Nature of Business, Liquidity and Basis of Presentation

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business, Liquidity and Basis of Presentation

Nature of Business, Liquidity and Basis of Presentation

Nature of Business

For information on the nature of our business, see Part II, Item 8, Note 1 - Nature of Business, Liquidity and Basis of Presentation, Nature of Business section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Liquidity

We have generally incurred operating losses and negative cash flows from operations since our inception. With the series of new debt offerings, debt extensions and conversions to equity that we completed during 2022 and the first half of 2023, we had $839.2 million of total outstanding recourse debt as of June 30, 2023, which was classified as long-term debt.

On March 20, 2023, we entered into an Amendment (the “Amended SPA”) to the Securities Purchase Agreement with SK ecoplant, dated October 23, 2021 (the “SPA”), and the Investor Agreement, dated December 29, 2021, pursuant to which we issued and sold to SK ecoplant 13,491,701 shares of Series B redeemable convertible preferred stock (the “Series B RCPS”) for cash proceeds of $311.0 million. For additional information, please see Part I, Item 1, Note 15 - SK ecoplant Strategic Investment.

On March 20, 2023, in connection with the Amended SPA we also entered into a Shareholders’ Loan Agreement with SK ecoplant (the “Loan Agreement”), pursuant to which we may draw down on a loan from SK ecoplant with a maximum principal amount of $311.0 million, should SK ecoplant send a redemption notice to us under the Amended SPA or otherwise reduce any portion of its current holdings of our Class A common stock. The Loan Agreement has a maturity of five years and bears an interest rate of 4.6%. The proceeds of the loan may be used by us for working capital and general corporate purpose needs.

On May 16, 2023, we issued 3% Green Convertible Senior Notes (the “3% Green Notes”) in an aggregate principal amount of $632.5 million due June 2028, unless earlier repurchased, redeemed or converted, less the initial purchasers’ discount of $15.8 million and other issuance costs of $3.8 million, resulting in net proceeds of $612.9 million. On June 1, 2023, we used approximately $60.9 million of the net proceeds from this offering to redeem all of the outstanding principal amount of our 10.25% Senior Secured Notes due March 2027. The redemption price equaled 104% of the principal amount redeemed plus accrued and unpaid interest. For additional information, please see Part I, Item 1, Note 7 - Outstanding Loans and Security Agreements.

Our future capital requirements will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, the rate of growth in the volume of system builds and the need for additional manufacturing space, the expansion of sales and marketing activities both in domestic and international markets, market acceptance of our product, our ability to secure financing for customer use of our Energy Servers, the timing of installations, and overall economic conditions, including the inflationary pressure in the US on our ongoing and future operations. The rising interest rate environment in the US has and will continue to adversely impact the cost of new capital deployment.

In the opinion of management, the combination of our existing cash and cash equivalents and expected timing of operating cash flows is expected to be sufficient to meet our operational and capital cash flow requirements and other cash flow needs for the next 12 months from the date of issuance of this Quarterly Report on Form 10-Q.

Inflation Reduction Act of 2022 – New and Expanded Production and Tax Credits for Manufacturers and Projects to Support Clean Energy

For information on the Inflation Reduction Act of 2022 (the “IRA”) signed into law on August 16, 2022, and its impact on our business, see Part II, Item 8, Note 1 - Nature of Business, Liquidity and Basis of Presentation, Inflation Reduction Act of 2022 section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Basis of Presentation

We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), including all disclosures required by generally accepted accounting principles as applied in the United States (“U.S. GAAP”). Certain prior period amounts have been reclassified to conform to the current period presentation.

Principles of Consolidation

For information on the principles of consolidation, see Part II, Item 8, Note 1 - Nature of Business, Liquidity and Basis of Presentation, Principles of Consolidation section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Business Combinations

For information on the business combinations, see Part II, Item 8, Note 1 - Nature of Business, Liquidity and Basis of Presentation, Business Combinations section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Use of Estimates

For information on the use of accounting estimates, see Part II, Item 8, Note 1 - Nature of Business, Liquidity and Basis of Presentation, Use of Estimates section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Concentration of Risk

Geographic Risk - The majority of our revenue for the three and six months ended June 30, 2023 was attributable to operations in the United States and, for the three and six months ended June 30, 2022, to operations in the Republic of Korea. A major portion of our long-lived assets is attributable to operations in the United States for all periods presented. In addition to shipments in the US and the Republic of Korea, we also ship our Energy Servers to other countries, primarily, Japan and India (the markets of the Republic of Korea, Japan and India, collectively referred to as the “Asia Pacific region”). In the three and six months ended June 30, 2023, total revenue related to shipments to the Asia Pacific region was 27% and 17%, respectively. In the three and six months ended June 30, 2022, total revenue related to shipments to the Asia Pacific region was 62% and 63%, respectively.

Credit Risk - At June 30, 2023, two customers accounted for approximately 65% and 19% of accounts receivable. At December 31, 2022, one customer represented approximately 75% of accounts receivable. To date, we have not experienced any credit losses.

Customer Risk - During the three months ended June 30, 2023, revenue from three customers accounted for approximately 39%, 22%, and 12% of our total revenue. During the six months ended June 30, 2023, three customers represented approximately 40%, 13%, and 12% of our total revenue.

During the three months ended June 30, 2022, two customers represented approximately 57% and 16% of our total revenue. During the six months ended June 30, 2022, two customers represented approximately 45% and 15% of our total revenue.