What changed in Plug Power's 10-K for the fiscal year ended December 31, 2024

No corresponding language in the FY2023 10-K.

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[removed] Although we plan to complete the remediation process with respect to the material weaknesses in our internal control over financial reporting as of December 31, 2023 as quickly as possible, we cannot at this time estimate how long it will take, and our remediation measures may not prove to be successful in remediating these material weaknesses. If our remedial measures are insufficient to address the material weaknesses, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we may be required to restate our financial results, which can subject us to fines, penalties or judgments, which can harm our reputation or otherwise cause a decline in investor confidence. In addition, if we are unable to successfully remediate our material weaknesses by June 30, 2024, we will have to pay the SEC an additional civil monetary penalty in the amount of $5.0 million in connection with the SEC settlement.

[removed] Any decline in business with our significant customers could have an adverse impact on our business, financial condition, and results of operations. Our future success is dependent upon the continued purchases of our products by a small number of customers. If we are unable to broaden our customer base and expand relationships with potential customers, our business will continue to be impacted by demand fluctuations due to our dependence on a small number of customers. Demand fluctuations can have a negative impact on our revenues, business, financial condition, results of operations and cash flows. Our dependence on a small number of major customers exposes us to additional risks. A slowdown, delay or reduction in a customer's orders could result in excess inventories or unexpected quarterly fluctuations in our operating results and liquidity. Each of our major customers has significant purchasing leverage over us to require changes in sales terms including pricing, payment terms and product delivery schedules, which could adversely affect our business, financial condition, results of operations and cash flows.

The Company has determined that the assets deployed for certain PPA arrangements, as well as certain assets related to the delivery of fuel to customers, are not recoverable based on the undiscounted estimated future cash flows of the asset group, and an expense of $4.8 million was recorded to impairment on the income statement. However, the estimated fair value of the assets in these asset groups equal or exceed the carrying amount of the assets or otherwise limit the amount of impairment that would have been recognized. The Company has identified the primary source of the losses for certain PPA arrangements to be the maintenance components of the PPA arrangements and the impact of customer [removed] warrant non-cash provisions. As the PPA arrangements are considered to be executory contracts and there is no specific accounting guidance that permits loss recognition for these revenue contracts, the Company has not recognized a provision for the expected future losses under these revenue arrangements. The Company expects that it will recognize future losses for these arrangements as it continues its efforts to reduce costs of delivering the maintenance component of these arrangements. The Company has estimated total future revenues and costs for these types of arrangements based on existing contracts and leverage of the related assets. For the future estimates, the Company used service cost estimates for extended maintenance contracts and customer warrant provisions at rates consistent with experience to date. The terms for the underlying estimates vary but the average residual term on the existing contracts is four years.

[removed] For assets related to our PPA agreements, we consider all underlying cash inflows related to our contract revenues and cash outflows relating to the costs incurred to service the PPAs. Our cash flow estimates used in the recoverability test, are based upon, among other things, historical results adjusted to reflect our best estimate of future cash flows and operating performance. Development of future cash flows also requires us to make assumptions and to apply judgment, including timing of future expected cash flows, future cost savings initiatives, and determining recovery values. Changes to our key assumptions related to future performance and other economic and market factors could adversely affect the outcome of our recoverability tests and cause more asset groups to be tested for impairment.

[removed] During the fourth quarter of 2023, there was a contract asset impairment charge of $2.4 million related to our assessment of recoverability of a customer contract. There was no such impairment charge for the year ended December 31, 2022.

[removed] In addition, we will have to raise additional [removed] capital to expand our business. There can be no assurance that we will have access to the capital we need on favorable terms when required or at all. In periods when the capital and credit markets experience significant volatility, the amounts, sources and cost of capital available to us may be adversely affected. For example, we are party to certain agreements with collateral requirements and capital or margin calls, and we cannot predict when and what amounts may be called. We primarily use external financing to provide working capital needed to operate and grow our business. Sufficient sources of external financing may not be available to us on cost effective terms. If we cannot raise additional funds when we need them, our financial condition and business could be materially adversely affected.

Our products and services depend largely on the availability of hydrogen. 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. We commenced producing liquid hydrogen at our Georgia facility in January 2024. There is no assurance that our hydrogen production will scale at the rate we anticipate or that we will complete additional hydrogen production plants on schedule or at all. Additionally, we are dependent upon hydrogen suppliers to provide us with hydrogen for the commercialization of our products and services. 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, delay in 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, [removed] or if supply chain issues relating to the availability of hydrogen continue, insufficient supplies of hydrogen may result. If hydrogen is not readily available or if hydrogen 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 which could materially and adversely affect our sales and the deployment of our [removed] products and services.

The [removed] Company's working capital was $822.2 million at December 31, 2023, which included unrestricted cash and cash equivalents of $135.0 million and restricted cash [removed] of $1.0 billion. The Company plans to invest a portion of its available cash to expand its current production and manufacturing capacity, construct hydrogen plants, and invest in capital projects. At the time of the issuance of the Company's 2023 third quarter Form 10-Q, conditions existed that raised substantial doubt about the Company's ability to continue as a going concern. As disclosed in Note 24, "Subsequent Events", on January 17, 2024, the Company entered into the At Market Issuance Sales Agreement (the "Original ATM Agreement") with B. Riley [removed] Securities, Inc. ("B. Riley"), pursuant to which the Company may, from time to time, offer and sell through or to B. Riley, as sales agent or principal, shares of the Company's common stock, having an aggregate offering price of up to $1.0 billion. As of February 23, 2024, the Company had offered and sold 77,417,069 shares of common stock having an aggregate offering price of approximately $302.1 million under the [removed] Original ATM Agreement. On February 23, 2024, the Company and B. Riley entered into Amendment No. 1 to the Original ATM Agreement (the "Amendment" and, together with the Original ATM Agreement, the "ATM Agreement") to increase the aggregate offering price of shares of the Company's common stock available for future issuance under the [removed] Original ATM Agreement to $1.0 billion. Under the ATM Agreement, for a period of [removed] 18 months, the Company has the right at its sole discretion to direct B. Riley to act on a principal basis and purchase directly from the Company up to $11.0 million of shares of its common stock on any trading day (the "Maximum Commitment Advance Purchase Amount") and up to $55.0 million of shares in any calendar week (the "Maximum Commitment Advance Purchase Amount Cap"). On and after June 1, 2024, so long as the Company's market capitalization is no less than $1.0 billion, the Maximum Commitment Advance Purchase Amount will remain $11.0 million and the Maximum Commitment Advance Purchase Amount Cap will remain $55.0 million. If the Company's market capitalization is less than $1.0 billion on and after June 1, 2024, the Maximum Commitment Advance Purchase Amount will be decreased to $10.0 million and the Maximum Commitment Advance Purchase Amount Cap will be decreased to $30.0 million. The Company believes that its working capital and cash position, together with its right to direct B. Riley to purchase shares directly from the Company under the ATM Agreement, will be sufficient to fund its on-going operations for a period of at least 12 months subsequent to the issuance of the accompanying consolidated financial statements and, as a result, substantial doubt about the Company's ability to continue as a going concern no longer exists.

