| Restatement of Previously Issued Consolidated Financial Statements | Restatement of Previously Issued Consolidated Financial Statements We have restated herein our condensed consolidated financial statements as of and for the quarter ended March 31, 2019. We have also restated related amounts within the accompanying footnotes to the condensed consolidated financial statements. Restatement Background As previously disclosed in our Annual Report on Form 10-K as filed on March 31, 2020, on February 11, 2020, our management, in consultation with the Audit Committee of our Board of Directors, determined that Bloom's previously issued consolidated financial statements as of and for the year ended December 31, 2018, as well as financial statements for the three month period ended March 31, 2019, the three and six month periods ended June 30, 2019 and 2018 and the three and nine month periods ended September 30, 2019 and 2018 should no longer be relied upon due to misstatements related to our Managed Services Agreements and similar arrangements and we would restate such financial statements to make the necessary accounting corrections. The revenue for the Managed Services Agreements and similar transactions will now be recognized over the duration of the contract instead of upfront. The restatement also includes corrections for additional identified immaterial misstatements in certain of the impacted periods. The misstatements impacting the three-month period ended March 31, 2019 are described in greater detail below. Description of Misstatements Under our Managed Services program, we sell our equipment to a bank financing party under a sale-leaseback transaction, which pays us for the Energy Server and takes title to the Energy Server. We then enter into a service contract with an end customer, who pays the bank a fixed, monthly fee for its use of the Energy Server and pays us for our maintenance and operation of the Energy Server. The majority of these Managed Services Agreements and similar transactions were originally recorded as sales, subject to an operating lease, in which revenues and associated costs were recognized at the time of installation and acceptance of the Bloom Energy Server at the customer site. In December 2019, in the course of reviewing a Managed Services transaction that closed on November 27, 2019, an issue was identified related to the accounting for our Managed Services transactions. The issue primarily related to whether the terms of our Managed Services Agreements and similar arrangements, including the events of default provisions, satisfied the requirements for sales under the revenue accounting standards. Subsequently, it was determined that the previous accounting for the Managed Services Agreements and similar transactions was misstated, as the Managed Services Agreements and similar transactions should have been accounted for as financing transactions under lease accounting standards. The impact of the correction of the misstatement is to recognize amounts received from the bank financing party as a financing obligation, and the Energy Server is recorded within property, plant and equipment, net on our consolidated balance sheets. We recognize revenue for the electricity generated by the systems, based on payments received by the bank from the customer, and the corresponding financing obligations to the bank is also amortized as these payments are received by the bank from the customer, with interest thereon being calculated on an effective interest rate basis. Depreciation expense is also recognized over the estimated useful life of the Energy Server. In addition, it was determined that stock-based compensation costs relating to manufacturing employees that were previously expensed as incurred incorrectly, should have been capitalized as a component of Energy Server manufacturing costs to inventory, deferred cost of revenues, construction-in-progress and property, plant and equipment in accordance with SEC Staff Accounting Bulletin Topic 14. These costs will now be expensed on consumption of the related inventory and over the economic useful life of the property, plant and equipment, as applicable. Also, as part of a review of historical revenue agreements as a result of the above errors, it was noted that we failed to identify embedded derivatives in certain revenue agreements for an escalator price protection (“EPP”) feature given to our customers. As a result, we have recorded a derivative liability, with an offset to product revenue, to account for the fair value of this feature at inception and will record the liability at its then fair value at each period end with any changes in fair value recognized in gain (loss) on revaluation of embedded derivatives. In addition to the impact of the restatement described above, in preparation of the condensed consolidated financial statements for the three months ended March 31, 2020, errors in our Condensed Consolidated Statements of Comprehensive Loss were discovered. For the three months ended March 31, 2019, the presentation of the Statement and other errors identified in the Statement have been corrected, which resulted in an additional $3.8 million increase to Comprehensive Loss, a change of $7.9 million in Comprehensive (Income) Loss Attributable