# Plug Power Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [Plug Power Inc](/companies/plug.md) (CIK 1093691)
- Form: 10-Q
- Filed: 2023-11-09
- Accepted by EDGAR: Nov 9, 2023, 21:30 ET
- Period: 2023-09-30
- Accession: 0001558370-23-018601
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1093691/000155837023018601/plug-20230930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1093691/000155837023018601/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $198.7m | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $669.2m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $336.7m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $954.7m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | −$138.0m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | −$285.5m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $27.7m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $83.4m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $105.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $310.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$274.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$717.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $11.8m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $33.7m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | −$4.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | −$6.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$283.5m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$726.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.47 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.22 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.47 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.22 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 599,465,146 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 593,417,595 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$863.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $484.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $110.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $2.24bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $5.45bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $930.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $1.94bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $4.1m | us-gaap:LongTermDebt |
| Current portion of debt | at 2023-09-30 | $2.6m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-09-30 | $3.51bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 91,340 characters.

The following discussion should be read in conjunction with our accompanying unaudited interim condensed consolidated financial statements and notes thereto included within this Quarterly Report on Form 10-Q, and our audited and notes thereto included in our 2022 Form 10-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, and Section 21E of the Exchange Act. These forward-looking statements contain projections of our future results of operations or of our financial position or state other forward-looking information. In some cases, you can identify these statements by forward-looking words such as “believe,” “could,” “continue,” “estimate,” “expect,” “forecast,” “intend,” “may,” “should,” “will,” “would,” “plan,” “project” or the negative of such words or other similar words or phrases. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Investors are cautioned not to unduly rely on forward-looking statements because they involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including, but not limited to:

- the risk that we continue to incur losses and might never achieve or maintain profitability;
- the risk that we will need to raise additional capital to fund our operations and such capital may not be available to us;
- the risks associated with global economic uncertainty, including inflationary pressures, fluctuating interest rates, currency fluctuations, bank failure, and supply chain disruptions;
- the risk that we may not be able to obtain from our hydrogen suppliers a sufficient supply of hydrogen at competitive prices or the risk that we may not be able to produce hydrogen internally at competitive prices;
- the risk that we may not be able to expand our business or manage our future growth effectively;
- the risk that delays in or not completing our product development and hydrogen plant construction goals may adversely affect our revenue and profitability;
- the risk with regards to the impact of the Inflation Reduction Act on our business;
- the risk that we may be unable to successfully pursue, integrate, or execute upon our new business ventures;
- 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 of certain of our products may impact our ability to manufacture and market said 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 could result in a material adverse effect on our financial condition, 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 we may not be able to convert all of our estimated future revenue into revenue and cash flows;
- the risk that a sale or issuance 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 adverse 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 weaknesses identified in internal control over financial reporting as of December 31, 2022 and 2021, or inability to otherwise maintain an effective system of internal control over financial reporting;
- our ability to attract and retain 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 involved with participating in joint ventures, including our ability or inability to execute our strategic growth plan through joint ventures;
- our ability to obtain financing arrangements to support the sale or leasing of our products and services to customers;
- our ability to achieve the forecasted revenue and costs 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 or reduction of government subsidies and economic incentives for alternative energy products;
- market acceptance of our products and services;
- 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 continue as a going concern, including our ability to raise sufficient funds to fund our operations through the next 12 months from the date of this Quarterly Report;
- the risk that some or all of the recorded goodwill, intangible assets and property, plant, and equipment could be subject to impairment;
- 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;
- our operational dependency on information technology and the risk of the failure of such technology, including failure to effectively prevent, detect, and recover from security compromises or breaches, including cyber-attacks;
- the cost of complying with current and future federal, state and international governmental regulations;
- the expense and resources associated with being subject to legal proceedings and legal compliance;
- the risks associated with past and potential future acquisitions;
- the risks associated with geopolitical instability, including the conflict between Russia and Ukraine and growing tensions between U.S. and China and neighboring regions; and
- the volatility of our stock price.

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, in our 2022 Form 10-K and supplemented by Part II, Item 1A of the Quarterly Report on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023 and Part II, Item 1A of this Quarterly Report on Form 10-Q. 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,” the “Company,” “we,” “our” or “us” refer to Plug Power Inc., including as the context requires, its subsidiaries.

### Overview

Plug is facilitating the paradigm shift to an increasingly electrified world by innovating cutting-edge hydrogen and fuel cell solutions. While we continue to develop commercially viable hydrogen and fuel cell product solutions, we have expanded our offerings to support a variety of commercial operations that can be powered with green hydrogen. We provide electrolyzers that allow customers — such as refineries, producers of chemicals, steel, fertilizer and commercial refueling stations — to generate hydrogen on-site. We are focusing our efforts on (a) 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; (b) stationary power systems that will support critical operations, such as data centers, microgrids, and generation facilities, in either a backup power or continuous power role and replace batteries, diesel generators or the grid for telecommunication logistics, transportation, and utility customers; and (c) production of hydrogen. Plug expects to support these products and customers with an ecosystem of vertically integrated products that produce, transport, store and handle, dispense, and use hydrogen for mobility and power applications.

Our current products and services include:

**GenDrive**: GenDrive is our hydrogen fueled 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, and ground support equipment.

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

**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.

**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.

**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.

**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 Plug’s membrane electrode assembly, a critical component of the fuel cell stack used in zero-emission fuel cell electric vehicle engines. Our ProGen technology provides heavy duty scalable power ranges between 15kW and 125kW.

**Electrolyzers**: The design and implementation of 5 and 10MW electrolyzer systems that 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 generated by using electricity from renewable energy inputs, such as solar or wind power.

**Liquefaction Systems**: Plug’s 15 ton-per-day and 30 ton-per-day liquefiers are engineered for high efficiency, reliability, and operational flexibility — providing consistent liquid hydrogen to customers. This design increases plant reliability and availability while minimizing parasitic losses like heat leak and seal gas losses.

**Cryogenic Equipment:** Engineered equipment including trailers and mobile storage equipment for the distribution of liquified hydrogen, oxygen, argon, nitrogen and other cryogenic gases.

We provide our products and solutions worldwide through our direct sales force, and by leveraging relationships with original equipment manufacturers (“OEMs”) and their dealer networks. We are currently targeting Asia, Australia, Europe, Middle East and North America for expansion in adoption. The European Union (the “EU”) has rolled out ambitious targets for the hydrogen economy as part of the EU strategy for energy integration and we are seeking to execute on our strategy to become one of the European leaders in the hydrogen economy. This includes a targeted account strategy for material handling, securing strategic partnerships with European OEMs, energy companies, utility leaders and accelerating our electrolyzer business. Our global strategy includes leveraging a network of integrators or contract manufacturers. Additionally, we have a joint venture with Niloco Hydrogen Holdings LLC, a wholly-owned subsidiary of Olin named “Hidrogenii”. Plug has been successful with acquisitions, strategic partnerships and joint ventures, and we plan to continue this mix.

Part of our long-term plan includes Plug penetrating the European and Asian hydrogen market, on-road vehicle market, and large-scale stationary market. Plug’s formation of joint ventures with HyVia and AccionaPlug in Europe and SK Plug Hyverse in Asia not only support this goal but are expected to provide us with a more global footprint.

We manufacture our commercially viable products in Latham, New York, Rochester, New York, Slingerlands, New York, Houston, Texas, Lafayette, Indiana, and Spokane, Washington, and support liquid hydrogen production and logistics in Charleston, Tennessee and Kingsland, Georgia.

### Recent Developments

### Liquidity and Capital Resources

The Company’s working capital was $1.3 billion at September 30, 2023, which included unrestricted cash and cash equivalents of $110.8 million and restricted cash of $225.8 million. In addition, the Company had available-for-sale securities and equity securities of $388.8 million and $67.8 million, respectively, as of September 30, 2023.

Since inception, the Company has financed its operations with proceeds from the sales of equity securities, convertible notes, debt and redeemable convertible preferred stock. As of September 30, 2023, the Company had an accumulated deficit of $3.8 billion. The Company has continued to experience negative cash flows from operations and net losses. The Company incurred net losses attributable to common stockholders of $726.4 million for the nine months ended September 30, 2023, and net losses attributable to common stockholders of $724.0 million, $460.0 million and $596.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. The net cash used in operating activities for the nine months ended September 30, 2023, was $863.9 million and the net cash used in operating activities for the year ended December 31, 2022 and 2021 was $828.6 million and $358.2 million, respectively. The Company expects to generate operating losses for the foreseeable future as it continues to devote significant resources to expand its current production and manufacturing capacity, construct hydrogen plants and fund the acquisition of additional inventory to deliver our end-products and related services. The net cash provided by/(used in) investing activities for the nine months ended September 30, 2023 and 2022 was $460.5 million and ($20.6) million, respectively. This increase was due to an increase in proceeds from maturities of available-for-sale securities compared to the prior year, partially offset by an increase of capital spending. Included in purchases of property, plant and equipment and outflows associated with materials, labor, and overhead are costs 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. The net cash provided by/(used in) financing activities for the nine months ended September 30, 2023 and 2022 was $14.4 million and ($41.3) million, respectively. The change was primarily driven by an increase in proceeds from finance obligations, partially offset by an increase in payments of contingent consideration.