[removed] If the estimated undiscounted future net cash flows for a [removed] given asset group are less than the carrying amount of the related asset group, an impairment loss is determined by comparing the estimated fair value with the carrying amount of the asset group. The impairment loss is then allocated to the assets in the asset group based on the asset's relative carrying amounts. However, assets are not impaired below their then estimated fair values. Fair value is generally determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party independent appraisals, as well as year-over-year trends in pricing of our new equipment and overall evaluation of our industry and market, as considered necessary. The Company considers these indicators with certain of its own internal indices and metrics in determining fair value in light of the nascent state of the Company's market and industry. The estimate of fair value represents our best estimates of these factors and is subject to variability. Changes to our key assumptions related to future performance and other economic and market factors could adversely affect our impairment evaluation.

[removed] Based on the results of our annual review, the Company recognized an impairment charge of $249.5 million for the year ended December 31, 2023. The [removed] Company's stock price declined below book value during the fourth quarter of [removed] 2023. Management believes the decline of the stock price was due primarily to missed projections and reduced liquidity. The Company's analyses did not indicate impairment of goodwill for the years ended December 31, [removed] 2022 and 2021. See Note 10, "Intangible Assets and Goodwill", for further information.

Revenue - sales of equipment, related infrastructure and other. Revenue from sales of equipment, related infrastructure and other represents sales of our GenDrive units, GenSure stationary backup power units, cryogenic stationary and on road storage, hydrogen liquefaction systems, electrolyzers and hydrogen fueling infrastructure referred to at the site level as hydrogen installations. Revenue from sales of equipment, related infrastructure and other for the year ended December 31, [removed] 2023 increased $152.5 million, or [removed] 27.3%, to $711.4 million from [removed] $558.9 million for the year ended December 31, [removed] 2022 primarily due to [removed] increases in revenue related to hydrogen site installations, liquefiers, cryogenic equipment, and [removed] electrolyzer stacks and systems. The [removed] increase in the revenue related to cryogenic storage equipment and liquefiers of [removed] $143.9 million was primarily due to [removed] executed agreements related to liquefier sales and $47.7 million resulting from the acquisition of CIS for which there was $3.7 million revenue recognized for the year ended December 31, [removed] 2022. Revenue related to [removed] electrolyzers increased $54.1 million, primarily due to [removed] 133 one megawatt equivalent units sold for the year ended December 31, [removed] 2023 compared to [removed] 13 one megawatt equivalent units sold [removed] for the year ended December 31, [removed] 2022. The increase in hydrogen infrastructure revenue of [removed] $42.1 million was due to [removed] 52 hydrogen site installations for the year ended December 31, [removed] 2023 compared to [removed] 44 for the year ended December 31, [removed] 2022. Revenue related to stationary increased $9.7 million, primarily due to an increase in the volume of units sold. Partially offsetting these increases was a decrease in revenue related to fuel cell systems of $36.2 million due to a decrease in the volume of GenDrive units sold, with 6,392 units sold for the year ended December 31, 2023 compared to 8,274 units sold for the year ended December 31, 2022. Additionally, there was a decrease of $61.1 million related to the sales of engineered oil and gas equipment from the Frames acquisition, for which sales are not expected to continue beyond current commitments.

● | Convertible senior notes totaling [removed] $195.3 million at December 31, 2023, none of which is due within the next twelve months. See Note [removed] 15, "Convertible Senior Notes", for more details.

[removed] In March 2018, the Company [removed] issued $100.0 million in aggregate principal amount of the [removed] 5.5% Convertible Senior [removed] Notes due on March 15, 2023 (the "5.5% Convertible Senior [removed] Notes"), in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

On May 30, 2023, our joint venture, 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 [removed] €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 nonperformance of these milestones or termination of this agreement could result in this guarantee being called upon. As of December 31, [removed] 2023, no payments related to this guarantee have been [removed] made by the Company and Plug Power France [removed] did not record a liability [removed] for this guarantee [removed] as the likelihood of the guarantee being called [removed] upon is remote as of December 31, 2023.

The Company's working capital was $822.2 million at December 31, 2023, which included unrestricted cash and cash equivalents of $135.0 million and restricted cash of $1.0 billion. The Company plans to invest a portion of its available cash to expand its current production and manufacturing capacity, construct hydrogen plants, and invest in capital projects. At the time of the issuance of the Company's 2023 third quarter Form 10-Q, conditions existed that raised substantial doubt about the Company's ability to continue as a going concern. As disclosed in Note 24, "Subsequent Events", on January 17, 2024, the Company entered into the At Market Issuance Sales Agreement (the "Original ATM Agreement") with B. Riley Securities, Inc. ("B. Riley"), pursuant to which the Company may, from time to time, offer and sell through or to B. Riley, as sales agent or principal, shares of the Company's common stock, having an aggregate offering price of up to $1.0 billion. As of February 23, 2024, the Company had offered and sold 77,417,069 shares of common stock having an aggregate offering price of approximately $302.1 million under the Original ATM Agreement. On February 23, 2024, the Company and B. Riley entered into Amendment No. 1 to the Original ATM Agreement (the "Amendment" and, together with the Original ATM Agreement, the "ATM Agreement") to increase the aggregate offering price of shares of the Company's common stock available for future issuance under the Original ATM Agreement to $1.0 billion. Under the ATM Agreement, for a period of 18 months, the Company has the right at its sole discretion to direct B. [removed] Riley to act on a principal basis and purchase directly from the Company up to [removed] $11.0 million of shares of its common stock on any trading day (the "Maximum Commitment Advance Purchase Amount") and up to [removed] $55.0 million of shares [removed] in any calendar week (the "Maximum Commitment Advance Purchase Amount Cap"). On and after June 1, 2024, so long as the Company's market capitalization is [removed] no less than $1.0 [removed] billion, the Maximum Commitment Advance Purchase Amount will remain $11.0 million and the Maximum Commitment Advance Purchase Amount Cap will remain $55.0 million. If the Company's market capitalization is less than $1.0 [removed] billion on and after June 1, 2024, the [removed] Maximum Commitment Advance Purchase Amount will be decreased to $10.0 million and the Maximum Commitment Advance Purchase Amount Cap will be decreased to $30.0 million. The Company believes that its working capital and cash position, together with its right to direct B. Riley to purchase shares directly from the Company under the ATM Agreement, will be sufficient to fund its on-going operations for a period of at least 12 months subsequent to the issuance of the accompanying consolidated financial statements and, as a result, substantial doubt about the Company's ability to continue as a going concern no longer exists.