to Noncontrolling Interest and Redeemable Noncontrolling Interests and an additional decrease of $4.1 million to Comprehensive Loss Attributable to Class A and Class B Stockholders. The Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2019 and the three and nine months ended September 30, 2019 will also be corrected when those periods are next reported. In the Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019 and 2018, Comprehensive Loss as previously reported is understated by $5.8 million and overstated by $1.8 million , respectively. In addition, the reconciliation of Comprehensive Loss to Comprehensive Loss Attributable to Class A and Class B Stockholders was erroneously omitted. As it relates to the impact of the errors to the Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019 and 2018, management evaluated the impact of the errors to the previously issued financial statements and concluded the impacts were not material. Accordingly, these items will be corrected when those periods are next reported. Finally, there were certain other immaterial misstatements identified or which had been previously identified which are also being corrected in connection with the restatement of previously issued financial statements. Description of Restatement Reconciliation Tables In the following tables, we have presented a reconciliation of our Condensed Consolidated Balance Sheet and Statements of Operations and Cash Flows from our prior periods as previously reported to the restated amounts as of and for the quarter ended March 31, 2019. In addition to the errors to the Condensed Consolidated Statement of Comprehensive Loss discussed above, that Statement has been restated for the restatement impact to net loss. The Statement of Redeemable Noncontrolling Interest, Stockholders' Deficit and Noncontrolling Interest for the quarter ended March 31, 2019 has also been restated for the restatement impact to Net Loss. See the Condensed Consolidated Statements of Operations reconciliation table below for additional information on the restatement impact to Net Loss. Bloom Energy Corporation Condensed Consolidated Balance Sheet (in thousands, except share and per share data) March 31, 2019 As Previously Reported Restatement Impacts Restatement Reference ASC 606 Adoption Impacts As Restated And Recast Assets Current assets: Cash and cash equivalents $ 320,414 $ — $ — $ 320,414 Restricted cash 18,419 — — 18,419 Accounts receivable 84,070 3,995 1 (2,418 ) 85,647 Inventories 116,544 3,327 2 — 119,871 Deferred cost of revenue 66,316 (13,405 ) 3 — 52,911 Customer financing receivable 5,717 — — 5,717 Prepaid expenses and other current assets 28,362 1,582 4 129 30,073 Total current assets 639,842 (4,501 ) (2,289 ) 633,052 Property, plant and equipment, net 475,385 236,246 5 — 711,631 Customer financing receivable, non-current 65,620 — — 65,620 Restricted cash, non-current 31,101 — — 31,101 Deferred cost of revenue, non-current 72,516 (70,583 ) 3 — 1,933 Other long-term assets 34,386 8,486 6 2,575 45,447 Total assets $ 1,318,850 $ 169,648 $ 286 $ 1,488,784 Liabilities, Redeemable Noncontrolling Interest, Stockholders’ Deficit and Noncontrolling Interests Current liabilities: Accounts payable $ 64,425 $ — — 64,425 Accrued warranty 16,736 (1,219 ) 7 (1,280 ) 14,237 Accrued expenses and other current liabilities 67,966 (3,893 ) 8 — 64,073 Financing obligations — 8,819 9 — 8,819 Deferred revenue and customer deposits 89,557 (16,153 ) 10 1,665 75,069 Current portion of recourse debt 15,683 — — 15,683 Current portion of non-recourse debt 19,486 — — 19,486 Current portion of non-recourse debt from related parties 2,341 — — 2,341 Total current liabilities 276,194 (12,446 ) 385 264,133 Derivative liabilities 11,166 4,556 11 — 15,722 Deferred revenue and customer deposits, net of current portion 201,863 (115,432 ) 10 17,320 103,751 Financing obligations, non-current — 394,037 9 — 394,037 Long-term portion of recourse debt 357,876 — — 357,876 Long-term portion of non-recourse debt 284,541 — — 284,541 Long-term portion of recourse debt from related parties 27,734 — — 27,734 Long-term portion of non-recourse debt from related parties 33,417 — — 33,417 Other long-term liabilities 58,032 (29,062 ) 8 — 28,970 Total liabilities 1,250,823 241,653 17,705 1,510,181 Redeemable noncontrolling interest 58,802 — — 58,802 Total stockholders’ deficit (105,439 ) (72,005 ) 12 (17,419 ) (194,863 ) Noncontrolling interest 114,664 — — 114,664 Total liabilities, redeemable noncontrolling interest, stockholders' deficit and noncontrolling interest $ 1,318,850 $ 169,648 $ 286 $ 1,488,784 1 Accounts receivable — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements, for which the amount recorded to accounts receivable represents amounts invoiced for capacity billings to end customers which have not yet been collected by the financing entity as of the period end. 2 Inventories — The correction of these misstatements resulted from the change of accounting for inventory, including net capitalization of stock-based compensation cost of $3.8 million and reclassification of inventories of $0.5 million held for shipments to customers under the Managed Services Program and similar arrangements to construction in progress within property, plant and equipment, net. 3 Deferred cost of revenue, current and non-current — The correction of these misstatements resulted from reclassifying deferred cost of revenue to property, plant and equipment, net for the leased Energy Servers under the Managed Services Agreements and similar sale-leaseback arrangements of $13.9 million (short-term) and $70.6 million (long-term), net capitalization of stock-based compensation costs of $2.1 million into current deferred cost of revenue, and the correction of certain other immaterial misstatements identified to relieve installation deferred cost of revenue of $1.7 million . 