In light of the Company’s projected capital expenditure and operating requirements under its current business plan, the Company is projecting that its existing cash and available for sale and equity securities will not be sufficient to fund its operations through the next twelve months from the date of issuance of this Quarterly Report on Form 10-Q. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern. In accordance with Accounting Standards Update ("ASU") No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40),” management has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the condensed consolidated financial statements are issued and has determined that the Company’s ability to continue as a going concern is dependent on its ability to raise additional capital. To alleviate the conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern, management is currently evaluating several different options to enhance the Company’s liquidity position, including the sale of securities, incurrence of debt or other financing alternatives. The Company’s plan includes various financing solutions from third parties with a particular focus on corporate level debt solutions, investment tax credit related project financings and loan guarantee programs, and/or large scale hydrogen generation infrastructure project financing. The amount of additional capital that the Company will need to raise may change based on changes to the Company’s business plan and changes to managament’s assumptions regarding projected liquidity. Although the Company has been successful in raising capital in the past and expects to continue to raise capital as required, those plans are not final and are subject to market and other conditions not within the Company’s control. As such, there can be no assurance that the Company will be successful in obtaining sufficient funding. Accordingly, management has concluded under the accounting standards that these plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

The Company’s significant obligations consisted of the following as of September 30, 2023:

(i) Operating and finance leases totaling $357.3 million and $44.2 million, respectively, of which $62.1 million and $9.1 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 $372.4 million, of which approximately $85.4 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) Convertible senior notes totaling $194.9 million at September 30, 2023 due June 1, 2025.

### SEC Settlement

On August 30, 2023, the Company reached a settlement of a civil administrative proceeding with the SEC related to the Company’s restatement of its previously issued financial statements as of and for the years ended December 31, 2019 and 2018, and as of and for each of the quarterly periods ended March 31, 2020 and 2019, June 30, 2020 and 2019, and September 30, 2020 and 2019. The Company, without admitting or denying the findings, agreed to a cease-and-desist order regarding Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 13a-1, 13a-13, and 13a-15(a) - (c) thereunder. As part of the settlement, the Company paid a civil monetary penalty to the SEC in the amount of $1.25 million on September 20, 2023.

### Cybersecurity Update

In or around March 2023, an unauthorized actor accessed our computer network and executed a ransomware attack, resulting in the encryption of certain of our computer systems, including systems used to store proprietary and confidential data, and exfiltration of limited data sets. Upon detection, we took immediate steps to contain, assess and remediate the incident, including engaging outside legal counsel and external forensic investigators, and to restore impacted systems. The Company has and is continuing to implement a series of additional security and related measures aimed at further safeguarding the integrity of its information technology systems and strengthening the overall security of the Company’s computer network and has engaged external forensic investigators to conduct a thorough independent investigation of the ransomware attack. We will continue to assess the potential impact of the ransomware attack on our business but based on information available to date, we do not believe that the ransomware attack has had a material impact on our business, operations or financial condition.

### Inflation, Material Availability and Labor Shortages

Most components essential to our business are generally available from multiple sources; however, we believe there are some component suppliers and manufacturing vendors, particularly those suppliers and vendors that supply materials in very limited supply worldwide or supply commodities that have high degree of volatility, whose loss to us or general unavailability could have a material adverse effect upon our business and financial condition. Furthermore, global commodity pricing has been volatile and may be influenced by political events and worldwide economic trends, which may impact our sourcing strategies resulting in adverse impacts on our business and financial condition. We are mitigating these potential risks by introducing alternate system architectures that we expect will allow us to diversify our supply chain with multiple fuel cell, electrolyzer stack and air supply component vendors. For example, although we believe the current hydrogen supply challenge is a transitory issue, we have experienced supply chain issues relating to the availability of hydrogen, including but not limited to suppliers utilizing force majeure provisions under existing contracts, which has negatively impacted the amount of hydrogen we have been able to provide under certain of our supply and other agreements. 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. We are also working closely with these vendors and other key suppliers on coordinated product introduction plans, product and sales forecasting, strategic inventories, and internal and external manufacturing schedules and levels. However, ongoing changes to, and evolution of, our products designs such as simultaneous design/build efforts and new product serviceability trends, or incorrect forecasting or updates to previously forecasted volumes could present challenges to those strategies despite best efforts in leveraging supplier relationships and capabilities. With respect to production, although we have experienced less cost pressures from global energy prices and inflation, those factors could rise again and there could be a negative impact to our key raw materials. Additionally, our regionally diverse supply chain could result in price shifts from one region to another region that may affect our costs and strategic initiatives. In cases where we have single sourced suppliers (typically due to new technology and products or worldwide shortages due to global demand), we work to engineer alternatives in our product design or develop new supply sources while covering short- and medium-term risks with supply contracts, building up inventory, and development partnerships. However, if we, or the industry or economy at large, were to experience a recession, then we may have a large stock of pre-purchased inventory that could be unused and aging for a period of time. In addition, during the fourth quarter of 2023, we are continuing discussions with suppliers to modify terms of our supply agreements, which may impact the timing of when we receive shipments of certain supplies or result in other supply chain issues. However, we continue to take proactive steps through our supply chain team to limit the impact of suppliers challenges generally and we continue to work closely with our suppliers and transportation vendors to ensure availability of products and implement other cost savings initiatives. With respect to its service business, the Company has experienced inflationary increases in labor, parts and related overhead. Accordingly, the Company increased its estimated projected costs to service fuel cell systems and related infrastructure, which resulted in an increase in the provision for loss contracts related to service during the third quarter of 2023. If these trends continue, we may have to record additional service loss provisions in the future. We anticipate bookings and revenue will be uneven in the near-term while we pursue sales opportunities and seek to build our liquefier backlog.

Additionally, we, as well as our suppliers and vendors, have observed an increasingly competitive labor market. Tight labor markets have resulted in labor inflation and longer times to fill open positions for us and our suppliers and vendors. Increased employee turnover, reassessment of employee responsibilities given current business needs, changes in the availability of our workers as well as labor shortages have resulted in, and could continue to result in, increased costs which could negatively affect our component or raw material purchasing abilities, and in turn, our financial condition, results of operations, or cash flows.

### Results of Operations

Our primary sources of revenue are from sales of fuel cell systems, related infrastructure and equipment, services performed on fuel cell systems and related infrastructure, Power Purchase Agreements (PPAs), and fuel delivered to customers. A certain portion of our sales result from acquisitions in legacy markets, which we are working to transition to renewable solutions. Revenue from sales of fuel cell systems, related infrastructure and equipment represents sales of our GenDrive units, GenSure stationary backup power units, cryogenic stationary and on road storage, electrolyzers and 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.

### Provision for Common Stock Warrants

On August 24, 2022, the Company and Amazon entered into the 2022 Transaction Agreement, under which the Company concurrently issued to Amazon.com NV Investment Holdings LLC, a wholly owned subsidiary of Amazon, the Amazon Warrant, to acquire the Amazon Warrant Shares, subject to certain vesting events described below. The Company and Amazon entered into the 2022 Transaction Agreement in connection with a concurrent commercial arrangement under which Amazon agreed to purchase hydrogen fuel from the Company through August 24, 2029.

In 2017, in separate transactions, the Company issued to each of Amazon.com NV Investment Holdings LLC and Walmart Warrants to purchase shares of the Company’s common stock.

The Company recorded a portion of the estimated fair value of the Amazon and Walmart Warrants as a reduction 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 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. For the third tranche of the shares under Walmart’s Warrant, the exercise price will be determined once the second tranche vests. For the third tranche of the Amazon Warrant Shares, see below for the exercise price and measurement dates used.