● | Capital commitments totaling [removed] $170.0 million related to the Company's equity method [removed] investments as of December 31, 2023, of which $152.7 million is due within the next 12 months. See Note 4, "Investments", for more details.

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.

Revenue - services performed on fuel cell systems and related 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 services performed on fuel cell systems and related infrastructure for the year ended December 31, 2023 increased $3.8 million, or 10.8%, to $39.1 million from $35.3 million for the year ended December 31, 2022. The increase in revenue from services performed on fuel cell systems and related infrastructure in 2023 was related to our expanding customer base and increase in the number of GenDrive units and infrastructure systems in service. The average number of GenDrive units under maintenance contracts during the year ended December 31, 2023 was 20,336, [removed] compared to 19,515 in 2022. Partially offsetting this increase in revenue was an increase in the provision for common stock warrants recorded as a reduction of revenue, which increased to [removed] $1.2 million for the year ended December 31, [removed] 2023 compared to [removed] $1.0 million for the year ended December 31, [removed] 2022.

On a quarterly basis, we evaluate any potential losses related to our extended maintenance contracts for fuel cell systems and related infrastructure that has been sold. We measure loss accruals at the customer contract level. The expected revenues and expenses for these contracts include all applicable expected costs of providing services over the remaining term of the contracts and the related unearned net revenue. A loss is recognized if the sum of expected costs of providing services under the contract exceeds related unearned net revenue and is recorded as a provision for loss contracts related to service in the consolidated statements of operations. A key component of these estimates is the expected future service costs. In estimating the expected future service costs, the Company considers its current service cost level and applies judgement related to certain cost saving estimates that have been implemented in the field. The expected future cost savings will be primarily dependent upon the success of the Company's initiatives related to increasing stack life and achieving better economies of scale on service labor. If the expected cost saving initiatives are not realized, this will increase the costs of providing services and could adversely affect our estimated contract loss accrual. Further, as we continue to work to improve quality and reliability; however, unanticipated additional quality issues or warranty claims may arise and additional material charges may be incurred in the future. These quality issues could also adversely affect our contract loss accrual. The Company has undertaken and will soon undertake several other initiatives to extend the life and improve the reliability of its equipment. [removed] As a result of these initiatives and our additional expectation that the increase in certain costs will abate, the Company believes that its contract loss accrual [removed] is sufficient. However, if elevated service costs persist, the Company will adjust its estimated future service costs and increase its contract loss accrual estimate. If actual service costs over the remaining term of existing extended maintenance contracts were 10% more or 10% less than those estimated in the [removed] determination of the loss accrual for fuel cell systems and related infrastructure at December 31, 2023, the loss accrual would be approximately $13.8 million higher or $13.8 million lower, respectively.

[removed] In connection with certain [removed] of the above noted sale/leaseback agreements, cash of $573.5 million and [removed] $383.7 million, respectively, was required to be restricted as security as of December 31, 2023 [removed] and 2022, which will be released over the lease term. As of December 31, 2023 and 2022, the Company also had certain letters of credit backed by security deposits totaling $370.7 million and $379.6 million, respectively, of which $340.0 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.

[removed] Fair value of the Walmart Warrant at January 1, 2019 and October 30, 2023 was based on the Black Scholes Option Pricing Model, which is based, in part, upon level 3 unobservable inputs for which there is little or no market data, requiring the Company to develop its own assumptions.

In [removed] connection with the issuance of the 5.5% Convertible Senior [removed] 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. In connection with the issuance of the [removed] 3.75% Convertible Senior Notes and the partial repurchase of the 5.5% Convertible Senior Notes, [removed] the Company amended and extended the maturity of the Common Stock Forward to June 1, 2025. The number of shares of common [removed] 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.

[removed] In January and February 2021, the Company [removed] issued and sold in a registered equity offering an aggregate of 32.2 million shares of its common stock at a [removed] purchase price of [removed] $65.00 per share for net proceeds of [removed] approximately $2.0 billion. Furthermore, in February 2021, the Company completed a sale of its common stock in connection with a strategic partnership with SK Holdings Co., Ltd. ("SK Holdings"). The Company sold 54,996,188 shares of its common stock to a subsidiary of SK Holdings at a purchase price of $29.29 per share, or an aggregate purchase price of approximately $1.6 billion.

[removed] The Company has determined that the assets deployed for certain PPA arrangements, as well as certain assets related to the delivery of fuel to customers, are not recoverable based on the undiscounted estimated future cash flows of the asset group, and an expense of $4.8 million was recorded to impairment on the income statement. However, the estimated fair value of the assets in these asset groups equal or exceed the carrying amount of the assets or otherwise limit the amount of impairment that would have been recognized. The Company has identified the primary source of the losses for certain PPA arrangements to be the maintenance components of the PPA arrangements and the impact of customer warrant non-cash provisions. As the PPA arrangements are considered to be executory contracts and there is no specific accounting guidance that permits loss recognition for these revenue contracts, the Company has not recognized a provision for the expected future losses under these revenue arrangements. The Company expects that it will recognize future losses for these arrangements as it continues its efforts to reduce costs of delivering the maintenance component of these arrangements. The Company has estimated total future revenues and costs for these types of arrangements based on existing contracts and leverage of the related assets. For the future estimates, the Company used service cost estimates for extended maintenance contracts and customer warrant provisions at rates consistent with experience to date. The terms for the underlying estimates vary but the average residual term on the existing contracts is four years.

[removed] At issuance in May 2020, the total net proceeds from the 3.75% Convertible Senior [removed] Notes, after deducting the initial purchaser's discount, the costs of related capped calls and other issuance costs, were approximately $189.2 million.

[removed] During the second quarter of 2023, there was an other current asset impairment charge of $9.7 million related to [removed] the termination of a commercial agreement. There was no such impairment charge for the year ended December 31, 2022.

In [removed] March 2020, ASU 2020-03, Codification Improvements to Financial Instruments, was issued to [removed] make various codification improvements to financial instruments to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. This update will be effective at various dates beginning with date of issuance of this ASU. The adoption of this standard will not have a material impact on the Company's consolidated financial statements.