4 Prepaid expenses and other current assets — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements whereby prepaid property tax and insurance payments are now classified within prepaid expenses, rather than offset against deferred revenue. 5 Property, plant and equipment, net — The correction of these misstatements resulted from the change of accounting for Managed Services transactions and similar arrangements, whereby product and install costs of goods sold of $232.6 million are now recorded as property, plant and equipment, net in the cases where the risks of ownership have not completely transferred to the financing party. This includes a net capitalization of stock-based compensation cost for these assets of $3.6 million . 6 Other long-term assets — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby the timing difference of capacity billings to end customers and the payments received from the financing entity is recorded within long term receivables and prepaid property tax and insurance payments are now classified within other long-term assets, rather than offset against long-term deferred revenue. 7 Accrued warranty — The correction of these misstatements resulted from the change of accounting for accrued warranty which is now recorded on an as-incurred basis for our Managed Services Agreements and similar arrangements, reducing accrued warranty by $0.4 million and the change of accounting for the grid pricing escalation guarantees we provided in some of our sales arrangements, which are now recorded as derivative liabilities, reducing accrued warranty by $0.8 million . 8 Accrued expense and other current liabilities and other long-term liabilities — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements, for which historical accrued liabilities recorded at inception of the agreements, as well as subsequent reductions of those liabilities, were reversed. 9 Financing obligations, current and non-current — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby instead of recognizing the upfront proceeds received from the bank as revenue, the proceeds received are classified as financing obligations. 10 Deferred revenue and customer deposits, current and non-current — The correction of these misstatements resulted from the change of accounting for the recognition of product and installation revenue from upfront or ratable recognition to recognition of the capacity payments received from the end customer as power is generated by the Energy Servers as electricity revenue. 11 Derivative liabilities — The correction of these misstatements resulted from the change of accounting for embedded derivatives related to grid pricing escalation guarantees we provided in some of our sales arrangements. These are now recorded as derivative liabilities and were previously treated as an accrued liability. 12 Total stockholders' deficit — Relates to the correction of an unadjusted misstatement in the valuation of our 6% Notes derivative, resulting in a credit to additional paid-in capital and additional expense of $0.8 million recorded within other expense, net, together with the cumulative increase to accumulated deficit from the restatement of $72.8 million . . Bloom Energy Corporation Condensed Consolidated Statement of Operations (in thousands, except per share data) Three Months Ended As Previously Reported Restatement Impacts Restatement Reference ASC 606 Adoption Impacts As Restated And Recast Revenue: Product $ 141,734 $ (48,171 ) a $ (2,637 ) $ 90,926 Installation 22,258 (11,195 ) a 1,156 12,219 Service 23,290 (574 ) a 751 23,467 Electricity 13,425 6,964 a — 20,389 Total revenue 200,707 (52,976 ) (730 ) 147,001 Cost of revenue: Product 124,000 (34,980 ) c, d (248 ) 88,772 Installation 24,166 (8,406 ) c — 15,760 Service 27,557 1,331 b, d (967 ) 27,921 Electricity 9,229 3,755 c — 12,984 Total cost of revenue 184,952 (38,300 ) (1,215 ) 145,437 Gross profit 15,755 (14,676 ) 485 1,564 Operating expenses: Research and development 28,859 — — 28,859 Sales and marketing 20,463 2 e (92 ) 20,373 General and administrative 39,074 — — 39,074 Total operating expenses 88,396 2 (92 ) 88,306 Loss from operations (72,641 ) (14,678 ) 577 (86,742 ) Interest income 1,885 — — 1,885 Interest expense (15,962 ) (5,838 ) f — (21,800 ) Interest expense to related parties (1,612 ) — — (1,612 ) Other expense, net 265 — — 265 Loss on revaluation of warrant liabilities and embedded derivatives — (540 ) g — (540 ) Loss before income taxes (88,065 ) (21,056 ) 577 (108,544 ) Income tax provision 208 — — 208 Net loss (88,273 ) (21,056 ) 577 (108,752 ) Less: net loss attributable to noncontrolling interests and redeemable noncontrolling interests (3,832 ) — — (3,832 ) Net