For the three months ended September 30, 2023, there was a negative provision recorded as an increase in revenue from PPAs and fuel delivered to customers. The negative provision for the three months ended September 30, 2023 was caused by a decline in the Company’s stock price, which is one of the inputs in determining the fair value of the warrants. The amount of provision for Amazon and Walmart Warrants recorded as an increase/(reduction) to revenue for the three and nine months ended September 30, 2023 and 2022, respectively, is shown in the table below (in thousands):

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended September 30, 2023 | ​ | ​ ​ 2022 | ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ | ​ ​ 2022 |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Sales of equipment, related infrastructure and other | ​ | $(765) | ​ | $(1,026) | ​ | $(1,891) | ​ | $(1,145) |
| Services performed on fuel cell systems and related infrastructure | ​ | (268) | ​ | (227) | ​ | (953) | ​ | (558) |
| Power purchase agreements | ​ | 1,767 | ​ | (3,791) | ​ | (4,635) | ​ | (5,800) |
| Fuel delivered to customers | ​ | 831 | ​ | (3,527) | ​ | (5,258) | ​ | (5,010) |
| Total | ​ | $1,565 | ​ | $(8,571) | ​ | $(12,737) | ​ | $(12,513) |

Net revenue, cost of revenue, gross profit (loss) and gross margin (loss) percentage for the three and nine months ended September 30, 2023 and 2022 were as follows (in thousands):

| ​ ​ ​ ​ ​ ​ For the period ended September 30, 2023: | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Three Months Ended ​ September 30, ​ ​ Net Revenue ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Cost of Revenue ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Gross Profit/(Loss) ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ Gross ​ Margin/(Loss) ​ ​ | ​ ​ ​ ​ Nine Months Ended ​ September 30, ​ ​ Net Revenue ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Cost of Revenue ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Gross Profit/(Loss) ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ Gross ​ Margin/(Loss) ​ ​ |
| --- | --- | ---: | --- | --- | --- | ---: | --- | ---: | ---: | --- | --- | --- | ---: | --- | ---: |
| Sales of equipment, related infrastructure and other | ​ | $145,130 | ​ | ​ 158,989 | ​ | $(13,859) |  | (9.5)% | $543,510 | ​ | ​ 504,717 | ​ | $38,793 |  | 7.1% |
| Services performed on fuel cell systems and related infrastructure | ​ | 9,290 | ​ | ​ 17,916 | ​ | (8,626) |  | (92.9)% | 27,088 | ​ | ​ 53,586 | ​ | (26,498) |  | (97.8)% |
| Provision for loss contracts related to service | ​ | ​ — | ​ | ​ 41,581 | ​ | ​ (41,581) | ​ | N/A ​ | ​ — | ​ | ​ 55,801 | ​ | ​ (55,801) | ​ | N/A ​ |
| Power purchase agreements | ​ | 20,068 | ​ | ​ 56,981 | ​ | (36,913) |  | (183.9)% | 44,135 | ​ | ​ 157,773 | ​ | (113,638) |  | (257.5)% |
| Fuel delivered to customers and related equipment | ​ | 19,371 | ​ | ​ 59,012 | ​ | (39,641) |  | (204.6)% | 47,391 | ​ | ​ 177,963 | ​ | (130,572) |  | (275.5)% |
| Other | ​ | 4,852 | ​ | ​ 2,197 | ​ | 2,655 |  | 54.7% | 7,055 | ​ | ​ 4,843 | ​ | 2,212 |  | 31.4% |
| Total | ​ | $198,711 | ​ | $336,676 | ​ | $(137,965) |  | (69.4)% | $669,179 | ​ | $954,683 | ​ | $(285,504) |  | (42.7)% |
| **For the period ended September 30, 2022:** | **​** | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Sales of equipment, related infrastructure and other | ​ | $157,985 | ​ | $127,381 | ​ | $30,604 |  | 19.4% | $383,065 | ​ | $310,362 | ​ | $72,703 |  | 19.0% |
| Services performed on fuel cell systems and related infrastructure | ​ | 8,406 | ​ | 12,619 | ​ | (4,213) |  | (50.1)% | 25,468 | ​ | 38,106 | ​ | (12,638) |  | (49.6)% |
| Provision for loss contracts related to service | ​ | ​ — | ​ | ​ 5,727 | ​ | ​ (5,727) | ​ | N/A ​ | ​ — | ​ | ​ 8,843 | ​ | ​ (8,843) | ​ | N/A ​ |
| Power purchase agreements | ​ | 9,524 | ​ | 35,549 | ​ | (26,025) |  | (273.3)% | 30,730 | ​ | 102,194 | ​ | (71,464) |  | (232.6)% |
| Fuel delivered to customers and related equipment | ​ | 12,389 | ​ | 53,129 | ​ | (40,740) |  | (328.8)% | 40,289 | ​ | 134,008 | ​ | (93,719) |  | (232.6)% |
| Other | ​ | 324 | ​ | 286 | ​ | 38 |  | 11.7% | 1,146 | ​ | 1,063 | ​ | 83 |  | 7.2% |
| Total | ​ | $188,628 | ​ | $234,691 | ​ | $(46,063) |  | (24.4)% | $480,698 | ​ | $594,576 | ​ | $(113,878) |  | (23.7)% |

### Net Revenue

*Revenue –* s*ales of equipment, related infrastructure and other.* Revenue from sales of equipment, related infrastructure and other 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, electrolyzer stacks and systems, and other equipment such as liquefiers and cryogenic storage equipment. Revenue from sales of equipment, related infrastructure and other for the three months ended September 30, 2023 decreased $12.9 million, or 8.1%, to $145.1 million from $158.0 million for the three months ended September 30, 2022 primarily due to a decrease in revenue related to fuel cell systems of $38.3 million due to a decrease in the volume of GenDrive units sold, with 1,452 units sold for the three months ended September 30, 2023 compared to 3,524 units sold for the three months ended September 30, 2022. Additionally, there was a decrease in revenue of $18.3 million related to decreased sales of engineered oil and gas equipment from the Frames acquisition, which sales are not expected to continue beyond current commitments. Partially offsetting these decreases was an increase in revenue related to electrolyzers of $19.8 million, which was due to 54 one megawatt equivalent units sold for the three months ended September 30, 2023 compared to 3 one megawatt equivalent units sold for the three months ended September 30, 2022. Additionally, revenue from cryogenic storage equipment and liquefiers increased $22.9 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily due to executed agreements related to liquefier sales and $8.3 million resulting from the acquisition of CIS for which there was no revenue recognized in the three months ended September 30, 2022.

Revenue from sales of equipment, related infrastructure and other for the nine months ended September 30, 2023 increased $160.4 million, or 41.9%, to $543.5 million from $383.1 million for the nine months ended September 30, 2022 primarily due to increases in revenue related to hydrogen site installations, liquefiers, cryogenic equipment, and electrolyzer stacks and systems. The increase in the revenue related to cryogenic storage equipment and liquefiers of $112.8 million was primarily due to executed agreements related to liquefier sales and $34.4 million resulting from the acquisition of CIS for which there was no revenue recognized for the nine months ended September 30, 2022. The increase in hydrogen infrastructure revenue of $49.1 million was due to 41 hydrogen site installations for the nine months ended September 30, 2023 compared to 30 for the nine months ended September 30, 2022. Revenue related to electrolyzers increased $59.1 million, which was due to 120 one megawatt equivalent units sold for the nine months ended September 30, 2023 compared to 7 one megawatt equivalent units sold for the nine months ended September 30, 2022. Partially offsetting these increases was a decrease in revenue related to fuel cell systems of $8.2 million due to a decrease in the volume of GenDrive units sold, with 5,167 units sold for the nine months ended September 30, 2023 compared to 6,011 units sold for the nine months ended September 30, 2022. Additionally, there was a decrease of $52.3 million related to the sales of engineered oil and gas equipment from the Frames acquisition, which sales are not expected to continue beyond current commitments. Lastly, there was a provision for common stock warrants of $1.9 million and $1.1 million for the nine months ended September 30, 2023 and 2022, respectively.

*Revenue – services performed on fuel cell systems and related infrastructure.* Revenue from services performed on fuel cell systems and related infrastructure represents revenue earned primarily on our service and maintenance contracts, as well as sales of spare parts. At September 30, 2023, there were 20,417 fuel cell units and 101 hydrogen installations under extended maintenance contracts, an increase from 19,726 fuel cell units and 89 hydrogen installations at September 30, 2022. Revenue from services performed on fuel cell systems and related infrastructure for the three months ended September 30, 2023 increased $0.9 million, or 10.5%, to $9.3 million from $8.4 million for the three months ended September 30, 2022. The increase in revenue from services performed on fuel cell systems and related infrastructure for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was primarily related to the increase in number of units in service. Additionally, there was a provision for common stock warrants of $0.3 million and $0.2 million for the three months ended September 30, 2023 and 2022, respectively.

Revenue from services performed on fuel cell systems and related infrastructure for the nine months ended September 30, 2023 increased $1.6 million, or 6.4%, to $27.1 million from $25.5 million for the nine months ended September 30, 2022. The increase in revenue from services performed on fuel cell systems and related infrastructure for the nine months ended September 30, 2023 compared to the nine months ended 2022 was primarily related to our expanding customer base and growth within our current customer base. Additionally, there was a provision for common stock warrants of $1.0 million and $0.6 million for the nine months ended September 30, 2023 and 2022, respectively.