As disclosed in Note 24, "Subsequent Events", on January 17, 2024, the Company entered into the Original ATM Agreement with B. Riley, pursuant to which the Company may, from time to time, offer and sell through or to B. Riley, as sales agent or principal, shares of the Company's common stock, having an aggregate offering price of up to $1.0 billion. As of February 23, 2024, the Company had offered and sold 77,417,069 shares of common stock having an aggregate offering price of approximately $302.1 million under the Original ATM Agreement. On February 23, 2024, the Company and B. Riley entered into the Amendment to increase the aggregate offering price of shares of the Company's common stock available for future issuance under the Original ATM Agreement to $1.0 billion. Under the ATM Agreement, for a period of 18 months, the Company has the right at its sole discretion to direct B. Riley to act on a principal basis and purchase directly from the Company up to $11.0 million of shares of its common stock on any trading day (the "Maximum Commitment Advance Purchase Amount") and up to $55.0 million of shares in any calendar week (the "Maximum Commitment Advance Purchase Amount Cap"). On and after June 1, 2024, so long as the Company's market capitalization is no less than $1.0 billion, the Maximum Commitment Advance Purchase Amount will remain $11.0 million and the Maximum Commitment Advance Purchase Amount Cap will remain $55.0 million. If the Company's market capitalization is less than $1.0 billion on and after June 1, 2024, the Maximum Commitment Advance Purchase Amount will be decreased to $10.0 million and the Maximum Commitment Advance Purchase Amount Cap will be decreased to $30.0 million. [removed] Through the date of filing of the Annual Report on Form 10-K, the Company issued 77,417,069 shares of common stock at a [removed] weighted-average sales price of [removed] $3.90 per share for [removed] gross proceeds of [removed] $302.1 million.

[removed] During 2020, the Company used a portion of the [removed] net proceeds from the issuance of the 3.75% Convertible Senior [removed] Notes to finance the cash portion of the [removed] partial repurchase of approximately $66.3 million in aggregate principal amount of the [removed] 5.5% Convertible Senior Notes [removed] and converted $33.5 million in aggregate principal amount of the 5.5% Convertible Senior Notes [removed] into 14.6 million shares of the [removed] Company's common stock. On January 7, 2021, the final remaining aggregate principal amount of the [removed] 5.5% Convertible Senior Notes [removed] was converted into 69,808 shares of the Company's common [removed] stock.

In June 2020, the Company acquired debt as part of the acquisition of [removed] United Hydrogen Group Inc. The outstanding carrying value of the debt was $3.9 million as of December 31, [removed] 2023. The outstanding principal on the debt [removed] is $5.5 million and the unamortized debt discount [removed] is $1.5 million, bearing varying interest rates ranging from [removed] 5.6% to 8.3%, and is scheduled to mature in 2026.

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. Cost of revenue from services performed on fuel cell systems and related infrastructure for the year ended December 31, 2023 increased $16.0 million, or 27.0%, to $75.4 million, compared to $59.4 million for the year ended December 31, 2022. The increase in cost of revenue was primarily due to the increase in number of units and sites in service. There was an average of 20,336 units [removed] under maintenance contracts during the year ended December 31, 2023, compared to an average of 19,515 for the year ended December 31, 2022. Gross loss increased to [removed] (92.9%) for the year ended December 31, [removed] 2023 compared to [removed] (68.3)% for the year ended December 31, [removed] 2022. The increase in gross loss was primarily due to [removed] higher labor, parts and related overhead incurred to support the service business during the year ended December 31, 2023.

The [removed] Company had the following capital commitments related to its equity method investments as of December [removed] 31 as follows (in thousands):

Loss on extinguishment of debt. Loss on extinguishment of debt consists of losses that arise from retirement of [removed] debt before maturity. For the year ended December 31, 2023, the Company had loss on extinguishment of debt of $0 as compared to loss on extinguishment of debt of $1.0 million for the year ended December 31, 2022.

[removed] The 2017 Amazon Warrant [removed] was exercised with respect to 34,917,912 and 24,704,450 shares of the Company's common stock [removed] as of December 31, 2023 and [removed] 2022, respectively.

The net deferred tax asset generated from the Company's [removed] current period federal NOL has been offset by a full valuation allowance because it is more likely than not that the tax benefits of the [removed] federal NOL carry forward will not be realized.

[removed] Impairment. The Company recorded impairment of $20.0 million for the year ended December 31, [removed] 2023, as compared to $5.2 million for the year ended December 31, 2022. This increase was primarily related to [removed] an other current asset impairment charge of $9.7 million resulting from a termination of a commercial agreement and impairment of right of use assets related to [removed] PPA arrangements.

[removed] 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 [removed] accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and [removed] judgments that affect the reported amounts of [removed] assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of [removed] and during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including but not limited to those related to revenue recognition, valuation of [removed] inventories, goodwill and intangible assets, valuation of long-lived assets, accrual for service loss contracts, operating and finance leases, allowance for [removed] doubtful accounts receivable, unbilled revenue, common stock warrants, stock-based compensation, income taxes, and contingencies. 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.

Revenue - sales of equipment, related infrastructure and other. Revenue from sales of equipment, related infrastructure and other represents sales of our GenDrive units, GenSure stationary backup power units, cryogenic stationary and on road storage, hydrogen liquefaction systems, electrolyzers and hydrogen fueling infrastructure referred to at the site level as hydrogen installations. Revenue from sales of equipment, related infrastructure and other for the year ended December 31, 2023 increased $152.5 million, or 27.3%, to $711.4 million from $558.9 million for the year ended December 31, 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 $143.9 million was primarily due to executed agreements related to liquefier sales and $47.7 million resulting from the acquisition of CIS for which there was $3.7 million revenue recognized for the year ended December 31, 2022. Revenue related to electrolyzers increased $54.1 million, primarily due to 133 one megawatt equivalent units sold for the year ended December 31, 2023 compared to 13 one megawatt equivalent units sold for the year ended December 31, 2022. The increase in hydrogen infrastructure revenue of $42.1 million was due to 52 hydrogen site installations for the year ended December 31, 2023 compared to 44 for the year ended December 31, 2022. Revenue related to stationary increased $9.7 million, primarily due to an increase in the volume of units sold. [removed] Partially offsetting these increases was a decrease in revenue related to fuel cell systems [removed] of $36.2 million due to a decrease in the volume of GenDrive units sold, with [removed] 6,392 units sold [removed] for the year ended December 31, [removed] 2023 compared to [removed] 8,274 units sold [removed] for the year ended December 31, [removed] 2022. Additionally, there was a decrease of $61.1 million related to the sales of engineered oil and gas equipment from the Frames acquisition, for which sales are not expected to continue beyond current commitments.

