12. Power Purchase Agreement Programs

Overview

In mid-2010, we began offering our Energy Servers through ~~its~~our Bloom Electrons program, which we denote as Power Purchase Agreement Programs, financed via investment entities. Under these arrangements, an operating entity is created (the "Operating Company") which purchases the Energy Server from us. The end customer then enters into a power purchase agreement ("PPA") with the Operating Company to purchase the power generated by the Energy Server(s) at a specified rate per kilowatt hour for a specified term which can range from 10 to 21 years. In some cases similar to direct purchases and leases, the standard one-year warranty and performance guaranties are included in the price of the product. The Operating Company also enters into a master services agreement ("MSA") with us following the first year of service to extend the warranty services and guaranties over the term of the PPA. In other cases, the MSA including warranties and guaranties are billed on a quarterly basis starting in the first quarter following the placed-in-service date of the ~~energy server(s)~~Energy Servers and continuing over the term of the PPA. The first of such arrangements was considered a sales-type lease and the product revenue from that agreement was recognized up front in the same manner as direct purchase and lease transactions. Substantially all of our subsequent PPAs have been accounted for as operating leases with the related revenue under those agreements recognized ratably over the PPA term as electricity revenue. We recognize the cost of revenue, primarily product costs and maintenance service costs, over the shorter of the estimated useful life of the Energy Server or the term of the PPA.

We and our third-party equity investors (together "Equity Investors") contribute funds into a limited liability investment entity ("Investment Company") that owns and is parent to the Operating Company (together, the "PPA Entities"). The PPA Entities constitute variable investment entities ("VIEs") under U.S. GAAP. We have considered the provisions within the contractual agreements which grant us power to manage and make decisions affecting the operations of these VIEs. We consider that the rights granted to the Equity Investors under the contractual agreements are more protective in nature rather than participating. Therefore, we have determined under the power and benefits criterion of ASC 810 - Consolidations that we are the primary beneficiary of these VIEs. On June 14, 2019, we entered into a PPA II upgrade of Energy Servers transaction, and as a result we determined that we no longer retain a controlling interest in PPA II and therefore it will no longer be consolidated as a VIE into our condensed consolidated financial statements as of June 30, 2019. See further discussion below.

As the primary beneficiary of these VIEs, we consolidate in ~~its~~our financial statements the financial position, results of operations and cash flows of the PPA Entities, and all intercompany balances and transactions between us and the PPA Entities are eliminated in the condensed consolidated financial statements.

The Operating Company acquires Energy Servers from us for cash payments that are made on a similar schedule as if the Operating Company were a customer purchasing an Energy Server from us outright. In the condensed consolidated financial

statements, the sales of our Energy Servers to the Operating Company are treated as intercompany transactions after the elimination of intercompany balances. The acquisition of Energy Servers by the Operating Company is accounted for as a non-cash reclassification from inventory to Energy Servers within property, plant and equipment, net on our condensed consolidated balance sheets. In arrangements qualifying for sales-type leases, we reduce these recorded assets by amounts received from U.S. Treasury Department cash grants and from similar state incentive rebates.

The Operating Company sells the electricity to end customers under PPAs. Cash generated by the electricity sales, as well as receipts from any applicable government incentive program, is used to pay operating expenses (including the management and services we provide to maintain the Energy Servers over the term of the PPA) and to service the non-recourse debt with the remaining cash flows distributed to the Equity Investors. In transactions accounted for as sales-type leases, we recognize subsequent customer billings as electricity revenue over the term of the PPA and amortizes any applicable government incentive program grants as a reduction to depreciation expense of the Energy Server over the term of the PPA. In transactions accounted for as operating leases, we recognize subsequent customer payments and any applicable government incentive program grants as electricity revenue over the term of the PPA.

Upon sale or liquidation of a PPA Entity, distributions would occur in the order of priority specified in the contractual agreements.

We have established six different PPA Entities to date. The contributed funds are restricted for use by the Operating Company to the purchase of Energy Servers manufactured by us in our normal course of operations, all six PPA Entities utilized their entire available financing capacity and have completed the purchase of their Energy Servers. Any debt incurred by the Operating Companies is non-recourse to us. Under these structures, each Investment Company is treated as a partnership for U.S. federal income tax purposes. Equity Investors receive investment tax credits and accelerated tax depreciation benefits. In 2016, we purchased the tax equity investor’s interest in PPA ~~Company~~ I, ~~("PPA I"),~~ which resulted in a change in our ownership interest in PPA I while we continued to hold the controlling financial interest in this company.

PPA II Upgrade of Energy Servers

Transaction Overview

On June 14, 2019, we entered into a transaction with SP Diamond State Class B Holdings, LLC (“SPDS”), a wholly owned subsidiary of Southern Power Company, in which SPDS will purchase a majority interest in PPA II, which operates in Delaware providing alternative energy generation for state tariff rate payers (the "PPA II Project"). PPA II will use the received funds to purchase current generation Bloom fuel cell energy servers in connection with the upgrade of its energy generation assets fleet.

In connection with the closing of this transaction, SPDS was admitted as a member of Diamond State Generation Partners, LLC ("DSGP"). DSGP, an operating company, is now owned by Diamond State Generation Holdings, LLC ("DSGH") and SPDS. Subject to (i) the satisfaction by Bloom of certain conditions precedent, and (ii) the non-occurrence of certain events outside of our control, SPDS has agreed to make capital contributions to DSGP sufficient for DSGP to purchase up to approximately 18 megawatts of Energy Servers from us in one or more phases following the closing, decommissioning 19 megawatts of our less efficient older generation Energy Servers. Prior to selling the new generation Energy Servers to DSGP in each phase, we will repurchase a proportionate number of DSGP’s existing Energy Servers and remove such existing Energy Servers from PPA II's site. In the future, subject to our ability to secure additional capital commitments from sources yet to be identified, the remaining 11 megawatts of existing Energy Servers that constitute PPA II may be repurchased by Bloom and replaced by up to approximately 9 megawatts of new Energy Servers to be sold by us to DSGP. After accounting for the funds committed by SPDS, we estimate that we will need to secure approximately $92 million of additional funding in order to complete the upgrade of the PPA II Project. In the event that we are unable to secure financing to fund the deployment of the additional 9 megawatts of new Energy Servers at the PPA II Project, we expect to continue to operate the existing Energy Servers, in which case we may need to amend certain operating permits for the PPA II Project. We will continue as operator of PPA II, but management of DSGP will transfer to SPDS as of the date we have completed the repurchase of all of the interests of Mehetia, Inc., a wholly-owned subsidiary of Credit Suisse AG (“Mehetia”), in the PPA II Project.

Obligations to the PPA II Financiers

After giving effect to the admission of SPDS as a member of DSGP at the closing and the retirement of the existing debt, there are three investors in the PPA II Project: Bloom Energy, Mehetia, and SPDS.

At closing, we made a partial payment for repurchase of the existing Energy Servers owned by DSGP in the amount of approximately $72.3 million, all of which was used by DSGP (along with additional DSGP's cash reserves) to prepay all of its existing indebtedness associated with PPA II. We also agreed to purchase all of the equity interests in PPA II currently held by Mehetia for an estimated purchase price of $57.5 million. The purchase of Mehetia’s equity interests in PPA II will be effected via multiple payments by us with the final payment to be made no later than March 31, 2020.

In connection with the admission of SPDS as a member of DSGP, the DSGP limited liability company agreement was amended to provide, among other things, for the allocation of revenues, benefits and expenses between us, Mehetia and SPDS. Under the amended limited liability company agreement, until such time as all of Mehetia’s equity interests in PPA II have been repurchased, Mehetia is entitled to 100% of the revenues generated by the PPA II Project from the operation of the existing Energy Servers and we are entitled to none of such revenues. From and after the date that all of Mehetia’s equity interests in PPA II have been repurchased, we will be entitled to 100% of the revenues generated by the PPA II Project from the operation of the existing Energy Servers. Additionally, SPDS is entitled to 100% of the revenues generated by the PPA II Project from the operation of the new Energy Servers. SPDS is also entitled to 100% of any tax attributes, income and loss associated with the new energy servers.

Obligations to DSGP

At closing, we and DSGP entered into two primary commercial contracts: first, a contract for the purchase, sale and installation of the new Energy Servers (the “EPC Agreement”), and second, a contract for the operation and maintenance of the PPA II Project, including both the existing Energy Servers and the new Energy Servers (the “O&M Agreement”). Both the upfront purchase price for the new Energy Servers under the EPC Agreement and the ongoing fees for our operations and maintenance of the PPA II Project under the O&M Agreement are paid on a fixed dollar per kilowatt ($/kW) basis.

Our obligations to DSGP pursuant to the EPC Agreement include: (i) designing, manufacturing, and installing the new Energy Servers, and selling such Energy Servers to DSGP; (ii) obtaining all necessary permits and other governmental approvals necessary for the installation and operation of the new Energy Servers; and (iii) commissioning each of the new Energy Servers upon the completion of installation.

Our obligations to DSGP pursuant to the O&M Agreement include: (i) maintaining all necessary permits and other governmental approvals necessary for the operation of the PPA II Project, and maintaining such permits and approvals throughout the term of the O&M Agreement; (ii) operating and maintaining the PPA II Project in compliance with all applicable laws, permits and regulations; (iii) satisfying the efficiency and output obligations set forth in such O&M Agreement (“Performance Requirements”); and (iv) complying with the requirements of the PPA II Tariff. The O&M Agreement obligates us to repurchase some or all of the Energy Servers constituting the PPA II Project in the event the PPA II Project fails to comply with the Performance Requirements and we fail to remedy such failure after a cure period.

The O&M Agreement for the PPA II Project provides for the following Performance Requirements and indemnity obligations:

Efficiency Guaranty. We warrant to DSGP that the PPA II Project will operate at a cumulative average efficiency level of 50%, including period of operation prior to closing of the PPA II upgrade transaction. If the aggregate average efficiency falls below the specified threshold, we are obligated to make a payment to DSGP equal to the increased expense resulting from such efficiency shortfall, with our aggregate liability for such payments capped at an amount specified in the O&M Agreement. During the period from September 2010 to June 30, 2019, no payments have been made pursuant to the Efficiency Guaranty.

Existing Energy Server Output Warranty. We warrant to DSGP that the remaining existing Energy Servers at the PPA II Project will, in the aggregate, generate a minimum amount of electricity in each calendar quarter, and we are obligated to repair or replace Energy Servers if such Energy Servers fail to satisfy this warranty. If we determine that a repair or replacement is not feasible, we are obligated to repurchase such Energy Servers at the original purchase price. During the period from September 2010 to June 30, 2019, no Energy Servers have been repurchased pursuant to the Existing Energy Server Output Warranty.

New Energy Server Output Warranty. We warrant to DSGP that the new Energy Servers purchased by DSGP in connection with the PPA II Project will, in the aggregate, generate a minimum amount of electricity on a cumulative basis, and we are obligated to repair or replace Energy Servers if such Energy Servers fail to satisfy this warranty. If we determine that a repair or replacement is not feasible, we are obligated to repurchase such Energy Servers at the original purchase price. During the period from the closing of the upgrade to June 30, 2019, no Energy Servers have been repurchased pursuant to the New Energy Server Output Warranty.

New Energy Server Output Guaranty. We warrant to DSGP that the new Energy Servers purchased by DSGP in connection with the PPA II Project will, in the aggregate, generate a minimum amount of electricity on a cumulative basis, and we are obligated to make a payment to DSGP to make DSGP for lost revenues resulting from the shortfall below the guaranteed level if such Energy Servers fail to satisfy this warranty, with our aggregate liability for such payments capped at an amount specified in the O&M Agreement. During the period from the closing of the upgrade to June 30, 2019, no payments have been made pursuant to the New Energy Server Output Guaranty.