*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, 2023, there were 138 GenKey sites associated with PPAs, as compared to 95 at September 30, 2022. Revenue from PPAs for the three months ended September 30, 2023 increased $10.5 million, or 110.7%, to $20.1 million from $9.5 million for the three months ended September 30, 2022. The increase in revenue was primarily due to an increase in the number of units under PPA arrangements, as well as the decrease in the provision for common stock warrants, which went from $3.8 million for the three months ended September 30, 2022 to a negative provision of $1.8 million for the three months ended September 30, 2023. All 10 of the new PPA sites in the third quarter of 2023 were not deployed until late in the quarter; therefore, the full impact on revenue has yet to be realized.

Revenue from PPAs for the nine months ended September 30, 2023 increased $13.4 million, or 43.6%, to $44.1 million from $30.7 million for the nine months ended September 30, 2022. The increase in revenue was primarily due to an increase in deployed units. Additionally, there was a decrease in the provision for common stock warrants, which went from $5.8 million for the nine months ended September 30, 2022 to $4.6 million for the nine months ended September 30, 2023. Additionally, all 10 of the new PPA sites in the third quarter of 2023 were not deployed until late in the quarter; therefore, the full impact on revenue has yet to be realized.

*Revenue – fuel delivered to customers and related equipment*. Revenue associated with fuel delivered to customers and related equipment 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, 2023 increased $7.0 million, or 56.4%, to $19.4 million from $12.4 million for the three months ended September 30, 2022. The increase in revenue was primarily due to an increase in the number of sites with fuel contracts, which increased from 182 sites as of September 30, 2022 to 237 sites as of September 30, 2023. Additionally, contributing to the increase in revenue was a change in the provision for common stock warrants, which went from $3.5 million for the three months ended September 30, 2022 to a negative provision of $0.8 million for the three months ended September 30, 2023. All of the new fuel sites in the third quarter of 2023 were not deployed until late in the quarter; therefore, the full impact on revenue has yet to be realized.

Revenue associated with fuel delivered to customers for the nine months ended September 30, 2023 increased $7.1 million, or 17.6%, to $47.4 million from $40.3 million for the nine months ended September 30, 2022. The increase in revenue was primarily due to an increase in the number of sites with fuel contracts, which increased from 182 sites as of September 30, 2022 to 237 sites as of September 30, 2023. Partially offsetting these increases was an increase in provision for common stock warrants, which went from $5.0 million for the nine months ended September 30, 2022 to $5.3 million for the nine months ended September 30, 2023. All of the new fuel sites in the third quarter of 2023 were not deployed until late in the quarter; therefore, the full impact on revenue has yet to be realized.

### Cost of Revenue

*Cost of revenue – sales of equipment, related infrastructure and other.* Cost of revenue from sales of equipment, related infrastructure and other 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 hydrogen fueling infrastructure referred to at the site level as hydrogen installations, electrolyzer stacks and systems, and other equipment such as cryogenic storage equipment and liquefiers. Cost of revenue from sales of fuel cell systems, related infrastructure and equipment for the three months ended September 30, 2023 increased $31.6 million, or 24.8%, to $159.0 million from $127.4 million for the three months ended September 30, 2022. The cost of revenue related to electrolyzer stacks and systems increased $20.6 million, which was due to 54 one megawatt equivalent units sold for the three months ended September 30, 2023 compared to 3 one megawatt equivalent units sold for the three months ended September 30, 2022 and ramp up costs associated with the electrolyzer gigafactory. The increase in cryogenic storage equipment and liquefiers of $14.6 million was due to an increase in costs related to the sales of liquefiers and cryogenic equipment. Included in the $14.6 million is cost of revenue of $6.9 million resulting from the acquisition of CIS for which there was no cost of revenue recognized for the three months ended September 30, 2022. Additionally, the Company recorded a $18.7 million lower of cost or market adjustment to inventory due to losses on new product offerings. Partially offsetting these increases was a decrease of hydrogen infrastructure cost of revenue of $0.6 million due to the decrease in the number of hydrogen site installations. There were 10 hydrogen site installations for the three months ended September 30, 2023 compared to 13 for the three months ended September 30, 2022. The decrease in the cost of revenue related to fuel cell systems of $6.2 million was due to a decrease in the volume of GenDrive units sold, with 1,452 units sold for the three months ended September 30, 2023 compared to 3,524 units sold for the three months ended September 30, 2022. The decrease in cost of revenue of $12.2 million is related to legacy oil and gas contracts from the Frames acquisition that are not expected to continue beyond current commitments. Gross margin decreased to (9.5%) for the three months ended September 30, 2023, compared to 19.4% for the three months ended September 30, 2022. The decrease in gross margin was primarily due to ramp up of costs on new product offerings for high power stationary units and electrolyzers as well as changes in customer mix.

Cost of revenue from sales of fuel cell systems, related infrastructure and equipment for the nine months ended September 30, 2023 increased $194.4 million, or 62.6%, to $504.7 million from $310.4 million for the nine months ended September 30, 2022. The increase in hydrogen infrastructure cost of revenue of $36.1 million was due to 41 hydrogen site installations for the nine months ended September 30, 2023 compared to 30 for the nine months ended September 30, 2022. The increase in cryogenic storage equipment and liquefiers of $89.7 million was due to an increase in costs related to the sales of liquefiers and cryogenic equipment. Included in the $89.7 million is cost of revenue of $29.9 million resulting from the acquisition of CIS in which there was no cost of revenue recognized for the nine months ended September 30, 2022. The cost of revenue related to electrolyzer stacks and systems increased $62.4 million, which was due to 120 one megawatt equivalent units sold for the nine months ended September 30, 2023 compared to 7 one megawatt equivalent units sold for the nine months ended September 30, 2022. The increase in the cost of revenue related to fuel cell systems of $30.5 million was due to an increase in stationary builds and volume increases in low power stationary and mobility. Additionally, the Company recorded a $18.7 million lower of cost or market adjustment to inventory due to losses on new product offerings. Partially offsetting these increases was a decrease in cost of revenue of $39.6 million related to legacy oil and gas contracts from the Frames acquisition that are not expected to continue beyond current commitments. Gross margin decreased to 7.1% for the nine months ended September 30, 2023, compared to 19.0% for the nine months ended September 30, 2022. The decrease in gross margin was primarily due to ramp up of costs on new product offerings for high power stationary units and electrolyzers as well as changes in customer mix.

*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 costs incurred for our product service and hydrogen site maintenance contracts and spare parts. At September 30, 2023, there were 20,417 fuel cell units and 101 hydrogen installations under extended maintenance contracts, an increase from

19,726 fuel cell units and 89 hydrogen installations at September 30, 2022, respectively. Cost of revenue from services performed on fuel cell systems and related infrastructure for the three months ended September 30, 2023 increased $5.3 million, or 42.0%, to $17.9 million from $12.6 million for the three months ended September 30, 2022. The increase in cost of revenue was primarily due to the increase in number of units and sites in service. Gross loss increased to (92.9%) for the three months ended September 30, 2023, compared to (50.1%) for the three months ended September 30, 2022. The increase in gross loss was primarily due to higher cost of parts experienced during the three months ended September 30, 2023.

Cost of revenue from services performed on fuel cell systems and related infrastructure for the nine months ended September 30, 2023 increased $15.5 million, or 40.6%, to $53.6 million from $38.1 million for the nine months ended September 30, 2022. The increase in cost of revenue was primarily due to the increase in number of units and sites in service. Gross loss increased to (97.8%) for the nine months ended September 30, 2023, compared to (49.6%) for the nine months ended September 30, 2022. The increase in gross loss was primarily due higher cost of parts experienced during the nine months ended September 30, 2023.

*Cost of revenue – provision for loss contracts related to service.* The Company also recorded a provision for loss contracts related to service of $41.6 million for the three months ended September 30, 2023, compared to $5.7 million for the three months ended September 30, 2022. The Company increased the provision due to continued cost and inflationary increases of labor, parts and related overhead coupled with the timing of the remaining period of service required. Accordingly, the Company increased its estimated projected costs to service fuel cell systems and related infrastructure.

The Company also recorded a provision for loss contracts related to service of $55.8 million for the nine months ended September 30, 2023, compared to $8.8 million for the nine months ended September 30, 2022. The Company increased the provision due to continued cost and inflationary increases of labor, parts and related overhead coupled with the timing of the remaining period of service required. Accordingly, the Company increased its estimated projected costs to service fuel cell systems and related infrastructure.