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 back-up power units, cryogenic stationary and on road storage, and electrolyzers, as well as hydrogen fueling infrastructure referred to at the site level as hydrogen installations. Cost of revenue from sales of equipment, related infrastructure and other for the year ended December 31, 2023 increased $297.5 million, or 63.6%, to $765.6 million, compared to $468.1 million for the year ended December 31, 2022. The increase in hydrogen infrastructure cost of revenue of $42.3 million was due to 52 hydrogen site installations for the year ended December 31, 2023 compared to 44 for the year ended December 31, 2022 as well as a $2.1 million lower of cost or net realizable valuation adjustment, of which there was none for the year ended December 31, 2022. The increase in cryogenic storage equipment and liquefiers of $103.5 million was due to a greater percentage of completion achieved on average on liquefaction systems for the year ended December 31, 2023 as compared to the year ended December 31, 2022. Included in the $103.5 million is cost of revenue of $43.5 million resulting from the acquisition of CIS, for which there was $3.6 million cost of revenue recognized for the year ended December 31, 2022. [removed] The cost of revenue related to electrolyzer stacks and systems [removed] increased $111.3 million, primarily due to [removed] volume with 113 one megawatt equivalent units sold for the year ended December 31, [removed] 2023 compared to [removed] 13 one megawatt equivalent units sold for the year ended December 31, [removed] 2022 as well as lower of cost or net realizable valuation adjustments of $29.6 million, of which there was none for the year ended December 31, [removed] 2022. The cost of revenue related to fuel cell systems increased by $79.3 million, primarily due to an increase in stationary builds and volume increases in low power stationary and mobility as well as lower of cost or net realizable valuation adjustments of $14.1 million, of which there was none for the year ended December 31, [removed] 2022. Partially offsetting these increases was a decrease in cost of revenue [removed] of $40.8 million related to [removed] legacy oil and gas contracts from the Frames acquisition that are not expected to continue beyond current commitments. The gross loss generated from sales of equipment, related infrastructure and other was (7.6%) for the year ended December 31, [removed] 2023, compared to [removed] a gross margin of 16.3% for the year ended December 31, [removed] 2022. The decrease from gross margin to gross loss was primarily due to ramp up of costs on new product offerings for high power stationary units and electrolyzers, inventory valuation adjustments as well as changes in customer mix.

[removed] In addition, we have continued discussions with suppliers to modify terms of our supply [removed] agreements, which may impact the timing of when we receive shipments of certain supplies or result in other supply chain issues. For example, we have experienced pricing impacts from vendors and suppliers due to the recent fluctuations in interest rates and increases in cost of capital, among other factors. However, we continue to take proactive steps through our supply chain team to limit the impact of supplier 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.

On or after December 1, 2024, the holders of the 3.75% Convertible Senior Notes may convert all or any portion of their notes at any time prior to the close of business on the second scheduled trading day immediately preceding the[removed] maturity date regardless of the foregoing conditions.

Cost of revenue - provision for loss contracts related to service. The Company recorded a provision for loss accrual during [removed] 2023 of $86.3 million, an increase of $59.5 million compared to the provision for loss accrual of [removed] $26.8 million as of December 31, [removed] 2022. The Company [removed] increased the provision due to [removed] 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.

[removed] As disclosed in Note 24, "Subsequent Events", on January 17, 2024, the Company entered into the Original ATM Agreement with B. Riley, pursuant to which the Company may, from time to time, offer and sell through or to B. Riley, as sales agent or principal, shares of the Company's common stock, having an aggregate [removed] offering price of up to $1.0 billion. [removed] As of February 23, [removed] 2024, the Company had offered and sold 77,417,069 shares of common stock having an aggregate offering price of approximately $302.1 million under the Original ATM Agreement. On February 23, 2024, the Company [removed] and B. Riley entered into the Amendment to increase the [removed] aggregate offering price of shares of the Company's common stock available for [removed] future issuance under the [removed] Original ATM Agreement to $1.0 billion. [removed] Under the ATM Agreement, for a period of 18 months, the Company [removed] has the right at its sole discretion to direct B. Riley to act on a principal basis and purchase directly from the Company up to $11.0 million of shares of [removed] its common stock [removed] on any trading day (the "Maximum Commitment Advance Purchase Amount") and up to $55.0 million of shares in any calendar week (the "Maximum Commitment Advance Purchase Amount Cap"). On and after June 1, 2024, so long as the Company's market capitalization is no less than $1.0 billion, the Maximum Commitment Advance Purchase Amount will remain $11.0 million and the Maximum Commitment Advance Purchase Amount Cap will remain $55.0 million. If the Company's market capitalization is less than $1.0 billion on and after June 1, 2024, the Maximum Commitment Advance Purchase Amount will be decreased to $10.0 million and the Maximum Commitment Advance Purchase Amount Cap will be decreased to $30.0 million. Through the date of filing of the Annual Report on Form 10-K, the Company issued 77,417,069 shares of common stock at a weighted-average sales price of $3.90 per share for gross proceeds of $302.1 million.

The Company [removed] recognized an income tax benefit for the year ended December 31, [removed] 2023 of $7.4 million consisting primarily of a foreign deferred tax benefit of $8.5 million and foreign current tax expense of $1.1 million. The Company has not changed its overall conclusion with respect to the need for a valuation allowance against its net deferred tax [removed] assets, which remain fully [removed] reserved within the United States and foreign jurisdictions, with the exception of the Netherlands in which a partial valuation allowance [removed] is established.

In December 2023, ASU 2023-09, Improvements to Income Tax Disclosures, was issued to require public business entities to annually disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Additionally, annual disclosures on income taxes paid will be required[removed] to be further disaggregated by federal, state, and foreign taxes. This update will be effective for annual periods beginning after December 15, 2024. The adoption of this standard will not have a material impact to our consolidated financial statements. However, we are currently evaluating the impact of this ASU on our income tax disclosures.

Other [removed] expense, net. Other [removed] expense, net primarily consists of foreign currency translation and gains and losses related to energy contracts. Other expense, net [removed] decreased $1.0 million for the year ended December 31, [removed] 2023 as compared to the year ended December 31, [removed] 2022.

● | Contingent consideration with an estimated fair value of approximately [removed] $126.2 million as of December 31, 2023, of which $87.2 million is due within the next 12 months. See Note 5, "Fair Value Measurements", for more details.