Other Obligations

In addition to the rights and obligations set forth above, the transaction documents related to the upgrade of the PPA II Project contain certain representations, warranties and covenants of Bloom, DSGH, DSGP, Mehetia and SPDS, including representations and warranties of Bloom and DSGP relating to the conduct of their respective businesses prior to the closing of the transaction, as well as indemnity obligations related to the breach of such representations, warranties and covenants. In addition, we have agreed to indemnify SPDS for losses that may be incurred in the event of certain regulatory, legal or legislative development in an aggregate amount of up to $97.2 million and we have also agreed to indemnify SPDS for losses that may be incurred in connection with the loss or disallowance of certain tax benefits that we expect the upgrade of the PPA II Project to generate, in an aggregate amount of up to $7.5 million. As of June 30, 2019, we established a cash-collateralized letter of credit of $20.0 million under this obligation, and we committed to fund an additional cash-collateralized letter of credit of $20.0 million subsequent to June 30, 2019. Under the terms of the Equity Capital Contribution Agreement, in some circumstances, including in the event that our shares of common stock are trading at a specified price for a specified period, Southern has the right to require that Bloom either (a) provide supplemental Tariff Damages Collateral (as defined in the agreement) in the amount of the difference between the then-applicable Tariff Damages and the Tariff Damages Collateral then-available to Southern pursuant to the LLC Agreement, or (b) make a payment to Southern in the amount of such difference. Based on current deployments, in the event our shares of common stock are trading at a specified price for a specified period, then based on current deployments we anticipate a potential commitment resulting from the difference between the Tariff Damage Collateral and Tariff Damage to be up to an additional $57.2 million.

Obligations Under the PPA II Tariff Agreement

In the event that DSGP claims that a “Forced Outage Event” has occurred under the PPA II tariff, DSGP is obligated to purchase and deliver replacement renewable energy credits ("RECs") in an amount equal to the number of megawatt hours for which it receives compensation under the ‘forced outage’ provisions of the tariff, but only if such replacement RECs are available in sufficient quantities and can be purchased for less than $45 per REC. A “Forced Outage Event” is defined under the PPA II tariff agreement as the inability of DSGP to obtain a replacement component part or a service necessary for the operation of the Energy Servers at their nameplate capacity. The PPA II tariff agreement provides for payments to DSGP in the event of a Forced Outage Event lasting in excess of 90 days. For the first 90 days following the occurrence of a Forced Outage Event, no payments are made under this provision of the tariff. Thereafter, DSGP is entitled to payments equal to 70% of the payments that would have been made under the tariff but for the occurrence of the Forced Outage Event-that is, the “Forced Outage Event” provision of the PPA II tariff agreement provides for payments to DSGP under the tariff equal to the amount that would be paid were PPA II Project energy servers operating at 70% of their nameplate capacity, irrespective of actual output. The PPA II tariff agreement also provides that the “Forced Outage Event” protections afforded thereunder shall automatically terminate in the event that we obtain an investment grade rating.

Impact of PPA II Project on Consolidated Financial Statements

As described above, the PPA II Project documents contain certain representations, warranties and covenants of Bloom, DSGH, DSGP, Mehetia and SPDS, including representations and warranties of Bloom and DSGP relating to the conduct of their respective businesses prior to the closing of the transaction, as well as indemnity obligations related to the breach of such representations, warranties and covenants. In addition, we have agreed to indemnify SPDS for losses that may be incurred in the event of certain regulatory, legal or legislative development in an aggregate amount of up to $97.2 million. As of June 30, 2019, we believe these events to be remote and therefore, no liability has been recorded on our condensed consolidated financial statements.

As a result of the transaction with SPDS, we reconsidered whether we should continue to consolidate DSGP. We use a qualitative approach in assessing the consolidation requirement for each of our 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. As a result of the PPA II Project, we determined that we no longer retain a

controlling interest in PPA II and therefore it will no longer be consolidated as a VIE into our condensed consolidated financial statements as of June 30, 2019. We determined that we have retained significant influence over DSGP and consequently recognize our remaining interest in DSGP as an equity-method investment as of June 30, 2019.

The PPA II Project occurs in two phases, phase 1 where initially SPDS had its purchased interest in 9.7 megawatts of Energy Servers installed during June 2019, and its remaining phase 2 purchased interest in 8.0 megawatts of Energy Servers to be installed which is expected to occur during the remainder of 2019. As of June 30, 2019, we have sold 9.7 megawatts of our current generation Energy Servers for $87.8 million to DSGP subsequent to its deconsolidation, which is included in product revenue, and recognized installation services of $3.9 million which is included in installation revenue, in our condensed consolidated statements of operations for the three and six months ended June 30, 2019. Concurrently, we had repurchased and written-off 10.0 megawatts of our earlier generation energy serves for $25.6 million and had installed the 9.7 megawatts of servers at a cost of goods sold of $26.3 million, which is included in cost of product revenue in our condensed consolidated statements of operations for the three and six months ended June 30, 2019. In anticipation of replacing the remaining installed 9.0 megawatts of Energy Servers during 2019 under phase 2 which reduced their previously expected useful lives, we recognized charges related to the decommissioning of PPA II Energy Servers of $8.1 million, which is included in cost of electricity revenue in our condensed consolidated statements of operations for the three and six months ended June 30, 2019. Additionally, in paying-off the outstanding debt and interest of PPA II amounting to $77.7 million, we incurred a debt payoff make-whole penalty of $5.9 million, which is included in general and administrative expense in our condensed consolidated statements of operations for the three and six months ended June 30, 2019. Finally, we had PPA II debt issuance costs written-off of $1.0 million and additional interest expense incurred for PPA 2 debt payoff of $0.1 million, which is included in interest expense in our condensed consolidated statements of operations for the three and six months ended June 30, 2019.

The PPA II Project resulted in the following impacts on our condensed consolidated balance sheet as of June 30, 2019: (i) cash and cash equivalents increased $4.6 million, comprised of $115.6 million cash receipts for the sale of new systems to PPA II, mostly offset by $72.3 million used for the repayment of all PPA II debt plus a make-whole payment fee, a $18.7 million distribution to Credit Suisse, the other investor in PPA II, and a $20.0 million reclassification into restricted cash for certain contingent indemnifications for SPDS under the PPA II Project in the form of a letter of credit to SPDS; (ii) inventories decreased $27.0 million due to the sale of 9.7 megawatts of current generation Energy Servers to PPA II during June 2019; (iii) property, plant and equipment decreased $33.7 million, comprised of $25.6 million due to the repurchase and write-off of 10.0 megawatts of older Energy Servers from PPA II plus $8.1 million of charges related to the decommissioning of PPA II Energy Servers for the second phase of energy server replacement, anticipated to occur during the remainder of 2019; (iv) restricted cash long-term increased $8.7 million, comprised of $20.0 million for certain contingent indemnifications for SPDS under the PPA II Project, partially offset by $11.3 million used for the repayment of debt; (v) current portion of non-recourse debt decreased $12.2 million; (vi) deferred revenue and customer deposits increased $23.8 million related to deposit funding paid by SPDS for new systems in phase 2; (vii) accrued other current liabilities increased $0.4 million, comprised of an increase of $1.1 million for the accrued installation cost for the Energy Servers purchased by SPDS, mostly offset by a decrease of $0.7 million related to the payoff of accrued interest made on PPA II's debt; (viii) long-term portion of non-recourse debt decreased $63.7 million for the payoff of long term portion of PPA II debt, net of debt issuance costs written-off; (ix) noncontrolling interest decreased $18.4 million, comprised of $18.7 million of cash distribution to Credit Suisse resulting from our repurchase of 10.0 megawatts existing Energy Servers, partially offset by $0.3 million related to the HLBV adjustment; and (x) the reclass of $37.0 million from noncontrolling interest to accrued other current liabilities related to our commitment to mandatorily redeem the noncontrolling interest in DSGH by March 31, 2020 under the PPA II Project.

PPA Entities' Activities Summary

The table below shows the details of the five continuing Investment Companies and their cumulative activities from inception to the periods indicated (dollars in thousands):


		PPA Company II		PPA Company IIIa		PPA Company IIIb		PPA Company IV		PPA Company V			PPA II			PPA IIIa		PPA IIIb		PPA IV		PPA V
Overview:
Maximum size of installation (in megawatts)		30		10		6		21		40			30			10		6		21		40
Installed size (in megawatts)		30		10		5		19		37			20		⁴	10		5		19		37
Term of power purchase agreements (years)		21		15		15		15		15			21			15		15		15		15
First system installed		Jun-12		Feb-13		Aug-13		Sep-14		Jun-15			Jun-12			Feb-13		Aug-13		Sep-14		Jun-15
Last system installed		Nov-13		Jun-14		Jun-15		Mar-16		Dec-16			Nov-13			Jun-14		Jun-15		Mar-16		Dec-16
Income (loss) and tax benefits allocation to Equity Investor		99%		99%		99%		90%		99%			99%			99%		99%		90%		99%
Cash allocation to Equity Investor		99%		99%		99%		90%		90%			99%			99%		99%		90%		90%
Income (loss), tax and cash allocations to Equity Investor after the flip date		5%		5%		5%		No flip		No flip			5%			5%		5%		No flip		No flip
Equity Investor ¹		Credit Suisse		US Bank		US Bank		Exelon Corporation		Exelon Corporation			Credit Suisse			US Bank		US Bank		Exelon Corporation		Exelon Corporation
Put option date ²		10th anniversary of initial funding date		1st anniversary of flip point		1st anniversary of flip point		N/A		N/A			March 31, 2020			1st anniversary of flip point		1st anniversary of flip point		N/A		N/A
Company cash contributions		$	22,442	$	32,223	$	22,658	$	11,669	$	27,932		$	22,442		$	32,223	$	22,658	$	11,669	$	27,932
Company non-cash contributions ³		$	—	$	8,655	$	2,082	$	—	$	—		$	—		$	8,655	$	2,082	$	—	$	—
Equity Investor cash contributions		$	139,993	$	36,967	$	20,152	$	84,782	$	227,344		$	139,993		$	36,967	$	20,152	$	84,782	$	227,344
Debt financing		$	144,813	$	44,968	$	28,676	$	99,000	$	131,237		$	144,813		$	44,968	$	28,676	$	99,000	$	131,237
Cumulative Activity as of March 31, 2019:
Cumulative Activity as of June 30, 2019:
Distributions to Equity Investor		$	116,942	$	4,246	$	1,907	$	4,982	$	68,944		$	138,602		$	4,430	$	2,007	$	6,420	$	69,099
Debt repayment—principal		$	67,985	$	5,209	$	4,238	$	16,111	$	6,644		$	144,813		$	5,651	$	4,414	$	16,731	$	7,572
Cumulative Activity as of December 31, 2018:
Distributions to Equity Investor		$	116,942	$	4,063	$	1,807	$	4,568	$	66,745		$	116,942		$	4,063	$	1,807	$	4,568	$	66,745
Debt repayment—principal		$	65,114	$	4,431	$	3,953	$	15,543	$	5,780		$	65,114		$	4,431	$	3,953	$	15,543	$	5,780

¹ Investor name represents ultimate parent of subsidiary financing the project.
² Investor right on the certain date, upon giving us advance written notice, to sell the membership interests to us or resign or withdraw from the investment partnership.	² Investor right on the certain date, upon giving us advance written notice, to sell the membership interests to us or resign or withdraw from the investment partnership.											² Investor right on the certain date, upon giving us advance written notice, to sell the membership interests to us or resign or withdraw from the investment partnership.
³ Non-cash contributions consisted of warrants that were issued by us to respective lenders to each PPA Entity, as required by such entity’s credit agreements. The corresponding values are amortized using the effective interest method over the debt term.	³ Non-cash contributions consisted of warrants that were issued by us to respective lenders to each PPA Entity, as required by such entity’s credit agreements. The corresponding values are amortized using the effective interest method over the debt term.											³ Non-cash contributions consisted of warrants that were issued by us to respective lenders to each PPA Entity, as required by such entity’s credit agreements. The corresponding values are amortized using the effective interest method over the debt term.
⁴Installed base decreased from March 31, 2019 due to the repurchase of 10 megawatts of our Energy Servers during June 2019 under the PPA II Project. See disclosures above.												⁴Installed base decreased from March 31, 2019 due to the repurchase of 10 megawatts of our Energy Servers during June 2019 under the PPA II Project. See disclosures above.