*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, 2023, there were 138 GenKey sites associated with PPAs, as compared to 95 at September 30, 2022. Cost of revenue from PPAs for the three months ended September 30, 2023 increased $21.4 million, or 60.3%, to $57.0 million from $35.5 million for the three months ended September 30, 2022 due to the increase in units and sites under PPA contract as well as the higher cost of parts experienced in the quarter ended September 30, 2023. Partially offsetting the increase in cost of revenue was a negative provision for common stock warrants of $1.8 million for the three months ended September 30, 2023 compared to a provision of $3.8 million for the three months ended September 30, 2022. Gross loss decreased to (183.9%) for the three months ended September 30, 2023, as compared to (273.3%) for the three months ended September 30, 2022 primarily due to the change in provision for warrants, offset by higher cost of parts and scrap events during the current quarter.

Cost of revenue from PPAs for the nine months ended September 30, 2023 increased $55.6 million, or 54.4%, to $157.8 million from $102.2 million for the nine months ended September 30, 2022 due to the increase in units and sites under PPA contract as well as higher cost of parts. Gross loss increased to (257.5%) for the nine months ended September 30, 2023, as compared to (232.6%) for the nine months ended September 30, 2022 primarily due to higher cost of parts and scrap events during the current year. In addition, there was a provision for common stock warrants of $4.6 million for the nine months ended September 30, 2023 compared to $5.8 million for the nine months ended September 30, 2022.

*Cost of revenue – fuel delivered to customers and related equipment*. Cost of revenue from fuel delivered to customers and related equipment 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, 2023 increased $5.9 million or 11.1%, to $59.0 million from $53.1 million for the three months ended September 30, 2022. The increase in cost of revenue was primarily due to an increase in the number of sites with fuel contracts, which increased from 182 sites as of September 30, 2022 to 237 sites as of September 30, 2023, as well as inefficiencies in fueling systems. Gross loss decreased to (204.6%) during the three months ended September 30, 2023, compared to (328.8%) during the three months ended September 30, 2022 primarily due to the change in provision for warrants.

Cost of revenue from fuel delivered to customers for the nine months ended September 30, 2023 increased $44.0 million, or 32.8%, to $178.0 million from $134.0 million for the nine months ended September 30, 2022. 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, inefficiencies in fueling systems, and increased logistics costs due to instability in the hydrogen network created by force majeure events declared by our suppliers. Gross loss increased to (275.5%) during the nine months ended September 30, 2023, compared to (232.6%) during the nine months ended September 30, 2022, primarily due to the increase in cost of revenue described above.

### Expenses

*Research and development expense.* Research and development (“R&D”) expense includes: materials to build development and prototype units, cash and non-cash stock-based 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, 2023 decreased $0.5 million, or 1.6%, to $27.7 million from $28.1 million for the three months ended September 30, 2022. The overall decrease in R&D investment is due to the timing of new product offerings going into production.

Research and development expense for the nine months ended September 30, 2023 increased $11.3 million, or 15.7%, to $83.4 million from $72.1 million for the nine months ended September 30, 2022. The overall growth in R&D investment is commensurate with the Company’s future expansion into new markets, new product lines, acquisitions and varied vertical integrations, partially offset by the timing of new product offerings going into production.

*Selling, general and administrative expenses.* Selling, general and administrative expenses includes cash and non-cash stock-based 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, 2023 increased $19.8 million, or 23.1%, to $105.5 million from $85.6 million for the three months ended September 30, 2022. This increase was primarily related to information technology and professional fees.

Selling, general and administrative expenses for the nine months ended September 30, 2023 increased $48.2 million, or 18.4%, to $310.6 million from $262.4 million for the nine months ended September 30, 2022. This increase was primarily related to information technology and professional fees.

*Impairment.* Impairment for the three months ended September 30, 2023 increased to $0.7 million from $0 for the three months ended September 30, 2022. Impairment for the nine months ended September 30, 2023, increased to $11.7 million from $0 for the nine months ended September 30, 2022. This increase was primarily related to a one-time contract expense of $9.8 million during the second quarter of 2023.

*Other-than-temporary impairment of available-for-sale securities.* Other-than-temporary impairment of available-for-sale securities for the three months ended September 30, 2023 increased to $10.8 million from $0 for the three months ended September 30, 2022. Other-than-temporary impairment of available-for-sale securities for the nine months ended September 30, 2023 increased to $10.8 million from $0 for the nine months ended September 30, 2022. This increase was due to a change in the Company’s ability and intent to retain these investments for a period of time sufficient to allow for any anticipated recovery in the fair value.

*Contingent consideration.* The fair value of the contingent consideration is related to earnouts for the Giner ELX, Inc., United Hydrogen Group Inc., Frames, Applied Cryo Technologies, Inc., and Joule acquisitions. The change in fair value for the three and nine months ended September 30, 2023 was $2.2 million and $26.3 million, respectively, primarily due to the passage of time and changes in assumptions related to future earnout payments.

*Interest income*. Interest income primarily consists of income generated by our investment holdings, restricted cash escrow accounts, and money market accounts. Interest income for the three and nine months ended September 30, 2023 decreased $3.0 million and increased $25.1 million, respectively, over the three and nine months ended September 30, 2022. The decrease during the three months ended September 30, 2023 was the primarily due to the maturity of the Company’s available-for-sale portfolio of higher-yielding U.S. treasury securities during the first six months of the year. The increase over the nine months ended September 30, 2023 was primarily related to the interest earned on high-yielding U.S. treasuries during the first six months of the year.

*Interest expense.* Interest expense consists of interest expense related to our long-term debt, convertible senior notes, obligations under finance leases and our finance obligations. Interest expense for the three and nine months ended September 30, 2023 increased $2.8 million and $4.8 million over the three and nine months ended September 30, 2022, respectively. The increase in interest expense was primarily related to an increase in finance obligations as well as a decrease in capitalized interest.

*Other income/(expense), net*. Other income/(expense), net primarily consists of foreign currency translation and gains and losses related to energy contracts. Other income/(expense), net for the three months ended September 30, 2023 was income of $5.0 million compared to an expense of $5.4 million for the three months ended September 30, 2022. Other expense for the nine months ended September 30, 2023 decreased $4.3 million compared to the nine months ended September 30, 2022. The changes were primarily related to a net gain of $8.1 million on energy contracts for the three months ended September 30, 2023 as well as foreign currency translation gains.

*Realized gain/(loss) on investments, net.* Realized gain/(loss) on investments, net consists of the sales related to available-for-sale debt securities. For the three and nine months ended September 30, 2023, the Company had a realized gain on investments of $0 and $0.3 million, respectively, from net realized loss on investments of $0 and $1.3 million, respectively, for the three and nine months ended September 30, 2022.

*Change in fair value of equity securities*. The change in fair value of equity securities resulted in a gain of $0.1 million and $9.0 million for the three and nine months ended September 30, 2023, respectively, compared to a loss of $4.2 million and $22.9 million, respectively, for the three and nine months ended September 30, 2022.

*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, AccionaPlug S.L., which is our 50/50 joint venture with Acciona, and SK Plug Hyverse, which is our 49/51 joint venture with SK E&S. For the three and nine months ended September 30, 2023, the Company recorded a loss of $7.0 million and $20.0 million, respectively, on equity method investments. These losses are driven from the start-up activities for commercial and production operations.

### Income Taxes

The Company recorded $4.7 million of an income tax benefit and $1.5 million of income tax expense for the three months ended September 30, 2023 and 2022, respectively. The Company recorded $6.9 million of income tax benefit and $1.5 million of income tax expense for the nine months ended September 30, 2023 and 2022, respectively. The tax benefit for the nine months ended September 30, 2023 was due to foreign income taxes. The Company has not changed its overall conclusion with respect to the need for a valuation allowance against its domestic net deferred tax assets, which remain fully reserved.

The domestic net deferred tax asset generated from the Company's net operating loss has been offset by a full valuation allowance because it is more likely than not that the tax benefits of the net operating loss carryforward will not be realized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.

### Public and Private Offerings of Equity and Debt

#### Common Stock Issuances

In February 2021, 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 32,200,000 million shares of its common stock at a purchase price of $65.00 per share for net proceeds of approximately $2.0 billion.

#### Convertible Senior Notes

In May 2020, the Company issued $212.5 million in aggregate principal amount of 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 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 the fourth quarter of 2020, $33.5 million of the remaining 5.5% Convertible Senior Notes were converted into 14.6 million shares of common 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 $0.2 million aggregate principal amount of the 5.5% Convertible Senior Notes remained outstanding, all of which were converted to common stock in January 2021.

### Secured Debt

In June 2020, the Company acquired debt as part of its acquisition of United Hydrogen Group Inc. During the three and nine months ended September 30, 2023, the Company repaid $0.3 million and $5.7 million of principal related to this outstanding debt, respectively. The outstanding carrying value of the debt was $4.1 million as of September 30, 2023. The remaining outstanding principal on the debt was $5.8 million and the unamortized debt discount was $1.7 million, bearing varying interest rates ranging from 5.6% to 8.3%. The debt is scheduled to mature in 2026. As of September 30, 2023, the principal balance is due at each of the following dates as follows (in thousands):

| ​ | ​ | ​ ​ |
| --- | --- | --- |
| December 31, 2023 |  | $300 |
| December 31, 2024 | ​ | **​** 3,357 |
| December 31, 2025 | ​ | **​** 1,200 |
| December 31, 2026 | ​ | **​** 900 |
| Total outstanding principal | ​ | $5,757 |

### 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, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (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. During the three and nine months ended September 30, 2023, there were no conversions of the 3.75% Convertible Senior Notes.