[removed] The exercise price for the first and second tranches of Walmart Warrant Shares was $2.1231 per share. After Walmart has made payments to the Company totaling $200.0 million, the third tranche of 20,368,784 Walmart Warrant Shares will vest in eight installments of 2,546,098 Walmart Warrant Shares each time Walmart or its affiliates, directly or indirectly through third parties, make an aggregate of $50.0 million in payments for goods and services to the Company, up to payments totaling $400.0 million in the aggregate. The exercise price of the third tranche of the Walmart Warrant Shares is $6.28 per share, which was determined pursuant to the terms of the Walmart Warrant as an amount equal to 90% of the 30-day volume weighted average share price of the Company's common stock as of October 30, 2023, the final vesting date of the second tranche of the Walmart Warrant Shares. The Walmart Warrant is exercisable through July 20, 2027. The Walmart Warrant provides for net share settlement that, if elected by the holder, will reduce the number of shares issued upon exercise to reflect net settlement of the exercise price. The Walmart Warrant provides for certain adjustments that may be made to the exercise price and the number of shares of common stock issuable upon exercise due to customary anti-dilution provisions based on future events. The Walmart Warrant is classified as an equity instrument.

The Company has continued to experience negative cash flows from operations and net losses. The Company incurred net losses of approximately [removed] $1.4 billion, $724.0 million and $460.0 million for the years ended December 31, [removed] 2023, 2022 and 2021, respectively.

The Organization for Economic Co-operation and Development [removed] ("OECD") Inclusive Framework on Base Erosion and Profit Shifting has proposed a global minimum corporate tax rate of 15% on multi-national corporations, commonly referred to as the Pillar Two rules that has been agreed upon in principle by over 140 countries. [removed] Numerous foreign countries have enacted legislation to implement the Pillar Two rules, effective beginning January 1, 2024, or are expected to enact similar legislation. [removed] The Company is currently evaluating the potential impacts that Pillar Two may have on its tax provision or effective tax rate in future periods and will continue to monitor the implementation of rules in the jurisdictions in which it operates.

On August 24, 2022, 1,000,000 of the Amazon Warrant Shares [removed] 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 December 31, [removed] 2023, the balance of the contract asset related to tranche 1 was [removed] $19.4 million which is recorded in contract assets in the Company's consolidated balance [removed] 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[removed] associated with the vested shares of tranche 2 was determined on the grant date of August 24, 2022 in the amount of $20.4 million. As of December 31, 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 December 31, 2023, the balance of the contract asset related to tranche 3 was $5.2 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 year ended December 31, 2023 and 2022 was $4.9 million and $5.2 million, respectively.

Selling, general and administrative. Selling, general and administrative expenses include cash and non-cash 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 year ended December 31, [removed] 2023 increased $58.5 million, or [removed] 16.1%, to $422.5 million from [removed] $363.9 million for the year ended December 31, [removed] 2022. This increase was primarily related to [removed] information technology and professional fees.

● | Future payments under non-cancelable unconditional purchase obligations with a remaining term in excess of one year totaling [removed] $60.8 million as of December 31, 2023, of which $42.1 million is due within the next 12 months. See Note [removed] 21, "Commitments and Contingencies", for more details.

[removed] At December 31, [removed] 2023 and December 31, 2022, 34,917,912 and 27,643,347 of the Walmart Warrant Shares had vested, [removed] respectively. As of December 31, 2023, the balance of the contract asset related to the Walmart Warrant was $2.4 million. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Walmart Warrant during the years ended December 31, [removed] 2023, 2022 and 2021 was $5.9 million, $7.1 million, and [removed] $6.1 million, respectively.

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 and internally produced hydrogen that is ultimately sold to customers. Cost of revenue from fuel delivered to customers for the year ended December 31, [removed] 2023 increased $52.1 million, or [removed] 26.8%, to $246.3 million from [removed] $194.3 million for the year ended December 31, [removed] 2022. The increase was primarily due to [removed] 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. There were 250 sites associated with fuel contracts at December 31, [removed] 2023, compared to [removed] 196 at December 31, [removed] 2022. Gross loss [removed] increased to (271.8%) during the year ended December 31, [removed] 2023 compared to [removed] (239.6)% during the year ended December 31, [removed] 2022, primarily due to [removed] the increase in [removed] cost of revenue described above.

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. Cost of revenue from services performed on fuel cell systems and related infrastructure for the year ended December 31, [removed] 2023 increased $16.0 million, or [removed] 27.0%, to $75.4 million, compared to [removed] $59.4 million for the year ended December 31, [removed] 2022. The increase in cost of revenue was primarily due to [removed] the increase in [removed] number of units and sites in service. There was an average of 20,336 units under maintenance contracts during the year ended December 31, 2023, compared to an average of 19,515 for the year ended December 31, 2022. Gross loss increased to (92.9%) for the year ended December 31, 2023 compared to (68.3)% for the year ended December 31, 2022. The increase in gross loss was primarily due to higher labor, parts and related overhead incurred to support the service business during the year ended December 31, 2023.

On May 18, 2020, the Company issued $200.0 million in aggregate principal amount of 3.75% Convertible Senior Notes due June 1, [removed] 2025, which is referred to herein as the 3.75% Convertible Senior Notes, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities [removed] Act of 1933, as amended, or 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.

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 year ended December 31, [removed] 2023 increased $18.5 million or 49.7%, as compared to the year ended December 31, [removed] 2022, and was due primarily to increases in interest rates and available-for-sale securities held on average during 2023, consisting primarily of corporate bonds and U.S. Treasuries.