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports made as defined in Rules 13-a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow for timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of ~~March 31,~~June 30, 2019. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of ~~March 31,~~June 30, 2019, controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding ~~its~~our required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitation on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A controls system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the controls system are met. Further, the design of a controls system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all controls systems, no evaluation of controls can provide absolute assurance that all controls issues and instances of fraud, if any, within our company have been detected. Accordingly, our disclosure controls and procedures provide reasonable assurance of achieving their objectives.

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

For a discussion of legal proceedings, see "Legal Matters" under Note 13 - Commitments and Contingencies, in the notes to our consolidated financial statements.

We are, and from time to time we may become, involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any other legal proceedings that in the opinion of our management and if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.

ITEM 1A - RISK FACTORS

You should carefully consider the risks and uncertainties described below, as well as the other information in this Quarterly Report on Form 10-Q, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below, or of additional risks and uncertainties not presently known to us or that we currently deem immaterial, could materially and adversely affect our business, financial condition, operating results and prospects. In such an event, the market price of our Class A common stock could ~~decline.~~decline and you could lose all or a portion of your investment.

Risks Relating to Our Business, Industry and Sales

The distributed generation industry is an emerging market and distributed generation may not receive widespread market acceptance.

The distributed generation industry is still relatively nascent in an otherwise mature and heavily regulated industry, and we cannot be sure that potential customers will accept distributed generation broadly, or our Energy Server products specifically. Enterprises may be unwilling to adopt our solution over traditional or competing power sources for any number of reasons including the perception that our technology is unproven, they lack confidence in our business model, the perceived unavailability of back-up service providers to operate and maintain the Energy Servers, and lack of awareness of our product or their perception of regulatory or political headwinds. Because this is an emerging industry, broad acceptance of our products and services is subject to a high level of uncertainty and risk. If the market develops more slowly than we anticipate, our business will be harmed.

Our limited operating history and our nascent industry make evaluating our business and future prospects difficult.

From our inception in 2001 through 2009, we were focused principally on research and development activities relating to our Energy Server technology. We did not deploy our first Energy Server and did not recognize any revenue until 2009. Since that initial deployment, our business has expanded significantly over a comparatively short time, given the characteristics of the electric power industry. As a result, we have a limited history operating our business at its current scale. Furthermore, our Energy Server is a new type of product in the nascent distributed energy industry. Consequently, predicting our future revenue and appropriately budgeting for our expenses is difficult, and we have limited insight into trends that may emerge and affect our business. If actual results differ from our estimates or if we adjust our estimates in future periods, our operating results and financial position could be materially and adversely affected.

Our products involve a lengthy sales and installation cycle and, if we fail to close sales on a regular and timely basis, our business could be harmed.

Our sales cycle is typically 12 to 18 months but can vary considerably. In order to make a sale, we must typically provide a significant level of education to prospective customers regarding the use and benefits of our product and ~~its~~our technology. The period between initial discussions with a potential customer and the eventual sale of even a single product typically depends on a number of factors, including the potential customer’s budget and decision as to the type of financing it chooses to use as well as the arrangement of such financing. Prospective customers often undertake a significant evaluation process which may further extend the sales cycle. Once a customer makes a formal decision to purchase our product, the fulfillment of the sales order by us requires a substantial amount of time. Generally, the time between the entry into a sales contract with a customer and the installation of our Energy Servers can range from nine to twelve months or more. This lengthy sales and installation cycle is subject to a number of significant risks over which we have little or no control. Because of both the long sales and long installation cycles, we may expend significant resources without having certainty of generating a sale.

These lengthy sales and installation cycles increase the risk that an installation may not be completed. In some instances, a customer can cancel an order for a particular site prior to installation, and we may be unable to recover some or all of our

costs in connection with design, permitting, installation and site preparations incurred prior to cancellation. Cancellation rates can be between 10% and 20% in any given period due to factors outside of our control including an inability to install an Energy Server at the customer’s chosen location because of permitting or other regulatory issues, unanticipated changes in the cost, or other reasons unique to each customer. Our operating expenses are based on anticipated sales levels, and many of our expenses are fixed. If we are unsuccessful in closing sales after expending significant resources or if we experience delays or cancellations, our business could be materially and adversely affected. Since we do not recognize revenue on the sales of our products until installation and acceptance, a small fluctuation in the timing of the completion of our sales transactions could cause operating results to vary materially from period to period.

Our Energy Servers have significant upfront costs, and we will need to attract investors to help customers finance purchases.

Our Energy Servers have significant upfront costs. In order to assist our customers in obtaining financing for our products, we have traditional lease programs with two leasing partners who have prequalified our product and provide financing for customers through various leasing arrangements. In addition to the traditional lease model, we also offer Power Purchase Agreement Programs, including Third-Party PPAs, in which financing the cost of the Energy Server is provided by an Operating Company and funded by a subsidiary investment entity (an "Investment Company") which is financed by us and/or in combination with Equity Investors. We refer to the Operating Company and its subsidiary Investment Company collectively as a PPA Entity. In recent periods, the substantial majority of our end customers have elected to finance their purchases, typically through Third Party PPAs.

We will need to grow committed financing capacity with existing partners or attract additional partners to support our growth. Generally, at any point in time, the deployment of a portion of our backlog is contingent on securing available financing. Our ability to attract third-party financing depends on many factors that are outside of our control, including the investors’ ability to utilize tax credits and other government incentives, our perceived creditworthiness and the condition of credit markets generally. Our financing of customer purchases of our Energy Servers is subject to conditions such as the customer’s credit quality and the expected minimum internal rate of return on the customer engagement, and if these conditions are not satisfied, we may be unable to finance purchases of our Energy Servers, which would have an adverse effect on our revenue in a particular period. If we are unable to help our customers arrange financing for our Energy Servers generally, our business will be harmed. For example, we have been working with financing sources to arrange for additional Third-Party PPA Entities, one of which will need to be finalized in order for our customers to arrange financing so that we can complete our planned installations in the ~~second quarter~~balance of 2019. In addition, while we secured financing to support the installation of approximately 18 megawatts of new products in connection with the upgrade of the PPA II Project, we will need to secure additional financing in order to support our planned completion of such project in the first half of 2020.

If we are unable to procure financing partners willing to finance such deployments, our business would be negatively impacted.

The economic benefits of our Energy Servers to our customers depends on the cost of electricity available from alternative sources including local electric utility companies, which cost structure is subject to change.

We believe that a customer’s decision to purchase our Energy Servers is significantly influenced by the price, the price predictability of electricity generated by our Energy Servers in comparison to the retail price and the future price outlook of electricity from the local utility grid and other renewable energy sources. The economic benefit of our Energy Servers to our customers includes, among other things, the benefit of reducing such customer’s payments to the local utility company. The rates at which electricity is available from a customer’s local electric utility company is subject to change and any changes in such rates may affect the relative benefits of our Energy Servers. Even in markets where we are competitive today, rates for electricity could decrease and render our Energy Servers uncompetitive. Several factors could lead to a reduction in the price or future price outlook for grid electricity, including the impact of energy conservation initiatives that reduce electricity consumption, construction of additional power generation plants (including nuclear, coal or natural gas) and technological developments by others in the electric power industry which could result in electricity being available at costs lower than those that can be achieved from our Energy Servers. If the retail price of grid electricity does not increase over time at the rate that we or our customers expect, it could reduce demand for our Energy Servers and harm our business.

Further, the local electric utility may impose “departing load,” “standby,” or other charges, including power factor charges, on our customers in connection with their acquisition of our Energy Servers, the amounts of which are outside of our control and which may have a material impact on the economic benefit of our Energy Servers to our customers. Changes in the

rates offered by local electric utilities and/or in the applicability or amounts of charges and other fees imposed by such utilities on customers acquiring our Energy Servers could adversely affect the demand for our Energy Servers.

In some states and countries, the current low cost of grid electricity, even together with available subsidies, does not render our product economically attractive. If we are unable to reduce our costs to a level at which our Energy Servers would be

competitive in such markets, or if we are unable to generate demand for our Energy Servers based on benefits other than electricity cost savings, such as reliability, resilience, or environmental benefits, our potential for growth may be limited.

Furthermore, an increase in the price of natural gas or curtailment of availability could make our Energy Servers less economically attractive to potential customers and reduce demand.

We rely on net metering arrangements that are subject to change.

Because our Energy Servers are designed to operate at a constant output twenty-four hours a day, seven days a week, and our customers’ demand for electricity typically fluctuates over the course of the day or week, there are often periods when our Energy Servers are producing more electricity than a customer may require, and such excess electricity must be exported to the local electric utility. Many, but not all, local electric utilities provide compensation to our customers for such electricity under “net metering” programs. Utility tariffs, interconnection agreements and net metering requirements are subject to changes in availability and terms. At times in the past, such changes have had the effect of significantly reducing or eliminating the benefits of such programs. Changes in the availability of, or benefits offered by, utility tariffs, the net metering requirements or interconnection agreements in place in the jurisdictions in which we operate could adversely affect the demand for our Energy Servers.

We currently face and will continue to face significant competition.

We compete for customers, financing partners, and incentive dollars with other electric power providers. Many providers of electricity, such as traditional utilities and other companies offering distributed generation products, have longer operating histories, have customer incumbency advantages, have access to and influence with local and state governments, and have access to more capital resources than do we. Significant developments in alternative technologies, such as energy storage, wind, solar, or hydro power generation, or improvements in the efficiency or cost of traditional energy sources, including coal, oil, natural gas used in combustion, or nuclear power, may materially and adversely affect our business and prospects in ways we cannot anticipate. We may also face new competitors who are not currently in the market. If we fail to adapt to changing market conditions and to compete successfully with grid electricity or new competitors, our growth will be limited which would adversely affect our business results.

We derive a substantial portion of our revenue and backlog from a limited number of customers, and the loss of or a significant reduction in orders from a large customer could have a material adverse effect on our operating results and other key metrics.

In any particular period, a substantial amount of our total revenue could come from a relatively small number of customers. As an example, in the ~~three~~six months ended ~~March 31,~~June 30, 2019, three customers accounted for approximately 72% of our total revenue. In year ended December 31, 2018, two customers accounted for approximately 54% of our total revenue. One of these customers, the Southern Company, wholly owns a Third-Party PPA, and this entity purchases Energy Servers, that are then provided to various end customers under PPAs. The loss of any large customer order or any delays in installations of new Energy Servers with any large customer could materially and adversely affect our business results.

Risks Relating to Our Products and Manufacturing

Our future success depends in part on our ability to increase our production capacity, and we may not be able to do so in a cost-effective manner.