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

| ​ ​ ​ Principal amounts: | ​ ​ ​ | ​ ​ September 30, 2023 ​ ​ | ​ ​ ​ | ​ ​ December 31, 2022 ​ ​ |
| --- | --- | ---: | --- | ---: |
| Principal | ​ | $197,278 | ​ | $197,278 |
| Unamortized debt issuance costs (1) | ​ | ​ (2,356) | ​ | ​ (3,359) |
| Net carrying amount | ​ | $194,922 | ​ | $193,919 |

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

The following table summarizes the total interest expense and effective interest rate related to the 3.75% Convertible Senior Notes for the three months ended September 30, 2023 (in thousands, except for the effective interest rate):

| ​ ​ ​ | ​ ​ | ​ ​ September 30, 2023 | ​ ​ | ​ ​ ​ September 30, ​ 2022 |
| --- | --- | --- | --- | --- |
| Interest expense | ​ | $1,849 | ​ | $1,849 |
| Amortization of debt issuance costs | ​ | ​ 338 | ​ | ​ 323 |
| Total | ​ | ​ 2,187 | ​ | ​ 2,172 |
| Effective interest rate | ​ | **​** 4.5% | ​ | ​ 4.5% |

Based on the closing price of the Company’s common stock of $7.60 on September 30, 2023, the if-converted value of the notes was greater than the principal amount. The estimated fair value of the notes at September 30, 2023 was approximately $314.7 million. The fair value estimation was primarily based on a quoted price in an active market.

### Capped Call

In conjunction with the pricing of the 3.75% Convertible Senior Notes, the Company entered into privately negotiated capped call transactions (the “3.75% Notes Capped Call”) with certain counterparties at a price of $16.2 million. The 3.75% Notes Capped Call 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.

The net cost incurred in connection with the 3.75% Notes Capped Call was recorded as a reduction to additional paid-in capital in the unaudited interim condensed consolidated balance sheets. The book value of the 3.75% Notes Capped Call is not remeasured.

### Common Stock Forward

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, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, which have been fully repaid. In connection with the issuance of the 5.5% Convertible Senior Notes, the Company entered into a forward stock purchase transaction (the “Common Stock 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. On May 18, 2020, 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 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. The book value of the Common Stock Forward is not remeasured.

There were no shares of common stock that settled in connection with the Common Stock Forward during the three and nine months ended September 30, 2023 or during the three and nine months ended September 30, 2022

### Amazon Transaction Agreement in 2022

On August 24, 2022, the Company and Amazon entered into a Transaction Agreement (the “2022 Transaction Agreement”), under which the Company concurrently issued to Amazon.com NV Investment Holdings LLC, a wholly owned subsidiary of Amazon, a warrant (the “Amazon Warrant”) to acquire up to 16,000,000 shares (the “Amazon Warrant Shares”) of the Company’s common stock, subject to certain vesting events described below. The Company and Amazon entered into the 2022 Transaction Agreement in connection with a concurrent commercial arrangement under which Amazon agreed to purchase hydrogen fuel from the Company through August 24, 2029.

1,000,000 of the Amazon Warrant Shares vested immediately upon issuance of the Amazon Warrant. 15,000,000 of the Amazon Warrant Shares will vest in multiple tranches over the 7-year term of the Amazon Warrant based on payments made to the Company directly by Amazon or its affiliates, or indirectly through third parties, with 15,000,000 of the Amazon Warrant Shares fully vesting if Amazon-related payments of $2.1 billion are made in the aggregate. The exercise price for the first 9,000,000 Amazon Warrant Shares is $22.9841 per share and the fair value on the grant date was $20.36. The exercise price for the remaining 7,000,000 Amazon Warrant Shares will be an amount per share equal to 90% of the 30-day volume weighted average share price of the Company’s common stock as of the final vesting event that results in full vesting of the first 9,000,000 Amazon Warrant Shares. The Amazon Warrant is exercisable through August 24, 2029.

Upon the consummation of certain change of control transactions (as defined in the applicable warrant) prior to the vesting of at least 60% of the aggregate Amazon Warrant Shares, the Amazon Warrant will automatically vest and become exercisable with respect to an additional number of Amazon Warrant Shares such that 60% of the aggregate Amazon Warrant Shares shall have vested. If a change of control transaction is consummated after the vesting of at least 60% of the aggregate Amazon Warrant Shares, then no acceleration of vesting will occur with respect to any of the unvested Amazon Warrant Shares as a result of the transaction. The exercise price and the Amazon Warrant Shares issuable upon exercise of the Amazon Warrant are subject to customary antidilution adjustments.

On August 24, 2022, 1,000,000 of the Amazon Warrant Shares issued pursuant to the 2022 Transaction Agreement vested. The warrant fair value associated with the vested shares of tranche 1 of $20.4 million was capitalized to contract assets based on the grant date fair value and is subsequently amortized ratably as a reduction to revenue based on the Company’s estimate of revenue over the term of the agreement. As of September 30, 2023 the balance of the contract asset related to tranche 1 was $19.5 million which is recorded in contract assets in the Company’s unaudited interim condensed consolidated balance sheet. During the second quarter of 2023, all 1,000,000 of the Amazon Warrant Shares associated with tranche 2 vested. The warrant fair value associated with the vested shares of tranche 2 was $20.4 million and was determined on the grant date of August 24, 2022. As of September 30, 2023 the balance of the contract asset related to tranche 2 was $13.8 million. Tranche 3 will vest over the next $1.0 billion of collections from Amazon and its affiliates. The grant date fair value of tranche 3 will also be amortized ratably as a reduction to revenue based on the Company’s estimate of revenue over the term of the agreement. As of September 30, 2023 the balance of the contract asset related to tranche 3 was $3.8 million. Because the exercise price has yet to be determined, the fair value of tranche 4 will be remeasured at each reporting period end and amortized ratably as a reduction to revenue based on the Company’s estimate of revenue over the term of the agreement. 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, 2023 and 2022 was $1.6 million and $1.8 million, respectively. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Amazon Warrant during the nine months ended September 30, 2023 and 2022 was $4.3 million and $1.8 million, respectively.

The assumptions used to calculate the valuations as of August 24, 2022 and September 30, 2023 are as follows:

| ​ ​ ​ | ​ ​ | ​ Tranches 1-3 August 24, 2022 | ​ ​ | ​ Tranche 4 September 30, 2023 |
| --- | --- | ---: | --- | ---: |
| Risk-free interest rate | ​ | 3.15% | ​ | 4.50% |
| Volatility | ​ | 75.00% | ​ | 70.00% |
| Expected average term | ​ | 7 years | ​ | 4 years |
| Exercise price | ​ | $22.98 | ​ | $6.84 |
| Stock price | ​ | $20.36 | ​ | $7.60 |

### Amazon Transaction Agreement in 2017

On April 4, 2017, the Company and Amazon entered into a Transaction Agreement (the “2017 Amazon Transaction Agreement”), pursuant to which the Company agreed to issue to Amazon.com NV Investment Holdings LLC, a warrant to acquire up to 55,286,696 Amazon Warrant Shares, subject to certain vesting events described below. The Company and Amazon entered into the 2017 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 vesting of the Amazon Warrant Shares was conditioned upon payments made by Amazon or its affiliates (directly or indirectly through third parties) pursuant to the existing commercial agreements. At December 31, 2021, all 55,286,696 of the Amazon Warrant Shares had vested.

The warrant had been exercised with respect to 34,917,912 shares and 24,704,450 shares of the Company’s common stock as of September 30, 2023 and December 31, 2022, respectively.

### Walmart Transaction Agreement

On July 20, 2017, the Company and Walmart entered into a Transaction Agreement (the “Walmart Transaction 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 Warrant 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 was 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 warrant had been exercised with respect to 13,094,217 shares of the Company’s common stock as of September 30, 2023 and December 31, 2022.

At September 30, 2023 and December 31, 2022, 27,643,347 of the Walmart Warrant Shares had vested. As of September 30, 2023, the balance of the contract liability related to the Walmart Warrant was $2.4 million. For the three months ended September 30, 2023, there was a negative provision for common stock warrants recorded as an addition to revenue of $3.1 million as compared to a provision of $6.7 million recorded as a reduction to revenue for the three months ended September 30, 2022. The negative provision for the three months ended September 30, 2023 was caused by a decline in the Company’s stock price, which is one of the inputs in determining the fair value of the warrants. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Walmart Warrant during the nine months ended September 30, 2023 and 2022 was $8.4 million and $10.4 million, respectively. During the three and nine months ended September 30, 2023 and 2022, there were no exercises with respect to the Walmart Warrant.