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 back-up power units, cryogenic stationary and on road storage, and electrolyzers, as well as hydrogen fueling infrastructure referred to at the site level as hydrogen installations. Cost of revenue from sales of equipment, related infrastructure and other for the year ended December 31, [removed] 2023 increased $297.5 million, or [removed] 63.6%, to $765.6 million, compared to [removed] $468.1 million for the year ended December 31, [removed] 2022. The increase in hydrogen infrastructure cost of revenue [removed] of $42.3 million was due to 52 hydrogen site [removed] installations for the year ended December 31, 2023 compared to 44 for the year ended December 31, 2022 as well as a $2.1 million lower of cost or net realizable valuation adjustment, of which there was none for the year ended December 31, 2022. The increase in cryogenic storage equipment and liquefiers of $103.5 million was due to a greater percentage of completion achieved on average on liquefaction systems for the year ended December 31, 2023 as compared to the year ended December 31, 2022. Included in the $103.5 million is cost of revenue of $43.5 million resulting from the acquisition of CIS, for which there was $3.6 million cost of revenue recognized for the year ended December 31, 2022. The cost of revenue related to electrolyzer stacks and systems increased $111.3 million, primarily due to volume with 113 one megawatt equivalent units sold for the year ended December 31, 2023 compared to 13 one megawatt equivalent units sold for the year ended December 31, 2022 as well as lower of cost or net realizable valuation adjustments of $29.6 million, of which there was none for the year ended December 31, 2022. The cost of revenue related to fuel cell systems increased by $79.3 million, primarily due to an increase in stationary builds and volume increases in low power stationary and mobility as well as lower of cost or net realizable valuation adjustments of $14.1 million, of which there was none for the year ended December 31, 2022. Partially offsetting these increases was a decrease in cost of revenue of $40.8 million related to legacy oil and gas contracts from the Frames acquisition that are not expected to continue beyond current commitments. The gross loss generated from sales of equipment, related infrastructure and other was (7.6%) for the year ended December 31, 2023, compared to a gross margin of 16.3% for the year ended December 31, 2022. The decrease from gross margin to gross loss was primarily due to ramp up of costs on new product offerings for high power stationary units and electrolyzers, inventory valuation adjustments as well as changes in customer mix.

In November 2023, ASU 2023-07, Improvements to Reportable Segment Disclosures, was issued to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The purpose of the amendments is to enable investors to better understand an entity's overall performance and assess potential future cash flows. This update [removed] will be effective for fiscal years beginning after December 15, 2023. [removed] The adoption of this standard is not expected to have a material impact on the Company's consolidated financial statements.

Change in fair value of contingent consideration. The change in fair value of contingent consideration is related to earnouts for the Giner ELX, [removed] Inc., United Hydrogen Group [removed] Inc., Frames, Applied Cryo, and Joule acquisitions. The change in fair value for the year ended December 31, [removed] 2023 and 2022 was $30.0 million and [removed] $16.5 million, respectively, primarily due to fair value remeasurements. This increase was primarily due [removed] to the fair value [removed] increase of $22.3 million related to the Joule acquisition for the year ended December 31, [removed] 2023.

Research and development. Research and development expenses include: materials to build development and prototype units, cash and non-cash 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 year ended December 31, [removed] 2023 increased $14.1 million, or [removed] 14.2%, to $113.7 million from [removed] $99.6 million for the year ended December 31, [removed] 2022. The overall growth in research and development investment is commensurate with the Company's future expansion into new markets, new product lines, and varied vertical integrations.

[removed] At both December 31, [removed] 2023 and December 31, 2022, all 55,286,696 of the 2017 Amazon Warrant Shares had [removed] vested. The total amount of provision for common stock warrants recorded as a reduction of revenue for the 2017 Amazon Warrant during the years ended December 31, [removed] 2023, 2022 and 2021 was $0.4 million, $0.4 million and [removed] $0.5 million, respectively.

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 year ended December 31, [removed] 2023, increased $6.2 million, as compared to the year ended December 31, [removed] 2022. The increase was primarily due to an increase in [removed] finance obligations related to sale/leaseback transactions.

On a quarterly basis, we evaluate any potential losses related to our extended maintenance contracts for fuel cell systems and related infrastructure that has been sold. We measure loss accruals at the customer contract level. The expected revenues and expenses for these contracts include all applicable expected costs of providing services over the remaining term of the contracts and the related unearned net revenue. A loss is recognized if the sum of expected costs of providing services under the contract exceeds related unearned net revenue and is recorded as a provision for loss contracts related to service in the consolidated statements of operations. [removed] A key component of these estimates is the expected future service costs. In estimating the expected future service costs, the Company considers its current service cost level and applies judgement related to certain cost saving estimates that have been implemented in the field. The expected future cost savings will be primarily dependent upon the success of the Company's initiatives related to increasing stack life and [removed] achieving better economies of scale on service labor. If the expected cost saving initiatives are not realized, this will increase the costs of providing services and could adversely affect our estimated contract loss [removed] accrual. Further, as we continue to work to improve quality and reliability; however, unanticipated additional quality issues or warranty claims may arise and additional material charges may be incurred in the future. These quality issues could also adversely affect our contract loss accrual. The Company has undertaken and will soon undertake several other initiatives to extend the life and improve the reliability of its equipment. As a result of these initiatives and our additional expectation that the increase in certain costs will abate, the Company believes that its contract loss accrual is sufficient. However, if elevated service costs persist, the Company will adjust its estimated future service costs and increase its contract loss accrual estimate. If actual service costs over the remaining term of existing extended maintenance contracts were 10% more or 10% less than those estimated in the determination of the loss accrual for fuel cell systems and related infrastructure at December 31, 2023, the loss accrual would be approximately $13.8 million higher or $13.8 million lower, respectively.

Progen: Progen is our fuel cell stack and engine technology currently used globally in mobility and stationary fuel cell [removed] systems, and as engines in electric delivery vans. This includes Plug's [removed] MEA, a critical component of the fuel cell stack used in zero-emission fuel cell [removed] EV engines.

Revenue - services performed on fuel cell systems and related 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 services performed on fuel cell systems and related infrastructure for the year ended December 31, [removed] 2023 increased $3.8 million, or [removed] 10.8%, to $39.1 million from [removed] $35.3 million for the year ended December 31, [removed] 2022. The increase in revenue from services performed on fuel cell systems and related infrastructure [removed] in 2023 was related to our expanding customer base and increase in [removed] the number of GenDrive units and infrastructure systems in service. The average number of GenDrive units under maintenance contracts during the year ended December 31, [removed] 2023 was 20,336, compared to 19,515 in 2022. Partially offsetting this increase in revenue was an increase in the provision for common stock warrants recorded as a reduction of revenue, which increased to $1.2 million for the year ended December 31, 2023 compared to $1.0 million for the year ended December 31, 2022.

The Company also had $1.2 million and $0.2 million of consideration held by our paying agent in connection with the [removed] Joule and CIS acquisitions, respectively, reported as restricted cash as of December 31, [removed] 2023, with a corresponding accrued liability on the Company's consolidated balance [removed] sheet. Additionally, the Company had [removed] $11.7 million and [removed] $10.8 million in restricted cash as collateral resulting from the Frames acquisition as of December 31, [removed] 2023 and 2022, respectively.

The Company [removed] has outstanding obligations to Wells Fargo under several Master Lease Agreements totaling [removed] $171.3 million and [removed] $159.5 million for the years ended December 31, [removed] 2023 and 2022, respectively. These outstanding obligations are included in operating lease liabilities and finance obligations on the consolidated balance sheets.