To the extent we are successful in growing our business, we may need to increase our production capacity. Our ability to plan, construct, and equip additional manufacturing facilities is subject to significant risks and uncertainties, including the following:

The expansion or construction of any manufacturing facilities will be subject to the risks inherent in the development and construction of new facilities, including risks of delays and cost overruns as a result of factors outside our control such as delays in government approvals, burdensome permitting conditions, and delays in the delivery of manufacturing equipment and subsystems that we manufacture or obtain from suppliers.

It may be difficult to expand our business internationally without additional manufacturing facilities located outside the United States. Adding manufacturing capacity in any international location will subject us to new laws and regulations including those pertaining to labor and employment, environmental and export import. In addition, it brings with it the risk of managing larger scale foreign operations.

We may be unable to achieve the production throughput necessary to achieve our target annualized production run rate at our current and future manufacturing facilities.

Manufacturing equipment may take longer and cost more to engineer and build than expected, and may not operate as required to meet our production plans.

We may depend on third-party relationships in the development and operation of additional production capacity, which may subject us to the risk that such third parties do not fulfill their obligations to us under our arrangements with them.

We may be unable to attract or retain qualified personnel.

If we are unable to expand our manufacturing facilities, we may be unable to further scale our business. If the demand for our Energy Servers or our production output decreases or does not rise as expected, we may not be able to spread a significant amount of our fixed costs over the production volume, resulting in a greater than expected per unit fixed cost, which would have a negative impact on our financial condition and our results of operations.

If we are not able to continue to reduce our cost structure in the future, our ability to become profitable may be impaired.

We must continue to reduce the manufacturing costs for our Energy Servers to expand our market. Additionally, certain of our existing service contracts were entered into based on projections regarding service costs reductions that assume continued advances in our manufacturing and services processes which we may be unable to realize. While we have been successful in reducing our manufacturing and services costs to date, the cost of components and raw materials, for example, could increase in the future. Any such increases could slow our growth and cause our financial results and operational metrics to suffer. In addition, we may face increases in our other expenses including increases in wages or other labor costs as well as installation, marketing, sales or related costs. We may continue to make significant investments to drive growth in the future. In order to expand into new electricity markets (in which the price of electricity from the grid is lower) while still maintaining our current margins, we will need to continue to reduce our costs. Increases in any of these costs or our failure to achieve projected cost reductions could adversely affect our results of operations and financial condition and harm our business and prospects. If we are unable to reduce our cost structure in the future, we may not be able to achieve profitability, which could have a material adverse effect on our business and our prospects.

If our Energy Servers contain manufacturing defects, our business and financial results could be harmed.

Our Energy Servers are complex products and they may contain undetected or latent errors or defects. In the past, we have experienced latent defects only discovered once the Energy Server is deployed in the field. Changes in our supply chain or the failure of our suppliers to otherwise provide us with components or materials that meet our specifications could also introduce defects into our products. In addition, as we grow our manufacturing volume, the chance of manufacturing defects could increase. Any manufacturing defects or other failures of our Energy Servers to perform as expected could cause us to incur significant re-engineering costs, divert the attention of our engineering personnel from product development efforts, and significantly and adversely affect customer satisfaction, market acceptance, and our business reputation.

Furthermore, we may be unable to correct manufacturing defects or other failures of our Energy Servers in a manner satisfactory to our customers, which could adversely affect customer satisfaction, market acceptance, and our business reputation.

The performance of our Energy Servers may be affected by factors outside of our control, which could result in harm to our business and financial results.

Field conditions, such as the quality of the natural gas supply and utility processes which vary by region and may be subject to seasonal fluctuations, have affected the performance of our Energy Servers and are not always possible to predict until the Energy Server is in operation. Although we believe we have designed new generations of Energy Servers to better withstand the variety of field conditions we have encountered, as we move into new geographies and deploy new service configurations, we may encounter new and unanticipated field conditions. Adverse impacts on performance may require us to incur significant re-engineering costs or divert the attention of our engineering personnel from product development efforts. Furthermore, we may be unable to adequately address the impacts of factors outside of our control in a manner satisfactory to our customers. Any of these circumstances could significantly and adversely affect customer satisfaction, market acceptance, and our business reputation.

If our estimates of useful life for our Energy Servers are inaccurate or we do not meet service and performance warranties and guaranties, or if we fail to accrue adequate warranty and guaranty reserves, our business and financial results could be harmed.

We offer certain customers the opportunity to renew their operations and maintenance service agreements on an annual basis, for up to 25 years, at prices predetermined at the time of purchase of the Energy Server. We also provide performance warranties and guaranties covering the efficiency and output performance of our Energy Servers. Our pricing of these contracts

and our reserves for warranty and replacement are based upon our estimates of the life of our Energy Servers and their components, including assumptions regarding improvements in useful life that may fail to materialize. We do not have a long history with a large number of field deployments, and our estimates may prove to be incorrect. Failure to meet these performance warranties and guaranty levels may require us to replace the Energy Servers at our expense or refund their cost to the customer, or require us to make cash payments to the customer based on actual performance, as compared to expected performance, capped at a percentage of the relevant equipment purchase prices. We accrue for product warranty costs and recognize losses on service or performance warranties when required by U.S. GAAP based on our estimates of costs that may be incurred and based on historical experience. However, as we expect our customers to renew their maintenance service agreements each year, the total liability over time may be more than the accrual. Actual warranty expenses have in the past been and may in the future be greater than we have assumed in our estimates, the accuracy of which may be hindered due to our limited history operating at our current scale.

Early generations of our Energy Server did not have the useful life and did not perform at an output and efficiency level that we expected. We implemented a fleet decommissioning program for our early generation Energy Servers in our PPA I program, which resulted in a significant adjustment to revenue in the quarter ended December 31, 2015, as we would otherwise have failed to meet efficiency and output warranties. As of ~~March 31,~~June 30, 2019, we had a total of 5744 megawatts in total deployed early generation servers, including our first and second generation servers, out of our total installed base of ~~396~~412 megawatts. We expect that our deployed early generation Energy Servers may continue to perform at a lower output and efficiency level and, as a result, the maintenance costs may exceed the contracted prices that we expect to generate if our customers continue to renew their maintenance service agreements in respect of those servers.

Our business is subject to risks associated with construction, utility interconnection, cost overruns and delays, including those related to obtaining government permits and other contingencies that may arise in the course of completing installations.

Because we generally do not recognize revenue on the sales of our Energy Servers until installation and acceptance, our financial results are dependent, to a large extent, on the timeliness of the installation of our Energy Servers. Furthermore, in some cases, the installation of our Energy Servers may be on a fixed price basis, which subjects us to the risk of cost overruns or other unforeseen expenses in the installation process.

The construction, installation, and operation of our Energy Servers at a particular site is also generally subject to oversight and regulation in accordance with national, state, and local laws and ordinances relating to building codes, safety, environmental protection, and related matters, and typically require various local and other governmental approvals and permits, including environmental approvals and permits, that vary by jurisdiction. In some cases, these approvals and permits require periodic renewal. It is difficult and costly to track the requirements of every individual authority having jurisdiction over our installations, to design our Energy Servers to comply with these varying standards, and to obtain all applicable approvals and permits. We cannot predict whether or when all permits required for a given project will be granted or whether the conditions associated with the permits will be achievable. The denial of a permit or utility connection essential to a project or the imposition of impractical conditions would impair our ability to develop the project. In addition, we cannot predict whether the permitting process will be lengthened due to complexities and appeals. Delay in the review and permitting process for a project can impair or delay our and our customers’ abilities to develop that project or may increase the cost so substantially that the project is no longer attractive to us or our customers. Furthermore, unforeseen delays in the review and permitting process could delay the timing of the installation of our Energy Servers and could therefore adversely affect the timing of the recognition of revenue related to the installation, which could harm our operating results in a particular period.

In addition, the completion of many of our installations is dependent upon the availability of and timely connection to the natural gas grid and the local electric grid. In some jurisdictions, the local utility company(ies) or the municipality has denied our request for connection or has required us to reduce the size of certain projects. Any delays in our ability to connect with utilities, delays in the performance of installation-related services, or poor performance of installation-related services by our general contractors or sub-contractors will have a material adverse effect on our results and could cause operating results to vary materially from period to period.

Furthermore, we rely on the ability of our third party general contractors to install Energy Servers at our customers’ sites and to meet our installation requirements. We currently work with a limited number of general contractors, which has impacted and may continue to impact our ability to make installations as planned. Our work with contractors or their sub-contractors may have the effect of us being required to comply with additional rules (including rules unique to our customers), working conditions, site remediation, and other union requirements, which can add costs and complexity to an installation project. The timeliness, thoroughness, and quality of the installation-related services performed by some of our general contractors and their sub-contractors in the past have not always met our expectations or standards and in the future may not meet our expectations and standards.

The failure of our suppliers to continue to deliver necessary raw materials or other components of our Energy Servers in a timely manner could prevent us from delivering our products within required time frames, and could cause installation delays, cancellations, penalty payments, and damage to our reputation.

We rely on a limited number of third-party suppliers for some of the raw materials and components for our Energy Servers, including certain rare earth materials and other materials that may be of limited supply. If our suppliers provide insufficient inventory at the level of quality required to meet customer demand or if our suppliers are unable or unwilling to provide us with the contracted quantities (as we have limited or in some case no alternatives for supply), our results of operations could be materially and negatively impacted. If we fail to develop or maintain our relationships with our suppliers, or if there is otherwise a shortage or lack of availability of any required raw materials or components, we may be unable to manufacture our Energy Servers or our Energy Servers may be available only at a higher cost or after a long delay. Such delays could prevent us from delivering our Energy Servers to our customers within required time frames and cause order cancellations. We have had to create our own supply chain for some of the components and materials utilized in our fuel cells. We have made significant expenditures in the past to develop our supply chain. In many cases, we entered into contractual relationships with suppliers to jointly develop the components we needed. These activities were time and capital intensive. Accordingly, the number of suppliers we have for some of our components and materials is limited and in some cases sole sourced. Some of our suppliers use proprietary processes to manufacture components. We may be unable to obtain comparable components from alternative suppliers without considerable delay, expense, or at all, as replacing these suppliers could require us either to make significant investments to bring the capability in-house or to invest in a new supply chain partner. Some of our suppliers are smaller, private companies, heavily dependent on us as a customer. If our suppliers face difficulties obtaining the credit or capital necessary to expand their operations when needed, they could be unable to supply necessary raw materials and components needed to support our planned sales and services operations, which would negatively impact our sales volumes and cash flows.

Moreover, we may experience unanticipated disruptions to operations or other difficulties with our supply chain or internalized supply processes due to exchange rate fluctuations, volatility in regional markets from where materials are obtained (particularly China and Taiwan), changes in the general macroeconomic outlook, global trade disputes, political instability, expropriation or nationalization of property, civil strife, strikes, insurrections, acts of terrorism, acts of war, or natural disasters. The failure by us to obtain raw materials or components in a timely manner or to obtain raw materials or components that meet our quantity and cost requirements could impair our ability to manufacture our Energy Servers or increase their costs or service costs of our existing portfolio of Energy Servers under maintenance services agreements. If we cannot obtain substitute materials or components on a timely basis or on acceptable terms, we could be prevented from delivering our Energy Servers to our customers within required timeframes, which could result in sales and installation delays, cancellations, penalty payments, or damage to our reputation, any of which could have a material adverse effect on our business and results of operations. In addition, we rely on our suppliers to meet quality standards, and the failure of our suppliers to meet or exceed those quality standards could cause delays in the delivery of our products, cause unanticipated servicing costs, and cause damage to our reputation.

We have, in some instances, entered into long-term supply agreements that could result in insufficient inventory and negatively affect our results of operations.