The assumptions used to calculate the valuations of the final tranche of the Walmart Warrant as of September 30, 2023 are as follows:

| ​ ​ | ​ | ​ September 30, 2023 |
| --- | --- | ---: |
| Risk-free interest rate | ​ | 4.61% |
| Volatility | ​ | 70.00% |
| Expected average term | ​ | 3.5 years |
| Exercise price | ​ | $6.84 |
| Stock price | ​ | $7.60 |

### Operating and Finance Lease Liabilities

As of September 30, 2023, the Company had operating leases, as lessee, primarily associated with sale/leaseback transactions that are partially secured by restricted cash and security deposits (see also Note 19, “Commitments and Contingencies”) 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, the lease contains customary operational covenants such as the requirement that the Company properly maintain the leased assets and carry appropriate insurance. 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, 2023.

### 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, 2023 was $355.2 million, $75.0 million and $280.2 million of which was classified as short-term and long-term, respectively, on the accompanying unaudited interim condensed consolidated balance sheet. The outstanding balance of this obligation at December 31, 2022 was $312.1 million, $55.4 million and $256.6 million of which was classified as short-term and long-term, respectively. The amount is amortized using the effective interest method. Interest expense recorded related to finance obligations for the three months ended September 30, 2023 and 2022 was $10.4 million and $7.4 million, respectively. Interest expense recorded related to finance obligations for the nine months ended September 30, 2023 and 2022 was $29.4 million and $21.1 million, respectively. The fair value of this finance obligation approximated the carrying value as of September 30, 2023 and December 31, 2022.

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, 2023 was $17.2 million, $10.4 million and $6.8 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, 2022 was $17.2 million, $3.5 million and $13.7 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 September 30, 2023 and December 31, 2022.

### Restricted Cash

In connection with certain of the above noted sale/leaseback agreements, cash of $539.4 million and $383.7 million was required to be restricted as security as of September 30, 2023 and December 31, 2022, respectively, which restricted cash will be released over the lease term. As of September 30, 2023 and December 31, 2022, the Company also had certain letters of credit backed by security deposits totaling $426.9 million and $379.6 million, respectively, of which $396.2 million and $354.0 million are security for the above noted sale/leaseback agreements, respectively, and $30.7 million and $25.6 million are customs related letters of credit, respectively.

As of both September 30, 2023 and December 31, 2022, the Company had $76.7 million held in escrow related to the construction of certain hydrogen plants.

The Company also had $1.2 million and $1.2 million of consideration held by our paying agent in connection with each of the Joule and CIS acquisitions, respectively, reported as restricted cash as of September 30, 2023, with a corresponding accrued liability on the Company’s unaudited interim condensed consolidated balance sheet. Additionally, the Company had $6.2 million and $10.8 million in restricted cash as collateral resulting from the Frames acquisition as of September 30, 2023 and December 31, 2022, respectively.

### Guarantee

On May 30, 2023, HyVia entered into a government grant agreement with Bpifrance. As part of the agreement, our wholly-owned subsidiary, Plug Power France, was required to issue a guarantee to Bpifrance in the amount of €20 million through the end of January 2027. Plug Power France is liable to the extent of the guarantee for sums due to Bpifrance from HyVia under the agreement based on the difference between the total amount paid by Bpifrance and the final amount certified by HyVia and Bpifrance. As part of the agreement, there are certain milestones that HyVia is required to meet, and the non-performance of these milestones or termination of this agreement could result in this guarantee being called upon. As of September 30, 2023, no payments related to this guarantee have been made by the Company, and Plug Power France did not record a liability for this guarantee as the likelihood of the guarantee being called upon as of September 30, 2023 is remote.

### Unconditional purchase obligations

The Company has entered into certain off–balance sheet commitments that require the future purchase of goods or services (“unconditional purchase obligations”). The Company’s unconditional purchase obligations primarily consist of supplier arrangements, take or pay contracts and service agreements. For certain vendors, the Company’s unconditional obligation to purchase a minimum quantity of raw materials at an agreed upon price is fixed and determinable; while certain other raw material costs will vary due to product forecasting and future economic conditions.

Future payments under non-cancelable unconditional purchase obligations with a remaining term in excess of one year as of September 30, 2023, are as follows (in thousands):

| ​ | ​ | ​ ​ |
| --- | --- | --- |
| Remainder of 2023 |  | $14,725 |
| 2024 | ​ | ​ 44,231 |
| 2025 | ​ | ​ 8,023 |
| 2026 | ​ | ​ 8,023 |
| 2027 | ​ | ​ 2,638 |
| 2028 and thereafter | ​ | ​ — |
| Total | ​ | $77,640 |

### Investments

Our investment portfolio, including cash and cash equivalents, totaled $567.4 million at September 30, 2023. Purchases of fixed maturity securities are classified as available-for-sale at the time of purchase based on individual security.

The composition of our investment portfolio, including cash and cash equivalents, as of September 30, 2023, is shown in the following table (in thousands):

| ​ ​ ​ Fixed maturity securities - available-for-sale | ​ ​ ​ | ​ ​ Carrying Amount ​ ​ | ​ ​ ​ | ​ Percentage of Portfolio ​ |
| --- | --- | ---: | --- | ---: |
| U.S. Treasuries | ​ | $260,657 | ​ | 45.9% |
| Corporate bonds | ​ | ​ 128,111 | ​ | 22.6% |
| **Total fixed maturity securities - available-for-sale** | **​** | $388,768 | ​ | 68.5% |
| Equity securities | ​ | ​ 67,823 | ​ | 12.0% |
| Cash and cash equivalents | ​ | ​ 110,809 | ​ | 19.5% |
| **Total investments, including cash and cash equivalents** | **​** | $567,400 | ​ | 100.0% |

### Extended Maintenance Contracts

On a quarterly basis, we evaluate any potential losses related to our extended maintenance contracts for fuel cell systems, related infrastructure and equipment that have been sold. The following table shows the roll forward of balances in the accrual for loss contracts, including changes due to the provision for loss accrual, releases to service cost of sales, releases due to the provision for warrants, and foreign currency translation adjustment (in thousands):

| ​ ​ ​ | ​ ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ ​ | ​ ​ Year Ended December 31, 2022 |
| --- | --- | --- | --- | --- |
| Beginning balance | ​ | $81,066 | ​ | $89,773 |
| Provision for loss accrual | ​ | ​ 55,194 | ​ | ​ 23,295 |
| Releases to service cost of sales | ​ | **​** (19,908) | ​ | ​ (35,446) |
| Increase to loss accrual related to customer warrants | ​ | **​** 607 | ​ | ​ 3,506 |
| Foreign currency translation adjustment | ​ | **​** (59) | ​ | ​ (62) |
| Ending balance | ​ | $116,900 | ​ | $81,066 |

The Company increased its provision for loss accrual to $55.2 million for the nine months ended September 30, 2023 due to continued cost and inflationary increases of labor, parts and related overhead coupled with the timing of the remaining period of service required. As a result, the Company increased its estimated projected costs to service fuel cell systems and related infrastructure.

### Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of and during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, valuation of long-lived assets, accrual for service loss contracts and common stock warrants. 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.

There have been no changes in our critical accounting estimates from those reported in our 2022 Form 10-K.

### Valuation of Long-Lived Assets

The Company completes its annual impairment assessment of goodwill on October 31 of each fiscal year. The Company has concluded that it has one reporting unit. Management continues to closely monitor the results of the Company’s business, the performance of the Company’s common stock, current liquidity and key assumptions used in its fair value estimate, in addition to operational initiatives and macroeconomic conditions, which may impact the results of the Company’s goodwill impairment assessment. The projected performance of the reporting unit, including the need for additional financing to fund the operations of the Company’s business for the next twelve months and the potential for future developments in the global economic environment, introduces a heightened risk for impairment in the Company’s goodwill, intangible assets and property, plant and equipment. If the Company cannot improve its current operating levels and meet its operating targets to achieve the growth and margin assumptions and/or if the Company is not able to obtain the additional financing required to fund its business for the next twelve months, some or all of the recorded goodwill, intangible assets and property, plant and equipment as of September 30, 2023 could be subject to impairment. Such potential impairment of goodwill, intangible assets and property, plant and equipment could be material to the Company’s condensed consolidated financial statements.

### Recent Accounting Pronouncements

#### Recently Adopted Accounting Guidance

Other than the adoption of the accounting guidance mentioned in our 2022 Form 10-K, there have been no other significant changes in our reported financial position or results of operations and cash flows resulting from the adoption of new accounting pronouncements.

