 2,270,858 | | | - | | | 300,000 | (2) | | 2,570,858 |
Operating loss | | (28,964,571) | | | (7,301,951) | | | (415,000) | | | (36,681,522) |
Interest and other income | | 150,006 | | | - | | | - | | | 150,006 |
Change in fair value of common stock warrant liability | | (37,101,818) | | | - | | | - | | | (37,101,818) |
Interest and other expense and foreign currency gain (loss) | | (398,275) | | | (447,975) | | | 292,602 | (3) | | (553,648) |
Gain on sale of equity interest in joint venture | | 3,234,717 | | | - | | | - | | | 3,234,717 |
Loss before income taxes | $ | (63,079,941) | | $ | (7,749,926) | | $ | (122,398) | | $ | (70,952,265) |
Income tax benefit | | 410,259 | | | 21 | | | - | | | 410,280 |
Net loss attributable to the Company | $ | (62,669,682) | | $ | (7,749,905) | | $ | (122,398) | | $ | (70,541,985) |
Preferred stock dividends declared | | (121,118) | | | - | | | | | | (121,118) |
Accretion of redeemable preferred stock | | - | | | (48,160,306) | | | 48,160,306 | (4) | | - |
Net loss attributable to common shareholders | $ | (62,790,800) | | $ | (55,910,211) | | $ | 48,037,908 | | $ | (70,663,103) |
Loss per share: | | | | | | | | | | | |
Basic and diluted | $ | (0.82) | | | | | | | | $ | (0.92) |
Weighted average number of common shares outstanding | | 76,436,408 | | | - | | | 530,504 | (5) | | 76,966,912 |
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
1. Basis of Presentation
On April 2, 2014, the Company completed the acquisition of ReliOn Inc. (ReliOn), in a transaction accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations.
The total purchase price of $4,000,000 is based on the issuance of 530,504 shares of Plug Power common stock at the closing price of the Company’s stock on April 1, 2014 of $7.54. Under the acquisition method of accounting, the total purchase price is allocated to ReliOn’s tangible and intangible assets based on their fair values as of the acquisition date. For the purposes of these pro forma financial statements, the acquisition consideration has been preliminarily allocated based on an estimate of the fair value of assets and liabilities acquired as of the acquisition date. The allocation of the acquisition consideration for ReliOn is based on estimates, assumptions, valuations and other studies which have not yet been finalized in order to make a definitive allocation. The final amounts allocated to assets acquired and liabilities assumed could differ materially from the amounts presented in the pro forma financial statements.
The preliminary allocation of the purchase price is as follows (in thousands)
Cash and cash equivalents | $ | 414,081 | |
Accounts receivable | | 294,701 | |
Inventory | | 5,154,495 | |
Prepaid expenses and other assets | | 88,894 | |
Property and equipment | | 1,000,000 | |
Identifiable intangibles | | 1,500,000 | |
Goodwill | | (2,566,117) * |
Accounts payable and accrued expenses | | (1,406,493) | |
Note payable | | (479,561) | |
Preliminary estimated acquisition consideration | $ | 4,000,000 | |
* Includes the excess of the estimated fair value of assets and liabilities acquired over the purchase price. Preliminary allocations result in negative goodwill, and under ASC 805, the Company will need to perform a required reassessment before recognizing a gain on a bargain purchase.
2. Pro Forma Adjustments
Pro forma adjustments are necessary to reflect the purchase price and to reflect amounts related to ReliOn’s net tangible and intangible assets at an amount equal to the preliminary estimate of their fair values.
There were no intercompany balances or transactions between the Company and ReliOn as of the dates or for the periods of these pro forma condensed combined financial statements.
The Company has not identified any pre-acquisition contingencies where the related asset, liability or impairment is probable and the amount of the asset, liability or impairment can be reasonably estimated. Prior to the end of the purchase price allocation period, if information becomes available which would indicate it is probable that such events have occurred and the amounts can be reasonably estimated, such items will be included in the purchase price allocation.
Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments as of March 31, 2014
The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet are as follows:
| (1) | To eliminate cash and accounts payable not included in the acquired assets and assumed liabilities |
| | |
| (2) | To increase property plant and equipment to estimated fair value at the acquisition date |
| | |
| (3) | To eliminate the historical intangible assets of Relion of $1,803,881 and to record the estimated fair value of identifiable intangible assets at acquisition date of $1,500,000 |
| | |
| (4) | To eliminate the note payable that was not assumed by the Company |
| | |
| (5) | To eliminate the redeemable preferred stock and stockholders’ equity accounts of ReliOn, to record the issuance of 530,504 shares of Plug Power common stock valued at $7.54 per share ($5,305 common stock and $3,994,695 additional paid-in-capital) for the acquisition of ReliOn and the assets and liabilities assumed, and to record additional retained earnings of $2,566,117 on the gain on bargain purchase. |
Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments for the Three Months Ended March 31, 2014
The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations are as follows:
| (1) | To add the estimated depreciation expense on the fair value of assets acquired |
| | |
| (2) | To add the estimated amortization expense on the fair value of assets acquired |
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| (3) | To eliminate interest expense associated with the note payable not assumed by the Company |
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| (4) | To eliminate the accretion to earnings of the redeemable preferred stock |
| | |
| (5) | To adjust for the shares issued upon acquisition |
Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments for the Twelve Months Ended December 31, 2013
The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations are as follows:
| (1) | To add the estimated depreciation expense on the fair value of assets acquired |
| | |
| (2) | To add the estimated amortization on the fair value of assets acquired |
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| (3) | To eliminate interest expense associated with the note payable not assumed by the Company |
| | |
| (4) | To eliminate the accretion to earnings of the redeemable preferred stock |
| | |
(5) | To adjust for the shares issued upon acquisition |