We have entered into long-term supply agreements with certain suppliers. Some of these supply agreements provide for fixed or inflation-adjusted pricing, substantial prepayment obligations and in a few cases, supplier purchase commitments. These arrangements could mean that we end up paying for inventory that we did not need or that was at a higher price than the market. Further, we face significant specific counterparty risk under long-term supply agreements when dealing with suppliers without a long, stable production and financial history. Given the uniqueness of our product, many of our suppliers do not have a long operating history and are private companies that may not have substantial capital resources. In the event any such supplier experiences financial difficulties, it may be difficult or impossible, or may require substantial time and expense, for us to recover any or all of our prepayments. We do not know whether we will be able to maintain long-term supply relationships with our critical suppliers or whether we may secure new long-term supply agreements. Additionally, many of our parts and

materials are procured from foreign suppliers, which exposes us to risks including unforeseen increases in costs or interruptions in supply arising from changes in applicable international trade regulations such as taxes, tariffs or quotas. Any of the foregoing could materially harm our financial condition and our results of operations.

We face supply chain competition, including competition from businesses in other industries, which could result in insufficient inventory and negatively affect our results of operations.

Certain of our suppliers also supply parts and materials to other businesses including businesses engaged in the production of consumer electronics and other industries unrelated to fuel cells. As a relatively low-volume purchaser of certain of these parts and materials, we may be unable to procure a sufficient supply of the items in the event that our suppliers fail to

produce sufficient quantities to satisfy the demands of all of their customers, which could materially harm our financial condition and our results of operations.

We, and some of our suppliers, obtain capital equipment used in our manufacturing process from sole suppliers and, if this equipment is damaged or otherwise unavailable, our ability to deliver our Energy Servers on time will suffer.

Some of the capital equipment used to manufacture our products and some of the capital equipment used by our suppliers have been developed and made specifically for us, are not readily available from multiple vendors, and would be difficult to repair or replace if they did not function properly. If any of these suppliers were to experience financial difficulties or go out of business or if there were any damage to or a breakdown of our manufacturing equipment and we could not obtain replacement equipment in a timely manner, our business would suffer. In addition, a supplier’s failure to supply this equipment in a timely manner with adequate quality and on terms acceptable to us could disrupt our production schedule or increase our costs of production and service.

Possible new tariffs could have a material adverse effect on our business.

Our business is dependent on the availability of raw materials and components for our Energy Servers, particularly electrical components common in the semiconductor industry, specialty steel products / processing and raw materials. ~~Recently~~Tariffs imposed ~~tariffs~~ on steel and aluminum imports have increased the cost of raw materials for our Energy Servers and decreased the available supply. Additional new tariffs or other trade protection measures which are proposed or threatened and the potential escalation of a trade war and retaliation measures could have a material adverse effect on our business, results of operations and financial condition.

Although we currently maintain alternative sources for raw materials, our business is subject to the risk of price fluctuations and periodic delays in the delivery of certain raw materials, which tariffs may exacerbate. Disruptions in the supply of raw materials and components could temporarily impair our ability to manufacture our Energy Servers for our customers or require us to pay higher prices in order to obtain these raw materials or components from other sources, which could affect our business and our results of operations. While it is too early to predict how the recently enacted tariffs on imported steel will impact our business, the imposition of tariffs on items imported by us from China or other countries could increase our costs and could have a material adverse effect on our business and our results of operations.

Risks Relating to Government Incentive Programs

Our business currently depends on the availability of rebates, tax credits and other financial incentives, and the reduction, modification, or elimination of such benefits could cause our revenue to decline and harm our financial results.

The U.S. federal government and some state and local governments provide incentives to end users and purchasers of our Energy Servers in the form of rebates, tax credits, and other financial incentives, such as system performance payments and payments for renewable energy credits associated with renewable energy generation. In addition, some countries outside the U.S. also provide incentives to end users and purchasers of our Energy Servers. We currently have operations and sell our Energy Servers in Japan, China, India, and the Republic of Korea, collectively our Asia Pacific region, where Renewable Portfolio Standards ("RPS") are in place to promote the adoption of renewable power generation, including fuel cells. Our Energy Servers have qualified for tax exemptions, incentives, or other customer incentives in many states including the states of California, Connecticut, Massachusetts, New Jersey and New York. Some states have utility procurement programs and/or renewable portfolio standards for which our technology is eligible. Our Energy Servers are currently installed in eleven U.S. states, each of which may have its own enabling policy framework. We rely on these governmental rebates, tax credits, and other financial incentives to significantly lower the effective price of the Energy Servers to our customers in the U. S. and the Asia Pacific region. Our financing partners and Equity Investors in Bloom Electrons programs may also take advantage of these financial incentives, lowering the cost of capital and energy to our customers. However, these incentives or RPS may expire on

a particular date, end when the allocated funding is exhausted, or be reduced or terminated as a matter of regulatory or legislative policy.

For example, the previous federal investment tax credit ("ITC"), a federal tax incentive for fuel cell production, expired on December 31, 2016. Without the availability of the ITC benefit incentive, we lowered the price of our Energy Servers to ensure the economics to our customers would remain the same as it was prior to losing the ITC benefit, adversely affecting our gross profit. While the ITC was reinstated by the U.S Congress on February 9, 2018 and made retroactive to January 1, 2017, under current law it will phase out on December 31, 2022.

As another example, the California Self Generation Incentive Program ("SGIP") is a program administered by the California Public Utilities Commission ("CPUC") which provides incentives to investor-owned utility customers that install

eligible distributed energy resources. In July 2016, the CPUC modified the SGIP to provide a smaller allocation of the incentives available to generating technologies such as our Energy Servers and a larger allocation to storage technologies. As modified, the SGIP will require all eligible power generation sources consuming natural gas to use a minimum 50% biogas to receive SGIP funds in 2019 and 100% in 2020. In addition, the CPUC provided a further limitation on the available allocation of funds that any one participant may claim under the SGIP. The SGIP will expire on January 21, 2021 absent any extension. Our customer sites accepted benefiting from the SGIP represented approximately 0% and ~~18%~~5% of total sites accepted for the ~~three~~six months ended ~~March 31,~~June 30, 2019 and 2018, respectively.

Changes in federal, state, or local programs or the RPS in the Asia Pacific region could reduce demand for our Energy Servers, impair sales financing, and adversely impact our business results. The continuation of these programs depends upon political support which to date has been bipartisan and durable. Nevertheless, one set of political activists aggressively seeks to eliminate these programs while another set seeks to deny access to these programs for any technology that relies on natural gas, regardless of the technology’s positive contribution to reducing air pollution, reducing carbon emissions or enabling electric service to be more reliable and resilient.

We rely on tax equity financing arrangements to realize the benefits provided by investment tax credits and accelerated tax depreciation and, in the event these programs are terminated, our financial results could be harmed.

We expect that any Energy Server deployments through financed transactions (including our Bloom Electrons programs, our leasing programs and any Third-Party PPA Programs) will receive capital from financing parties ("Equity Investors") who derive a significant portion of their economic returns through tax benefits. Equity Investors are generally entitled to substantially all of the project’s tax benefits, such as those provided by the ITC and Modified Accelerated Cost Recovery System ("MACRS") or bonus depreciation, until the Equity Investors achieve their respective agreed rates of return. The number of and available capital from potential Equity Investors is limited, we compete with other energy companies eligible for these tax benefits to access such investors, and the availability of capital from Equity Investors is subject to fluctuations based on factors outside of our control such as macroeconomic trends and changes in applicable taxation regimes. Concerns regarding our limited operating history, lack of profitability and that we are only the party who can perform operations and maintenance on our ~~energy servers~~Energy Servers have made it difficult to attract investors in the past. Our ability to obtain additional financing in the future depends on the continued confidence of banks and other financing sources in our business model, the market for our Energy Servers, and the continued availability of tax benefits applicable to our Energy Servers. In addition, conditions in the general economy and financial and credit markets may result in the contraction of available tax equity financing. If we are unable to enter into tax equity financing agreements with attractive pricing terms, or at all, we may not be able to obtain the capital needed to fund our financing programs or use the tax benefits provided by the ITC and MACRS depreciation, which could make it more difficult for customers to finance the purchase of our Energy Servers. Such circumstances could also require us to reduce the price at which we are able to sell our Energy Servers and therefore harm our business, our financial condition, and our results of operations.

Risks Related to Legal Matters and Regulations

We are subject to various environmental laws and regulations that could impose substantial costs upon us and cause delays in building our manufacturing facilities.

We are subject to national, state, and local environmental laws and regulations as well as environmental laws in those foreign jurisdictions in which we operate. Environmental laws and regulations can be complex and may often change. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury, fines, and penalties. Recently, for example, we paid rather than contest an administrative penalty of $40,000 and assessed costs of $5,454.43 related to the start-up of upgraded units at our Delaware Fuel Cell Project before such upgraded units were inspected. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties or third-party damages. In addition, ensuring we are in compliance with applicable environmental laws ~~could require~~requires significant time and management resources and could cause delays in our ability to build out,

equip and operate our facilities as well as service our fleet, which would adversely impact our business, our prospects, our financial condition, and our operating results. In addition, environmental laws and regulations such as the Comprehensive Environmental Response, Compensation and Liability Act in the United States impose liability on several grounds including for the investigation and cleanup of contaminated soil and ground water, for building contamination, for impacts to human health and for damages to natural resources. If contamination is discovered in the future at properties formerly owned or operated by us or currently owned or operated by us, or properties to which hazardous substances were sent by us, it could result in our liability under environmental laws and regulations. Many of our customers who purchase our Energy Servers have high sustainability standards, and any environmental noncompliance by us could harm our reputation and impact a current or potential customer’s buying decision. The costs of complying with environmental laws, regulations, and customer requirements, and any claims concerning noncompliance or liability with respect to contamination in the future, could have a material adverse effect on our financial condition or our operating results.

The installation and operation of our Energy Servers are subject to environmental laws and regulations in various jurisdictions, and there is uncertainty with respect to the interpretation of certain environmental laws and regulations to our Energy Servers, especially as these regulations evolve over time.

Bloom is committed to compliance with applicable environmental laws and regulations including health and safety standards, and we continually review the operation of our Energy Servers for health, safety, and environmental compliance. Our Energy Servers, like other fuel cell technology-based products of which we are aware, produce small amounts of hazardous wastes and air pollutants, and we seek to ensure that they are handled in accordance with applicable regulatory standards.

Maintaining compliance with laws and regulations can be challenging given the changing patchwork of environmental laws and regulations that prevail at the federal, state, regional, and local level. Most existing environmental laws and regulations preceded the introduction of our innovative fuel cell technology and were adopted to apply to technologies existing at the time, namely large coal, oil, or gas-fired power plants. Currently, there is generally little guidance from these agencies on how certain environmental laws and regulations may or may not be applied to our technology.

For example, natural gas, which is the primary fuel used in our Energy Servers, contains benzene, which is classified as a hazardous waste if it exceeds 0.5 milligrams ("mg") per liter. A small amount of benzene found in the public natural gas pipeline (equivalent to what is present in one gallon of gasoline in an automobile fuel tank which are exempt from federal regulation) is collected by the gas cleaning units contained in our Energy Servers which are typically replaced once every 18 to 24 months by us from customers’ sites. From 2010 to late 2016 and in the regular course of maintenance of the Energy Servers, we periodically replaced the units in our servers under a federal environmental exemption that permitted the handling of such units without manifesting the contents as containing a hazardous waste. Although at the time we believed that we operated under the exemption with the approval of two states that had adopted the federal exemption, the U.S. Environmental Protection Agency ("EPA") issued guidance for the first time in late 2016 that differed from our belief and conflicted with the state approvals we had obtained even though we had operated under the exemption since 2010. We have complied with the new guidance and, given the comparatively small quantities of benzene produced, we do not anticipate significant additional costs or risks from our compliance with the revised 2016 guidance. However, the EPA has asked us to show cause why it should not collect approximately $1.0 million in fines from us for the prior period, which we are contesting. Additionally, we paid a nominal fine to an agency in a different state under that state’s environmental laws relating to the operation of our Energy Server under the exemption prior to the issuance of the revised EPA guidance.