loss attributable to Class A and Class B common stockholders $ (84,441 ) $ (21,056 ) $ 577 $ (104,920 ) a Revenue impacted by Managed Services restatements — The correction of these misstatements resulted from the change from upfront recognition of product and installation revenue to recognition of the capacity payments received from the end customer as power is generated by the Energy Servers as electricity revenue over the term of our Managed Services Agreements and similar sale-leaseback arrangements, which also impacted our service revenue allocation. b Service cost of revenue impacted by grid pricing escalation guarantees — The correction of these misstatements resulted in a change in the accounting for our grid escalation guarantees that resulted in a decrease in service cost of revenue of $0.1 million . c Cost of revenue impacted by Managed Services restatements — The correction of these misstatements resulted from the change from upfront recognition of product and installation cost of revenue to recognition of the depreciation expense on the capitalized Energy Servers over their useful life of 21 years for our Managed Services Agreements and similar sale-leaseback transactions, resulting in a decrease in product cost of revenue of $37.5 million and installation cost of revenue of $9.2 million , offset by an increase in electricity cost of revenue of $3.7 million , together with the correction of certain other immaterial misstatements identified to record installation cost of revenue of $0.8 million . d Cost of revenue impacted by stock-based compensation allocation — The correction of these misstatements resulted from the capitalization of stock-based compensation costs, with a net increase to product cost of revenue of $2.5 million , and an increase in service cost of revenue of $1.4 million due to the expensing of stock-based compensation related to field replacement units. e Sales and marketing and general and administrative expenses — The correction of these misstatements primarily resulted from the change of accounting for sales commission expense on an as earned basis, to accounting for the expense over the term of our Managed Services Agreements and similar sale-leaseback arrangements. f Interest expense — The correction of these misstatements resulted from the change of accounting for sales that should have been accounted for as financing transactions, in which the upfront consideration received from the financing party is accounted for as a financing obligation and interest expense is recognized over the term of the Managed Services Agreement using the effective interest method. g Gain (loss) on revaluation of warrant liabilities and embedded derivatives — The correction of these misstatements resulted from the change of accounting for the grid pricing escalation guarantees we provided in some of our sales arrangements which is now recorded as a derivative liability that needs to be fair valued each period end. The fair value increased in the period, resulting in a loss of $0.5 million . Bloom Energy Corporation Condensed Consolidated Statements of Cash Flows (in thousands) Three Months Ended As Previously Reported Restatement Impacts Restatement Reference ASC 606 Adoption Impacts As Restated And Recast Cash flows from operating activities: Net loss $ (88,273 ) $ (21,056 ) $ 577 $ (108,752 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 11,271 2,954 A — 14,225 Write-off of property, plant and equipment, net 1 — — 1 Revaluation of derivative contracts (453 ) 540 B — 87 Stock-based compensation 63,882 3,940 C — 67,822 Loss on long-term REC purchase contract 59 — — 59 Amortization of debt issuance cost 5,152 — — 5,152 Changes in operating assets and liabilities: Accounts receivable 816 (98 ) D 3,413 4,131 Inventories 15,932 (4,845 ) E — 11,087 Deferred cost of revenue 26,014 (37,098 ) F — (11,084 ) Customer financing receivable and other 1,339 — — 1,339 Prepaid expenses and other current assets 5,194 1,423 G 11 6,628 Other long-term assets 83 (396 ) H (103 ) (416 ) Accounts payable (2,464 ) — — (2,464 ) Accrued warranty (2,500 ) 50 I (247 ) (2,697 ) Accrued expense and other current liabilities 823 (1,196 ) J — (373 ) Deferred revenue and customer deposits (44,533 ) 49,428 K (3,651 ) 1,244 Other long-term liabilities 3,487 679 L — 4,166 Net cash used in operating activities (4,170 ) (5,675 ) — (9,845 ) Cash flows from investing activities: Purchase of property, plant and equipment (8,543 ) (3,403 ) M — (11,946 ) Payments for acquisition of intangible assets (848 ) — — (848 ) Proceeds from maturity of marketable securities 104,500 — — 104,500 Net cash used in investing activities 95,109 (3,403 ) — 91,706 Cash flows from financing activities: Repayment of debt (5,016 ) — — (5,016 ) Repayment of debt to related parties (778 ) — — (778 ) Proceeds from financing obligations — 10,961 N — 10,961 Repayment of financing obligations — (1,883 ) N — (1,883 ) Distributions to noncontrolling and redeemable noncontrolling interests (3,189 ) — — (3,189 ) Proceeds from issuance of common stock 7,493 — — 7,493 Net cash (used in) provided by financing activities (1,490 ) 9,078 — 7,588 Net increase in cash, cash equivalents, and restricted cash 89,449 — — 89,449 Cash, cash equivalents, and restricted cash: Beginning of period 