Nature of Business, Liquidity, Basis of Presentation

12 Months Ended

Dec. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business, Liquidity, Basis of Presentation

Nature of Business, Liquidity and Basis of Presentation

Nature of Business

We design, manufacture, sell and, in certain cases, install solid-oxide fuel cell systems ("Energy Servers") for on-site power generation. Our Energy Servers utilize an innovative fuel cell technology and provide efficient energy generation with reduced operating costs and lower greenhouse gas emissions as compared to conventional fossil fuel generation. By generating power where it is consumed, our energy producing systems offer increased electrical reliability and improved energy security while providing a path to energy independence.

Liquidity

We have generally incurred operating losses and negative cash flows from operations since our inception. As of December 31, 2019, we had $401.4 million of total outstanding recourse debt, of which $273.4 million of 6% Convertible Promissory Notes ("6% Convertible Notes") were to mature on in December 2020. With the series of new debt offerings, debt extensions and conversions to equity that we completed during 2020, we had $168.0 million of total outstanding recourse debt as of December 31, 2020, all of which is classified as long-term debt. There is also no recourse debt repayment required in the next 12 months, and scheduled debt repayments will commence in June 2022.

The impact of the COVID-19 pandemic on our ability to execute our business strategy and on our financial position and results of operations remains uncertain. Our future cash flow requirements may vary materially from those currently planned and 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, the expansion of sales and marketing activities, market acceptance of our product, our ability to secure financing for customer use, the timing of installations, and overall economic conditions including the impact of COVID-19 on our ongoing and future operations.

In the opinion of management, the combination of our existing cash and cash equivalents and 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 Annual Report on Form 10-K.

Correction of Previously Issued Consolidated Financial Statements

In preparation of the condensed consolidated financial statements for the three months ended March 31, 2020, errors in our Condensed Consolidated Statements of Comprehensive Loss were discovered. In the Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019 and 2018, Comprehensive Loss as previously reported was understated by $5.8 million and overstated by $1.8 million, respectively. In addition, the reconciliation of Comprehensive Loss to Comprehensive Loss Attributable to Class A and Class B Stockholders was erroneously omitted. Management evaluated the impact of these errors to the previously issued financial statements and concluded the impacts were not material. The Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019 and 2018 have been revised to correct the errors described above.

Basis of Presentation

We have prepared the consolidated financial statements included herein pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), and as permitted by those rules, including all disclosures required by generally accepted accounting principles as applied in the United States (“U.S. GAAP”). All intercompany transactions and balances have been eliminated upon consolidation.

Principles of Consolidation

These consolidated financial statements reflect our accounts and operations and those of our subsidiaries in which we have a controlling financial interest. We use a qualitative approach in assessing the consolidation requirement for each of our variable interest entities ("VIEs"), which we refer to as a tax equity partnership (each such VIE, also referred to as our power purchase agreement entities ("PPA Entities")). This approach focuses on determining whether we have the power to direct those activities of the PPA Entities that most significantly affect their economic performance and whether we have the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the PPA Entities. For all periods presented,

we have determined that we are the primary beneficiary in all of our operational PPA Entities, as discussed in Note 13 - Portfolio Financings. We evaluate our relationships with the PPA Entities on an ongoing basis to ensure that we continue to be the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

We do not consolidate Third Party PPAs as we have determined that, although these entities are variable interest entities, we are not the primary beneficiary as we do not have the power to direct those activities of the Third Party PPAs that most significantly affect their economic performance and we do not have the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the Third Party PPAs.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. The most significant estimates include the determination of the stand-alone selling price, including material rights estimates, inventory valuation, specifically excess and obsolescence provisions for obsolete or unsellable inventory and, in relation to property, plant and equipment (specifically Energy Servers), assumptions relating to economic useful lives and impairment assessments.

Other accounting estimates include variable consideration relating to product performance guaranties, assumptions to compute the fair value of debt financings, lease and non-lease components and related financing obligations such as incremental borrowing rates, estimated output, efficiency and residual value of the Energy Servers, product performance warranties and guaranties and extended maintenance, derivative valuations, estimates for recapture of the U.S. investment tax credit and similar federal tax benefits, estimates relating to contractual indemnities provisions, estimates for income taxes and deferred tax asset valuation allowances, and stock-based compensation costs. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including sales, expenses, our allowance for doubtful accounts, stock-based compensation, the carrying value of our long-lived assets, inventory, financial assets, and valuation allowances for tax assets, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning the COVID-19 pandemic and the actions taken to contain it or treat it, as well as the economic impact on local, regional, national and international customers, suppliers and markets. We have made estimates of the impact of COVID-19 within our consolidated financial statements and there may be changes to those estimates in future periods as new information becomes available. Actual results could differ materially from these estimates under different assumptions and conditions.

Concentration of Risk

Geographic Risk - The majority of our revenue and long-lived assets are attributable to operations in the United States for all periods presented. Additionally, we sell our Energy Servers in Japan, India, and the Republic of Korea (collectively, the "Asia Pacific region"). In the year ended December 31, 2020, 2019 and 2018, total revenue in the Asia Pacific region was 35%, 23% and 14%, respectively, of our total revenue.

Credit Risk - At December 31, 2020, one customer, SK Engineering and Construction Co., Ltd. ("SK E&C"), accounted for approximately 56% of accounts receivable. At December 31, 2019, two customers, Costco Wholesale Corporation and The Kraft Group LLC, accounted for approximately 19% and 17% of accounts receivable, respectively. To date, we have not experienced any credit losses.

Customer Risk - In the year ended December 31, 2020, revenue from two customers, SK E&C and Duke Energy Corporation, accounted for approximately 34% and 28%, respectively, of our total revenue. In the year ended December 31, 2019, revenue from two customers, The Southern Company and SK E&C, accounted for approximately 34% and 23%, respectively, of our total revenue. In the year ended December 31, 2018, revenue from customer The Southern Company accounted for approximately 51% of our total revenue. Duke Energy and The Southern Company each indirectly own Operating Companies which are party to a portfolio of power purchase agreements (each, a “PPA”). Each Operating Company purchased the Energy Servers contemplated by each PPA from us. The sale of an Operating Company with a portfolio of PPAs in which we have no equity interest is called a “Third-Party PPA.”