Another example relates to the very small amounts of chromium in hexavalent form, or CR+6, which our Energy Servers emit at nanometer scale. This occurs any time a steel super alloy is exposed to high temperatures. CR+6 is found in small concentrations in the air generally. However, exposure to high or significant concentrations over prolonged periods of time can be carcinogenic. While the small amount of chromium emitted by our Energy Servers is initially in the hexavalent form, it converts to a non-toxic trivalent form, or CR+3, rapidly after it leaves the Energy Server. In tests we have conducted, air measurements taken 10 meters from an Energy Server show that the CR+6 is largely converted.

Our Energy Servers do not present any significant health hazard based on our modeling, testing methodology, and measurements. There are several supporting elements to this position including that the emissions from our Energy Servers are in very low concentrations, are emitted as nano-particles that convert to the non-hazardous form CR+3 rapidly, are quickly dispersed into the air, and are not emitted in close proximity to locations where people would be expected to have a prolonged exposure. Nevertheless, we have engineered a technology solution that we are deploying.

Several states in which we currently operate, including California, require permits for emissions of hazardous air pollutants based on the quantity of emissions, most of which require permits only for quantities of emissions that are higher than those observed from our Energy Servers. Other states in which we operate, including New York, New Jersey, and North Carolina, have specific exemptions for fuel cells. Some states in which we operate have CR+6 limits which are an order of

magnitude over our operating range. Within California, the Bay Area Air Quality Management District ("BAAQMD") requires a permit for emissions that are more than 0.00051 lbs/year. Other California regulations require that levels of CR+6 be below 0.00005 µg/m³, which is the level required by Proposition 65 and which requires notification of the presence of CR+6 unless it can be shown to be at levels that do not pose a significant health risk. We have determined that the standards applicable in California in this regard are more stringent than those in any other state or foreign location in which we have installed Energy Servers to date, therefore, deployment of our solution has been focused on California's standards.

There are generally no relevant environmental testing methodology guidelines for a technology such as ours. The standard test method for analyzing emissions cannot be readily applied to our Energy Servers because it would require inserting a probe into an emission stack. Our servers do not have emission stacks; therefore, we have to construct an artificial stack on top of our server in order to conduct a test. If we used the testing methodology similar to what the air districts have used in other large scale industrial products, it would show that we would need to reduce the emissions of CR+6 from our Energy

Servers to meet the most stringent requirements. However, we employed a modified test method that is designed to capture the actual operating conditions of our Energy Servers and its distinctly different design from legacy power plants and industrial equipment. Based on our modeling, measured results and analysis, we believe we are in compliance with State of California air regulations. However, it is possible that the California Air Districts will require us to abate or shut down the operations of certain of our existing Energy Servers on a temporary basis or will seek the imposition of monetary fines.

While we seek to comply with air quality and emission standards in every region in which we operate, it is possible that certain customers in other regions may request that we provide the new technology solution for their Energy Servers to comply with the stricter standards imposed by California even though they are not applicable and even though we are under no contractual obligation to do so. We plan to satisfy these requests from customers. Failure or delay in attaining regulatory approval could result in our not being able to operate in a particular local jurisdiction.

These examples illustrate that our technology is moving faster than the regulatory process in many instances. It is possible that regulators could delay or prevent us from conducting our business in some way pending agreement on, and compliance with, shifting regulatory requirements. Such actions could delay the installation of Energy Servers, could result in fines, could require modification or replacement or could trigger claims of performance warranties and defaults under customer contracts that could require us to repurchase their Energy Servers, any of which could adversely affect our business, our financial performance, and our reputation. In addition, new laws or regulations or new interpretations of existing laws or regulations could present marketing, political or regulatory challenges and could require us to upgrade or retrofit existing equipment, which could result in materially increased capital and operating expenses.

Furthermore, we have not yet determined whether our Energy Servers will satisfy regulatory requirements in the other states in the U.S. and in international locations in which we do not currently sell Energy Servers but may pursue in the future.

As a fossil fuel-based technology, we may be subject to a heightened risk of regulation, to a potential for the loss of certain incentives, and to changes in our customers’ energy procurement policies.

Although the current generation of Energy Servers running on natural gas produce nearly ~~60%~~50% less carbon emissions compared to the average of U.S. combustion power generation, the operation of our Energy Servers does produce carbon dioxide ~~(CO2)~~("CO2"), which has been shown to be a contributing factor to global climate change. As such, we may be negatively impacted by CO2-related changes in applicable laws, regulations, ordinances, rules, or the requirements of the incentive programs on which we and our customers currently rely. Changes ~~or in some cases~~(or a lack of change to comprehensively recognize the risks of climate change and recognize the benefit of our technology as one means to maintain reliable and resilient electric service with a lower greenhouse gas emission profile) in any of the laws, regulations, ordinances, or rules that apply to our installations and new technology could make it illegal or more costly for us or our customers to install and operate our Energy Servers on particular sites, thereby negatively affecting our ability to deliver cost savings to customers, or we could be prohibited from completing new installations or continuing to operate existing projects. Certain municipalities in California have already banned the use of distributed generation products that utilize fossil fuel. Additionally, our customers’ and potential customers’ energy procurement policies may prohibit or limit their willingness to procure our Energy Servers. Our business prospects may be negatively impacted if we are prevented from completing new installations or our installations become more costly as a result of laws, regulations, ordinances, or rules applicable to our Energy Servers, or by our customers’ and potential customers’ energy procurement policies.

Existing regulations and changes to such regulations impacting the electric power industry may create technical, regulatory, and economic barriers which could significantly reduce demand for our Energy ~~Servers.~~Servers or affect the financial performance of current sites.

The market for electricity generation products is heavily influenced by U.S. federal, state, local, and foreign government regulations and policies as well as by internal policies and regulations of electric utility providers. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. These regulations and policies are often modified and could continue to change, which could result in a significant reduction in demand for our Energy Servers. For example, utility companies commonly charge fees to larger industrial customers for disconnecting from the electric grid or for having the capacity to use power from the electric grid for back-up purposes. These fees could change, thereby increasing the cost to our customers of using our Energy Servers and making them less economically attractive.

In addition, our project with Delmarva Power & Light Company ("~~Delmarva"~~the Delaware Project") is subject to laws and regulations relating to electricity generation, transmission, and sale ~~such~~in Delaware and at the federal level.

A law governing the sale of electricity from the Delaware Project was necessary to implement part of several incentives that Delaware offered to Bloom to build our major Manufacturing Center in Delaware. Those incentives have proven controversial in Delaware, in part because our Manufacturing Center, while a significant source of continuing manufacturing employment, has not expanded as quickly as projected. A citizen-antagonist continues to oppose the Delaware Project and seeks support from Delaware officials and others. In 2018, he unsuccessfully petitioned the Delaware Public Service Commission. Most recently, he has appealed a favorable Order of the Secretary of Delaware’s Department of Natural Resources and Environmental Control to Delaware’s Environmental Appeals Board (EAB), an administrative entity with authority to review the Secretary’s Orders. The Secretary’s Order at issue approved permits that enable the upgrade of the Delaware Project. We expect the EAB to uphold the Secretary’s Order as the appeal is without merit and raises issues that are outside the scope of the permits and beyond the jurisdiction of the EAB. While we believe the appeal is without merit, if the appeal was successful, we may face adverse consequences that would negatively affect our operation of the Delaware Project. The Appeal and the opposition to the Delaware Project are examples of potentially material risks associated with electric power regulation.

At the federal level, the Federal Energy Regulatory Commission ("FERC") ~~regulation~~has authority to regulate under various federal energy regulatory laws, ~~which requires FERC authorization to make~~ wholesale sales of electric energy, capacity, and ancillary ~~services.~~services, and the delivery of natural gas in interstate commerce. Also, several of our PPA Entities are subject to regulation under FERC with respect to market-based sales of electricity, which requires us to file notices and make other periodic filings with FERC, which increases our costs and subjects us to additional regulatory oversight.

Although we generally are not regulated as a utility, federal, state, and local government statutes and regulations concerning electricity heavily influence the market for our product and services. These statutes and regulations often relate to electricity pricing, net metering, incentives, taxation, and the rules surrounding the interconnection of customer-owned

electricity generation for specific technologies. In the United States, governments frequently modify these statutes and regulations. Governments, often acting through state utility or public service commissions, change and adopt different requirements for utilities and rates for commercial customers on a regular basis. Changes, or in some cases a lack of change, in any of the laws, regulations, ordinances, or other rules that apply to our installations and new technology could make it more costly for us or our customers to install and operate our Energy Servers on particular sites and, in turn, could negatively affect our ability to deliver cost savings to customers for the purchase of electricity.

We may become subject to product liability claims which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

We may in the future become subject to product liability claims. Our Energy Servers are considered high energy systems because they use flammable fuels and may operate at 480 volts. Although our Energy Servers are certified to meet ANSI, IEEE, ASME, and NFPA design and safety standards, if not properly handled in accordance with our servicing and handling standards and protocols, there could be a system failure and resulting liability. These claims could require us to incur significant costs to defend. Furthermore, any successful product liability claim could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our company and our Energy Servers, which could harm our brand, our business prospects, and our operating results. While we maintain product liability insurance, our insurance may not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage or outside of our coverage may have a material adverse effect on our business and our financial condition.

Current or future litigation or administrative proceedings could have a material adverse effect on our business, our financial condition and our results of operations.

We have been and continue to be involved in legal proceedings, administrative proceedings, claims, and other litigation that arise in the ordinary course of business. Purchases of our products have also been the subject of litigation. For ~~example, in 2011, an amendment~~information regarding pending legal proceedings, please see Part II, Item 1 of this Quarterly Report on Form 10-Q captioned "Legal Proceedings" and footnote 13 to the Delaware Renewable Energy Portfolio Statute was enacted to permit the Delaware public service utility, Delmarva, to meet its renewable energy standards using energy generated by fuel cells manufacturedour consolidated financial statements entitled "Commitments and operated in Delaware. This statute required Delmarva to charge a tariff to its rate payers to pay for certain costs of providers of such energy generated by fuel cells. In 2012, plaintiffs FuelCell Energy Inc. and John A. Nichols filed suit against Delaware Governor Jack Markell and the Delaware Public Service Commission in the U.S. District Court for Delaware claiming that the 2011 amendment to the statute discriminated against interstate fuel cell providers and subsidized us for building a manufacturing facility in Delaware to manufacture fuel cells. We were not named as a party to this lawsuit and the litigation was ultimately settled. As another example, in July 2018, we received a Statement of Claim from two former executives of Advanced Equities, Inc. seeking to compel arbitration and alleging a breach of a confidential agreement from June 2014. This Statement of Claim sought, among other things, to void the indemnification and confidentiality provisions under the confidential agreement and to recover attorneys’ fees and costs. The Statement of Claim was dismissed without prejudice on July 22, 2018.Contingencies." In addition, since our Energy Server is a new type of product in a nascent market, we have in the past needed and may in the future need to seek the amendment of existing regulations, or in some cases the creation of new regulations, in order to operate our business in some jurisdictions. Such regulatory processes may require public hearings concerning our business, which could expose us to subsequent litigation.