280,485 — — 280,485 End of period $ 369,934 $ — $ — $ 369,934 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 14,545 $ 5,838 N $ — $ 20,383 Cash paid during the period for taxes 222 — — 222 A Depreciation and amortization — The correction of these misstatements resulted from the change of accounting for Energy Servers under the Managed Services Program and similar arrangements that were previously expensed as product and install cost of revenue, but are now recorded as property, plant and equipment, net and depreciated over their useful lives of 21 years. B Revaluation of derivative contracts — The correction of these misstatements resulted from the change of accounting for the grid pricing escalation guarantees we provided in some of our sales arrangements. These commitments were previously treated as an accrued liability. We now consider the commitments a derivative liability, with the initial value of recorded as a reduction in product revenue and then any changes in the value adjusted through other expense, net each period thereafter. C Stock-based compensation — The correction of these misstatements resulted from the change of accounting for stock-based compensation, including net capitalization of stock-based compensation cost into inventory of $4.4 million . The correction of this misstatement also resulted in the capitalization of $0.5 million of stock-based compensation costs related to assets under the Managed Services Programs now recorded as construction in progress within property, plant and equipment, net. D Accounts receivable — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements, for which the amount recorded to accounts receivable represents amounts invoiced for capacity billings to end customers which have not yet been collected by the financing entity as of the period end. E Inventories — The correction of these misstatements resulted from the change of accounting for inventories held for shipments planned to customers under the Managed Services Program and similar arrangements now being accounted for as construction in progress within property, plant and equipment, net. F Deferred cost of revenue, current and non-current — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby leased Energy Servers of $37.2 million previously classified as deferred cost of revenue is now recorded as construction in progress within property, plant and equipment, net, and the net capitalization of stock-based compensation expenses of $0.1 million . G Prepaid expenses and other current assets — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby prepaid property tax and insurance payments are now classified within prepaid expenses. H Other long-term assets — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby the timing difference of capacity billings to end customers and the payments received from the financing entity is recorded within long term receivables and prepaid property tax and insurance payments are now classified within other long-term assets, rather than offset against long-term deferred revenue. I Accrued warranty — The correction of these misstatements resulted from the change of accounting for accrued warranty which is now recorded on an as-incurred basis on our Managed Services Agreements and similar arrangements. J Accrued expense and other current liabilities and other long-term liabilities — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements whereby instead of recognizing the bank financing as revenue, the bank financing loan proceeds received and due are classified as a financing liability. K Deferred revenue and customer deposits, current and non-current — The correction of these misstatements resulted from the change of accounting for the recognition of product and installation revenue from upfront or ratable recognition to the recognition of the capacity payments received from the end customer as power is generated by the Energy Servers as electricity revenue. L Other long-term liabilities — The correction of these misstatements resulted from the change of accounting for the grid pricing escalation guarantees we provided in some of our sales arrangements. These commitments were previously treated as an accrued liability. We now consider the commitments a derivative liability, with the initial value recorded as a reduction in product revenue and then any changes in the value adjusted through gain (loss) on revaluation of embedded derivatives, net each period thereafter. M Purchase of property, plant and equipment — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby costs previously recognized as product and installation cost of revenue are now recorded as property, plant and equipment, net in the cases where the risks of ownership have not completely transferred to the financing party. N Proceeds and repayments from financing obligations — The correction of these misstatements resulted from the change of accounting for Managed Services Agreements and similar arrangements, whereby instead of recognizing the upfront proceeds received from the bank as revenue, the proceeds received and due are classified as proceeds from financing obligations and the capacity payments received from the end customer are classified as repayment of financing obligations and interest paid. |