#### Recent Accounting Guidance Not Yet Effective

All issued but not yet effective accounting and reporting standards as of September 30, 2023 are either not applicable to the Company or are not expected to have a material impact on the Company.

## Market risk

As filed, 191 characters.

There has been no material change from the information provided in the Company’s 2022 Form 10-K under the section titled “Item 7A: Quantitative and Qualitative Disclosures About Market Risk.”

## Controls and procedures

As filed, 1,608 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act, are recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial 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 September 30, 2023. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2023, our disclosure controls and procedures were not effective because of material weaknesses in internal control over financial reporting described in Part II, Item 9A “Controls and Procedures” of our 2022 Form 10-K. The material weaknesses have not been remediated as of September 30, 2023.

### Changes in Internal Control over Financial Reporting

There were no changes during the quarter ended September 30, 2023 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 12,159 characters.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that could materially affect the Company’s business, financial condition or future results discussed in the Company’s 2022 Form 10-K in Part I, Item 1A. “Risk Factors” and the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023 in Part II, Item 1A “Risk Factors.” The risks described in the 2022 Form 10-K and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023 are not the only risks that could affect the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and/or operating results in the future. Other than the following, there have been no material changes to the risk factors identified in the 2022 Form 10-K and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023.

***Economic turmoil and political instability, including a potential U.S. government shutdown, could have a material adverse effect on our business, financial condition and results of operations.***

Current economic turmoil and political instability in the geographic markets we serve, such as tight credit markets, inflation, low consumer confidence, limited capital spending, and changes in government priorities, could have a material adverse effect on our business, financial condition and results of operations. In addition, if there is a government shutdown in the United States, especially a prolonged shutdown, it could have a material adverse effect on our business, financial condition and results of operations. For example, the Inflation Reduction Act (“IRA”), which contains numerous credits and tax incentives that may be beneficial to us, was adopted in August 2022, but interagency guidance processes are still ongoing. A prolonged U.S. government shutdown could cause uncertainty or delay in such processes, which could impact the timing of any benefits we anticipate receiving under the IRA. In addition, a government shutdown may impact the availability and administration of government funding, which may impact our ability to secure a loan with the U.S. Department of Energy, or our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

***Our products and performance depend largely on the availability of hydrogen gas and recent insufficient supplies of hydrogen have negatively affected, and any continued insufficient supply of hydrogen could, in the future, negatively affect, our sales and deployment of our products and services.***

Our products and services depend largely on the availability of hydrogen gas. Although we are in the process of building multiple hydrogen production plants, our business could be materially and adversely affected by an inadequate availability of hydrogen or our failure to secure hydrogen supply at competitive prices. There is no assurance that our hydrogen production will scale at the rate we anticipate or that we will complete hydrogen production plants on schedule. Additionally, we are dependent upon hydrogen suppliers to provide us with hydrogen gas for the commercialization of our products and services. If these fuels are not readily available or if their prices are such that energy produced by our products costs more than energy provided by other sources, then our products could be less attractive to potential users and our products’ value proposition could be negatively affected. For example, we have experienced supply chain issues relating to the availability of hydrogen, including but not limited to suppliers utilizing force majeure provisions under existing contracts, which has led to volume constraints, delayed our deployments and service margin improvements, and negatively impacted the amount of hydrogen we have been able to provide under certain of our supply and other agreements. If hydrogen suppliers elect not to participate in the material handling market or if supply chain issues relating to the availability of hydrogen continue, insufficient supplies of hydrogen may result, which could materially and adversely affect our sales and the deployment of our products and services.

***Our ability to source parts and raw materials from our suppliers could be disrupted or delayed in our supply chain which could adversely affect our results of operations.***

Our operations require significant amounts of necessary parts and raw materials. We deploy a continuous, companywide process to source our parts and raw materials from fewer suppliers, and to obtain parts from suppliers in low-cost countries where possible. If we are unable to source these parts or raw materials, our operations may be disrupted, or we could experience a delay or halt in certain of our manufacturing operations. We believe that our supply management and production practices are based on an appropriate balancing of the foreseeable risks and the costs of alternative practices. Nonetheless, reduced availability or interruption in supplies, whether resulting from more stringent regulatory requirements, supplier financial condition, increases in duties and tariff costs, disruptions in transportation, an outbreak of a severe public health pandemic, such as the COVID-19 pandemic, including resurgences and the emergence of new variants, severe weather, or the occurrence or threat of wars or other conflicts, could have an adverse effect on our financial condition, results of operations and cash flows. For example, we have experienced supply chain issues, including but not limited to suppliers utilizing force majeure provisions under existing contracts. We have experienced and may continue to experience issues relating to the availability of hydrogen, which has led to volume constraints, delayed our deployments and service margin improvements, and negatively impacted the amount of hydrogen we have been able to provide under certain of our supply and other agreements. Furthermore, ongoing global economic trends have caused significant challenges for global supply chains resulting in inflationary cost pressures, component shortages, and transportation delays, which have impacted our business. We expect that these challenges could continue to have an impact on our businesses for the foreseeable future.

***We have incurred losses and anticipate continuing to incur losses, and there is a substantial doubt that we will have sufficient funds to fund our operations through the next 12 months from the date of this Quarterly Report on Form 10-Q.***

We have not achieved operating profitability in any quarter since our formation and we will continue to incur net losses until we can produce sufficient revenue to cover our costs. As of September 30, 2023, we had an accumulated deficit of $3.8 billion. We have continued to experience negative cash flows from operations and net losses. Our net losses attributable to common stockholders were $726.4 million for the nine months ended September 30, 2023, and our net losses attributable to common stockholders were $724.0 million, $460.0 million and $596.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. The net cash used in operating activities for the nine months ended September 30, 2023 was $863.9 million and the net cash used in operating activities for the year ended December 31, 2022 and 2021 was $828.6 million and $358.2 million, respectively. We expect to generate operating losses for the foreseeable future as we continue to devote significant resources to expand our current production and manufacturing capacity, construct hydrogen plants and fund the acquisition of additional inventory to deliver our end-products and related services.

In light of our projected capital expenditure and operating requirements under our current business plan, we have determined that there is a substantial doubt that we will have sufficient capital to fund our operations through the next twelve months from the date of issuance of this Quarterly Report on Form 10-Q. Our ability to continue as a going concern is dependent on our ability to raise additional capital. To alleviate the conditions and events that raise substantial doubt about our ability to continue as a going concern, management is currently evaluating several different options to enhance our liquidity position, including the sale of securities, incurrence of debt or other financing alternatives. Although we intend to diligently explore and pursue any number of financing alternatives, we do not know what forms of financing, if any, will be available to us, and the determination that there is substantial doubt about our ability to continue as a going concern could impair our ability to raise financing. If financing is not available on acceptable terms, we may not be able to execute on our current business plan, which could materially adversely affect our business, financial condition and results of operations. Moreover, if we raise additional capital through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders.

We anticipate that we will continue to incur losses until we can produce and sell our products and services on a large-scale and cost-effective basis. We cannot guarantee when we will operate profitably, if ever. In order to achieve profitability, we must successfully execute our planned path to profitability in the early adoption markets on which we are focused. The profitability of our products depends largely on material and manufacturing costs and the market price of hydrogen. The hydrogen infrastructure that is needed to support our growth readiness and cost efficiency must be available and cost efficient. We must continue to shorten the cycles in our product roadmap with respect to improvement in product reliability and performance that our customers expect. We must execute on successful introduction of our products into the market. We must accurately evaluate our markets for, and react to, competitive threats in both other technologies (such as advanced batteries) and our technology field. Finally, we must continue to lower our products’ build costs and lifetime service costs. If we are unable to successfully take these steps, we may never operate profitably, and, even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future.

***Our estimated future revenue may not be indicative of actual future revenue or profitability.***

Our estimated future revenue represents, as of a point in time, expected future revenue from work not yet completed under executed contracts. As of September 30, 2023, our estimated future revenue was approximately $1.2 billion. While we anticipate a significant amount of our estimated future revenue will be recognized as revenue over one to ten years, our estimated future revenue is subject to order cancellations and delays. We or our customers may attempt to cancel or modify orders in estimated future revenue, and we may not be able to convert all of our estimated future revenue into revenue and cash flows. In addition, if production of products are delayed resulting from parts availability and other constraints stemming from the supply chain disruptions, revenue recognition can occur over longer periods of time, and products may remain in estimated future revenue for extended periods of time. If we receive relatively large orders in any given quarter, fluctuations in quarterly levels of estimated future revenue can result because the estimated future revenue may reach levels which may not be sustained in subsequent quarters. Our estimated future revenue should not be relied on as a measure of actual future revenue or profitability.

Filed Nov 9, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-018601. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.