Unfavorable outcomes or developments relating to proceedings to which we are a party or transactions involving our products such as judgments for monetary damages, injunctions, or denial or revocation of permits, could have a material adverse effect on our business, our financial condition, and our results of operations. In addition, settlement of claims could adversely affect our financial condition and our results of operations.

Risks Relating to Our Intellectual Property

Our failure to protect our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights may be costly.

Although we have taken many protective measures to protect our trade secrets including agreements, limited access, segregation of knowledge, password protections, and other measures, policing unauthorized use of proprietary technology can be difficult and expensive. For example, many of our engineers reside in California where it is not legally permissible to prevent them from working for a competitor if and when one should exist. Also, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Such litigation may result in our intellectual property rights being challenged, limited in scope, or declared invalid or

unenforceable. We cannot be certain that the outcome of any litigation will be in our favor, and an adverse determination in any such litigation could impair our intellectual property rights, our business, our prospects, and our reputation.

We rely primarily on patent, trade secret, and trademark laws and non-disclosure, confidentiality, and other types of contractual restrictions to establish, maintain, and enforce our intellectual property and proprietary rights. However, our rights under these laws and agreements afford us only limited protection and the actions we take to establish, maintain, and enforce our intellectual property rights may not be adequate. For example, our trade secrets and other confidential information could be disclosed in an unauthorized manner to third parties, our owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed, or misappropriated or our intellectual property rights may not be sufficient to provide us with a competitive advantage, any of which could have a material adverse effect on our business, financial condition, or operating results. In addition, the laws of some countries do not protect proprietary rights as fully as do the laws of the United States. As a result, we may not be able to protect our proprietary rights adequately abroad.

Our patent applications may not result in issued patents, and our issued patents may not provide adequate protection, either of which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.

We cannot be certain that our pending patent applications will result in issued patents or that any of our issued patents will afford protection against a competitor. The status of patents involves complex legal and factual questions, and the breadth of claims allowed is uncertain. As a result, we cannot be certain that the patent applications that we file will result in patents being issued or that our patents and any patents that may be issued to us in the future will afford protection against competitors with similar technology. In addition, patent applications filed in foreign countries are subject to laws, rules, and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications related to issued U.S. patents will be issued in other regions. Furthermore, even if these patent applications are accepted and the associated patents issued, some foreign countries provide significantly less effective patent enforcement than in the United States.

In addition, patents issued to us may be infringed upon or designed around by others and others may obtain patents that we need to license or design around, either of which would increase costs and may adversely affect our business, our prospects, and our operating results.

We may need to defend ourselves against claims that we infringed, misappropriated, or otherwise violated the intellectual property rights of others, which may be time-consuming and would cause us to incur substantial costs.

Companies, organizations, or individuals, including our competitors, may hold or obtain patents, trademarks, or other proprietary rights that they may in the future believe are infringed by our products or services. Although we are not currently subject to any claims related to intellectual property, these companies holding patents or other intellectual property rights allegedly relating to our technologies could, in the future, make claims or bring suits alleging infringement, misappropriation, or other violations of such rights, or otherwise assert their rights and by seeking licenses or injunctions. Several of the proprietary components used in our Energy Servers have been subjected to infringement challenges in the past. We also generally indemnify our customers against claims that the products we supply infringe, misappropriate, or otherwise violate third party intellectual property rights, and we therefore may be required to defend our customers against such claims. If a claim is successfully brought in the future and we or our products are determined to have infringed, misappropriated, or otherwise violated a third party’s intellectual property rights, we may be required to do one or more of the following:

cease selling or using our products that incorporate the challenged intellectual property;

pay substantial damages (including treble damages and attorneys’ fees if our infringement is determined to be willful);

obtain a license from the holder of the intellectual property right, which may not be available on reasonable terms or at all; or

redesign our products or means of production, which may not be possible or cost-effective.

Any of the foregoing could adversely affect our business, prospects, operating results, and financial condition. In addition, any litigation or claims, whether or not valid, could harm our reputation, result in substantial costs and divert resources and management attention.

We also license technology from third parties and incorporate components supplied by third parties into our products. We may face claims that our use of such technology or components infringes or otherwise violates the rights of others, which would subject us to the risks described above. We may seek indemnification from our licensors or suppliers under our contracts with them, but our rights to indemnification or our suppliers’ resources may be unavailable or insufficient to cover our costs and losses.

Risks Relating to Our Financial Condition and Operating Results

We have incurred significant losses in the past and we may not be profitable for the foreseeable future.

Since our inception in 2001, we have incurred significant net losses and have used significant cash in our business. As of ~~March 31,~~June 30, 2019, we had an accumulated deficit of $2.7 billion. We expect to continue to expand our operations, including by investing in manufacturing, sales and marketing, research and development, staffing systems, and infrastructure to support our growth. We anticipate that we will incur net losses for the foreseeable future. Our ability to achieve profitability in the future will depend on a number of factors, including:

growing our sales volume;

increasing sales to existing customers and attracting new customers;

attracting and retaining financing partners who are willing to provide financing for sales on a timely basis and with attractive terms;

continuing to improve the useful life of our fuel cell technology and reducing our warranty servicing costs;

reducing the cost of producing our Energy Servers;

improving the efficiency and predictability of our installation process;

improving the effectiveness of our sales and marketing activities;

attracting and retaining key talent in a competitive marketplace; and

the amount of stock based compensation recognized in the period.

Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future.

Our financial condition and results of operations and other key metrics are likely to fluctuate on a quarterly basis in future periods, which could cause our results for a particular period to fall below expectations, resulting in a severe decline in the price of our Class A common stock.

Our financial condition and results of operations and other key metrics have fluctuated significantly in the past and may continue to fluctuate in the future due to a variety of factors, many of which are beyond our control. For example, the amount of product revenue we recognize in a given period is materially dependent on the volume of installations of our Energy Servers in that period and the type of financing used by the customer.

In addition to the other risks described herein, the following factors could also cause our financial condition and results of operations to fluctuate on a quarterly basis:

the timing of installations, which may depend on many factors such as availability of inventory, product quality or performance issues, or local permitting requirements, utility requirements, environmental, health, and safety requirements, weather, and customer facility construction schedules;

size of particular installations and number of sites involved in any particular quarter;

the mix in the type of purchase or financing options used by customers in a period, and the rates of return required by financing parties in such period;

whether we are able to structure our sales agreements in a manner that would allow for the product and installation revenue to be recognized up front at acceptance;

delays or cancellations of Energy Server installations;

fluctuations in our service costs, particularly due to unaccrued costs of servicing and maintaining Energy Servers;

weaker than anticipated demand for our Energy Servers due to changes in government incentives and policies or due to other conditions;

fluctuations in our research and development expense, including periodic increases associated with the pre-production qualification of additional tools as we expand our production capacity;

interruptions in our supply chain;

the length of the sales and installation cycle for a particular customer;

the timing and level of additional purchases by existing customers;

unanticipated expenses or installation delays associated with changes in governmental regulations, permitting requirements by local authorities at particular sites, utility requirements and environmental, health, and safety requirements;

disruptions in our sales, production, service or other business activities resulting from disagreements with our labor force or our inability to attract and retain qualified personnel; and

unanticipated changes in federal, state, local, or foreign government incentive programs available for us, our customers, and tax equity financing parties.

Fluctuations in our operating results and cash flow could, among other things, give rise to short-term liquidity issues. In addition, our revenue, key operating metrics, and other operating results in future quarters may fall short of the expectations of investors and financial analysts, which could have an adverse effect on the price of our Class A common stock.

If we fail to manage our growth effectively, our business and operating results may suffer.

Our current growth and future growth plans may make it difficult for us to efficiently operate our business, challenging us to effectively manage our capital expenditures and control our costs while we expand our operations to increase our revenue. If we experience a significant growth in orders without improvements in automation and efficiency, we may need additional manufacturing capacity and we and some of our suppliers may need additional and capital intensive equipment. Any growth in manufacturing must include a scaling of quality control as the increase in production increases the possible impact of manufacturing defects. In addition, any growth in the volume of sales of our Energy Servers may outpace our ability to engage sufficient and experienced personnel to manage the higher number of installations and to engage contractors to complete installations on a timely basis and in accordance with our expectations and standards. Any failure to manage our growth effectively could materially and adversely affect our business, our prospects, our operating results, and our financial condition. Our future operating results depend to a large extent on our ability to manage this expansion and growth successfully.

If we discover a material weakness in our internal control over financial reporting or otherwise fail to maintain effective internal control over financial reporting, our ability to report our financial results on a timely and an accurate basis may adversely affect the market price of our Class A common stock.

The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act") requires, among other things, that public companies evaluate the effectiveness of their internal control over financial reporting and disclosure controls and procedures. As a recently public company and as an emerging growth company, we elected to delay adopting the requirements of the Sarbanes-Oxley Act as is our option under the Sarbanes-Oxley Act. Although we did not discover any material weaknesses in internal control over financial reporting at ~~March 31,~~June 30, 2019, subsequent testing by us or our independent registered public accounting firm, which has not yet performed an audit of our internal control over financial reporting, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. To comply with Section 404A, we may incur substantial cost, expend significant management time on compliance-related issues, and hire additional accounting, financial, and internal audit staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404A in a timely manner or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we could be subject to sanctions or investigations by the Securities and Exchange Commission ("SEC") or other regulatory authorities, which would require additional financial and management resources. Any failure to maintain effective disclosure controls and procedures or internal control over financial reporting could have a material adverse effect on our business and operating results and cause a decline in the price of our Class A common stock. For further discussion on Section 404A compliance, see our Risk Factor: We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors and may make it more difficult to compare our performance with other public companies.

Our ability to use our deferred tax assets to offset future taxable income may be subject to limitations that could subject our business to higher tax liability.

We may be limited in the portion of net operating loss carryforwards that we can use in the future to offset taxable income for U.S. federal and state income tax purposes. Our net operating loss carryforwards ("NOLs") will expire, if unused, beginning in 2022 and 2028, respectively. A lack of future taxable income would adversely affect our ability to utilize these NOLs. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income.

Changes in our stock ownership as well as other changes that may be outside of our control could result in ownership changes under Section 382 of the Code, which could cause our NOLs to be subject to certain limitations. Our NOLs may also be impaired under similar provisions of state law. Our deferred tax assets, which are currently fully reserved with a valuation allowance, may expire unutilized or underutilized, which could prevent us from offsetting future taxable income.

Risks Relating to Our Liquidity

We must maintain customer confidence in our liquidity and long-term business prospects in order to grow our business.

Currently, we are the only provider able to fully support and maintain our Energy Servers. If potential customers believe we do not have sufficient capital or liquidity to operate our business over the long-term or that we will be unable to maintain their Energy Servers and provide satisfactory support, customers may be less likely to purchase or lease our products, particularly in light of the significant financial commitment required. In addition, financing sources may be unwilling to provide financing on reasonable terms. Similarly, suppliers, financing partners, and other third parties may be less likely to invest time and resources in developing business relationships with us if they have concerns about the success of our business.

Accordingly, in order to grow our business, we must maintain confidence in our liquidity and long-term business prospects among customers, suppliers, financing partners, and other parties. This may be particularly complicated by factors such as:

our limited operating history at a large scale;

our lack of profitability;

unfamiliarity with or uncertainty about our Energy Servers and the overall perception of the distributed generation market;

prices for electricity or natural gas in particular markets;

competition from alternate sources of energy;

warranty or unanticipated service issues we may experience;

the environmental consciousness and perceived value of environmental programs to our customers;

the size of our expansion plans in comparison to our existing capital base and the scope and history of operations;

the availability and amount of tax incentives, credits, subsidies or other incentive programs; and

the other factors set forth in this “Risk Factors” section.