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. Cost of revenue from PPAs for the year ended December 31, [removed] 2023 increased $74.2 million, or [removed] 51.3%, to $218.9 million from [removed] $144.7 million for the year ended December 31, [removed] 2022. The increase in cost was primarily a result of an increase in the average number of units and customer sites party to these agreements. There was an average of [removed] 30,626 GenDrive units under PPAs [removed] in 2023, compared to [removed] 25,188 in 2022. The average number of hydrogen sites under PPA arrangements was [removed] 132 in 2023, compared to [removed] 91 in 2022. Gross loss [removed] increased to (243.5%) for the year ended December 31, [removed] 2023 compared to [removed] (206.7)% for the year ended December 31, [removed] 2022. The increase in gross loss was primarily due to [removed] higher cost of parts and scrap events during the year ended December 31, 2023.

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 a high degree of volatility, whose loss to us or general unavailability could have a material adverse effect upon our business and financial condition. For example, although we believe the [removed] recent liquid hydrogen supply [removed] challenge to be 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 [removed] contracts, which has negatively impacted the amount of hydrogen we [removed] have been able to provide under certain of our [removed] supply and other agreements. Furthermore, global commodity pricing has been volatile and has been influenced by political events and worldwide economic trends, which has impacted our sourcing strategies, resulting in adverse impacts on our business and financial condition. We have mitigated and are continuing to mitigate these risks by continuing to diversify our supply chain, including diversifying our global supply chain and implementing alternate system architectures that we expect will allow us to source from multiple fuel cell, electrolyzer stack and air supply component vendors. While we continue to invest in our supply chain to improve its resilience with a focus on automation, dual sourcing of critical components, insourcing 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 cost pressures from global energy prices and inflation have been less volatile than previous years, an increase in cost pressures or a rise in inflation could negatively affect our business again, which could have a pricing impact on our key raw materials. We have a regionally diverse supply chain, and 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 are unable to reduce such inventory, that could tie up working capital.

Revenue - fuel delivered to customers and related equipment. Revenue associated with fuel and related equipment delivered to customers represents the sale of hydrogen that has been purchased by the Company from a third party or generated at our hydrogen production [removed] plant. Revenue associated with fuel delivered to customers for the year ended December 31, [removed] 2023 increased $9.0 million, or [removed] 15.7%, to $66.2 million from [removed] $57.2 million for the year ended December 31, [removed] 2022. The increase in revenue was primarily due to an increase in the number of sites with fuel contracts, which increased [removed] from 196 sites as of December 31, [removed] 2022 to 250 sites as of December 31, 2023. Partially offsetting this increase in revenue was an increase in the provision for common stock warrants recorded as a reduction of revenue, which increased to [removed] $5.6 million for the year ended December 31, [removed] 2023 compared to [removed] $4.5 million for the year ended December 31, [removed] 2022.

Change in fair value of equity securities. Change in fair value of equity securities consists of the changes in fair value for equity securities from the purchase date to the end of the period. For the year ended December 31, [removed] 2023, the change in fair value of equity securities [removed] increased by $11.4 million as compared to [removed] a decrease in the change in fair value of $18.2 million for the year ended December 31, [removed] 2022. The Company sold its remaining equity securities [removed] as of December 31, 2023.

Revenue - Power purchase agreements. Revenue from PPAs represents payments received from customers for power generated through the provision of equipment and service. Revenue from PPAs for the year ended December 31, [removed] 2023 increased $16.5 million, or [removed] 35.1%, to $63.7 million from [removed] $47.2 million for the year ended December 31, [removed] 2022. The increase in revenue was a result of an increase in the average number of units and customer sites party to these agreements. There was an average of [removed] 30,626 GenDrive units under PPAs generating revenue in [removed] 2023, compared to [removed] 25,188 in 2022. In addition, the average number of hydrogen sites under PPA arrangements was [removed] 132 in 2023, compared to [removed] 91 in 2022. Partially offsetting this increase in revenue was an increase in the provision for common stock warrants recorded as a reduction of revenue, which increased to [removed] $3.8 million for the year ended December 31, [removed] 2023 compared to [removed] $3.6 million for the year ended December 31, [removed] 2022.

The Company uses a variety of information sources in determining standalone selling prices for electrolyzer systems solutions. Electrolyzer stacks are typically sold on a standalone basis and the standalone selling price is the contractual price with the customer. The Company uses an adjusted market assessment approach to determine the standalone selling price of electrolyzer [removed] systems when sold with extended service or other equipment. This includes considering both standalone selling prices of the systems by the Company and available information on competitor pricing on similar products. The determination of standalone selling prices of the Company's performance obligations requires judgment, including periodic assessment of pricing approaches and available observable evidence in the market. Once relative standalone selling prices are determined, the Company proportionately allocates the transaction price to each performance obligation within the customer arrangement based upon standalone selling price. Revenue on electrolyzer systems and stacks is generally recognized at the point at which transfer of control passes to the customer, which usually occurs upon title transfer at shipment or delivery to the customer location. In certain instances, control of electrolyzer systems transfers to the customer over time, and the related revenue is recognized over time as the performance obligation is satisfied. We recognize revenue over time when contract performance results in the creation of a product for which we do not have an alternative use and the contract includes an enforceable right to payment in an amount that corresponds directly with the value of the performance completed. In these instances, we use an input measure (cost-to-total cost or percentage-of-completion method) of progress to determine the amount of revenue to recognize during each reporting period based on the costs incurred to satisfy the performance obligation.

Other revenue includes payments received for technical services that include engineering services, program management services, procurement services and operations, testing and validation services with HyVia. The scope of these services includes mutually agreed upon services as [removed] may be requested from time to time by HyVia. Other revenue also includes sales of electrolyzer engineering and design services. The scope of these services includes establishing and defining project technical requirements, standards and guidelines as well as assistance in scoping and scheduling of large-scale electrolyzer solutions.

● | Operating and finance leases totaling [removed] $355.7 million and [removed] $45.6 million, respectively, of which [removed] $63.7 million and [removed] $9.4 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.

● | Finance obligations totaling [removed] $368.4 million of which approximately [removed] $84.0 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.

[removed] Impairment of goodwill. The Company recorded impairment of goodwill of [removed] $249.5 million for the year ended December 31, [removed] 2023, as compared to [removed] $0 for the year ended December 31, [removed] 2022. The Company performs an impairment[removed] review of goodwill on an annual basis at October [removed] 31, and when a triggering event is determined to have occurred between annual impairment tests. Based on the results of our quantitative impairment analysis, the Company recognized an impairment charge of $249.5 million for the year ended December 31, 2023.