Several of these factors are largely outside our control, and any negative perceptions about our liquidity or long-term business prospects, even if unfounded, would likely harm our business.

Our substantial indebtedness, and restrictions imposed by the agreements governing our, and our PPA Entities’, outstanding indebtedness, may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs.

As of ~~March 31,~~June 30, 2019, we and our subsidiaries had approximately ~~$741.1~~$668.2 million of total consolidated indebtedness, of which an aggregate of ~~$401.3~~$405.8 million represented indebtedness that is recourse to us. Of this ~~$741.1~~$668.2 million debt, ~~$35.1~~$35.6 million represented debt under our 5% Notes, ~~$2.8~~$2.4 million represented operating debt, ~~$339.8~~$262.4 million represented debt of our PPA Entities, ~~$267.3~~$271.5 million represented debt under our 6% Notes and ~~$96.1~~$96.4 million represented debt under our 10% Notes. The agreements governing our and our PPA Entities’ outstanding indebtedness contain, and other future debt agreements may contain, covenants imposing operating and financial restrictions on our business that limit our flexibility including, among other things, to:

borrow money;

pay dividends or make other distributions;

incur liens;

make asset dispositions;

make loans or investments;

issue or sell share capital of our subsidiaries;

issue guaranties;

enter into transactions with affiliates;

merge, consolidate or sell, lease or transfer all or substantially all of our assets;

require us to dedicate a substantial portion of cash flow from operations to the payment of principal and interest on indebtedness, thereby reducing the funds available for other purposes such as working capital and capital expenditures;

make it more difficult for us to satisfy and comply with our obligations with respect to our indebtedness;

subject us to increased sensitivity to interest rate increases;

make us more vulnerable to economic downturns, adverse industry conditions, or catastrophic external events;

limit our ability to withstand competitive pressures;

limit our ability to invest in new business subsidiaries that are not PPA Entity-related;

reduce our flexibility in planning for or responding to changing business, industry, and economic conditions; and/or

place us at a competitive disadvantage to competitors that have relatively less debt than we have.

Our debt agreements and our PPA Entities’ debt agreements require the maintenance of financial ratios or the satisfaction of financial tests such as debt service coverage ratios and consolidated leverage ratios. Our and our PPA Entities’ ability to meet these financial ratios and tests may be affected by events beyond our control and, as a result, we cannot assure you that we will be able to meet these ratios and tests. Upon the occurrence of events such as a change in control of our company, significant asset sales or mergers or similar transactions, the liquidation or dissolution of our company or the cessation of our stock exchange listing, holders of our 6% Notes have the right to cause us to repurchase for cash any or all of such outstanding notes at a repurchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon. We cannot provide assurance that we would have sufficient liquidity to repurchase such notes. Furthermore, our financing and debt agreements, such as our 6% Notes and our 10% Notes, contain events of default. If an event of default were to occur, the trustee or the lenders could, among other things, terminate their commitments and declare outstanding amounts due and payable and our cash may become restricted. We cannot provide assurance that we would have sufficient liquidity to repay or refinance our indebtedness if such amounts were accelerated upon an event of default. Borrowings under other debt instruments that contain cross-acceleration or cross-default provisions may, as a result, be accelerated and become due and payable as a consequence. We may be unable to pay these debts in such circumstances. If we were unable to repay those amounts, lenders could proceed against the collateral granted to them to secure repayment of those amounts. We cannot assure you that the collateral will be sufficient to repay in full those amounts. We cannot provide assurance that the operating and financial restrictions and covenants in these agreements will not adversely affect our ability to finance our future operations or capital needs, or our ability to engage in other business activities that may be in our interest or our ability to react to adverse market developments.

If our PPA Entities default on their obligations under non-recourse financing agreements, we may decide to make payments to prevent such PPA Entities’ creditors from foreclosing on the relevant collateral, as such a foreclosure would result in our losing our ownership interest in the PPA Entity or in some or all of its assets, or a material part of our assets, as the case may be. To satisfy these obligations, we may be required to use amounts distributed by our other PPA Entities as well as other sources of available cash, thereby reducing the cash available to develop our projects and to our operations. The loss of a material part of our assets or our ownership interest in one or more of our PPA Entities or some or all of their assets, or any use of our resources to support our obligations or the obligations of our PPA Entities, could have a material adverse effect on our business, our financial condition, and our results of operations.

As of ~~March 31,~~June 30, 2019, we and our subsidiaries had approximately ~~$741.1~~$668.2 million of total consolidated indebtedness, including ~~$37.5~~$26.2 million in short-term debt and ~~$703.6~~$642.0 million in long-term debt. In addition, our 10% Notes contain restrictions on our ability to issue additional debt and both the 6% Notes and 10% Notes limit our ability to provide collateral for any additional debt. Given our current level of indebtedness, the restrictions on additional indebtedness contained in the 10% Notes and the fact that most of our assets serve as collateral to secure existing debt, it may be difficult for us to secure additional debt financing at an attractive cost, which may in turn impact our ability to expand our operations and our product development activities and to remain competitive in the market.

In addition, our substantial level of indebtedness could limit our ability to obtain required additional financing on acceptable terms or at all for working capital, capital expenditures, and general corporate purposes. Any of these risks could impact our ability to fund our operations or limit our ability to expand our business, which could have a material adverse effect

on our business, our financial condition, our liquidity, and our results of operations. Our liquidity needs could vary significantly and may be affected by general economic conditions, industry trends, performance, and many other factors not within our control.

We may not be able to generate sufficient cash to meet our debt service obligations.

Our ability to generate sufficient cash to make scheduled payments on our debt obligations will depend on our future financial performance, which will be affected by a range of economic, competitive, and business factors, many of which are outside of our control.

In addition, we conduct a significant volume of our operations through, and receive equity allocations from, our PPA Entities, which contribute to our cash flow. These PPA Entities are separate and distinct legal entities, do not guarantee our debt obligations, and will have no obligation, contingent or otherwise, to pay amounts due under our debt obligations or to make any funds available to pay those amounts, whether by dividend, distribution, loan, or other payments. Distributions by the PPA Entities to us are precluded under these arrangements if there is an event of default or if financial covenants, such as maintenance of applicable debt service coverage ratios, are not met even if there is not otherwise an event of default. Furthermore, under the terms of our equity financing arrangements for ~~PPA Company II,~~ PPA Company IIIa and PPA Company IIIb, substantially all of the cash flows generated from these PPA Entities in excess of debt service obligations are distributed to Equity Investors until the investors achieve a targeted internal rate of return or until a fixed date in the future ("Flip Date"), which is expected to be after a period of five or more years, after which time we will receive substantially all of the remaining income (loss), tax, and tax allocation attributable to the long-term customer payments and other incentives. In the case of PPA Company IV and PPA Company V, Equity Investors receive 90% of all cash flows generated in excess of its debt service obligations and other expenses for the duration of the applicable PPA Entity without any Flip Date or other time- or return-based adjustment. Moreover, even after the occurrence of the Flip Date for the PPA Entities, we do not anticipate distributions to be material enough independently to support our ongoing cash needs, and, therefore, we will still need to generate significant cash from our product sales. It is possible that the PPA Entities may not contribute significant cash to us even if we are in compliance with the financial covenants under the project debt incurred by the PPA Entities.

Future borrowings by our PPA Entities may contain restrictions or prohibitions on the payment of dividends to us. The ability of our PPA Entities to make such payments to us may be subject to applicable laws including surplus, solvency, and other limits imposed on the ability of companies to pay dividends.

If we do not generate sufficient cash to satisfy our debt obligations, including interest payments, or if we are unable to satisfy the requirement for the payment of principal at maturity or other payments that may be required from time to time under the terms of our debt instruments, we may have to undertake alternative financing plans such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments, or seeking to raise additional capital. We cannot provide assurance that any refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then in effect. Furthermore, the ability to refinance indebtedness would depend upon the condition of the finance and credit markets at the time which have in the past been, and may in the future be, volatile. Our inability to generate sufficient cash to satisfy our debt obligations or to refinance our obligations on commercially reasonable terms or on a timely basis would have an adverse effect on our business, our results of operations and our financial condition.

Under some circumstances, we may be required to or elect to make additional payments to our PPA Entities or the Power Purchase Agreement Program Equity Investors.

Our six PPA Entities are structured in a manner such that other than the amount of any equity investment we have made, we do not have any further primary liability for the debts or other obligations of the PPA Entities. However, we are required to guarantee the obligations of our wholly-owned subsidiary which invests alongside other investors in the PPA Entities. These obligations typically include the capital contribution obligations of such subsidiary to the PPA Entity as well as the representations and warranties made by and indemnification obligations of such subsidiary to Equity Investors in the applicable PPA Entity. As a result, we may be obligated to make payments on behalf of our wholly-owned subsidiary to Equity Investors in the PPA Entities in the event of a breach of these representations, warranties or covenants.

All of our PPA Entities that operate Energy Servers for end customers have significant restrictions on their ability to incur increased operating costs, or could face events of default under debt or other investment agreements if end customers are not able to meet their payment obligations under PPAs or if Energy Servers are not deployed in accordance with the project’s schedule. For example, under PPA Company IIIa’s credit agreement, on or before February 19, 2019 PPA Company IIIa was obligated to offer its lenders an insurance policy or performance bond to mitigate the risk should we will fail to perform our obligations under our operation and maintenance obligations to PPA Company IIIa. Upon receipt of such offer, the lenders may

elect to require PPA Company IIIa to obtain such insurance policy or performance bond, at PPA Company IIIa’s expense, or elect to require PPA Company IIIa to prepay all remaining amounts owed under PPA Company IIIa’s project debt. PPA Company IIIa has offered its lenders such an insurance policy and is awaiting the lenders’ decision. If our PPA Entities experience unexpected, increased costs such as insurance costs, interest expense or taxes or as a result of the acceleration of repayment of outstanding indebtedness, or if end customers are unable or unwilling to continue to purchase power under their PPAs, there could be insufficient cash generated from the project to meet the debt service obligations of the PPA Entity or to meet any targeted rates of return of Equity Investors. If a PPA Entity fails to make required debt service payments, this could constitute an event of default and entitle the lender to foreclose on the collateral securing the debt or could trigger other payment obligations of the PPA Entity. To avoid this, we could choose to contribute additional

capital to the applicable PPA Entity to enable such PPA Entity to make payments to avoid an event of default, which could adversely affect our business or our financial condition. Additionally, under PPA Company II’s credit agreement, PPA Company II is obligated to offer to repay all outstanding debt in the event that we obtain an investment grade credit rating unless we provide a guarantee of the debt obligations of the PPA Company II. Upon receipt of such offer, the lenders may elect to require PPA Company II to prepay all remaining amounts owed under PPA Company II’s project debt. Under PPA Company IV’s note purchase agreement, PPA Company IV is obligated to offer to repay all outstanding debt in the event that at any time we fail to own (directly or indirectly) at least 50.1% of the equity interest of PPA Company IV not owned by the Equity Investor(s). Upon receipt of such offer, the lenders may waive that obligation or elect to require PPA Company IV to prepay all remaining amounts owed under PPA Company IV’s project debt. The obligations under PPA Company ~~II and~~ IV have not been triggered as of ~~March 31,~~June 30, 2019.

Risks Relating to Our Operations

We may have conflicts of interest with our PPA Entities.

In each of our PPA Entities, we act as the managing member and are responsible for the day-to-day administration of the project. However, we are also a major service provider for each PPA Entity in its capacity as the operator of the Energy Servers under an operations and maintenance agreement. Because we are both the administrator and the manager of our PPA Entities, as well as a major service provider, we face a potential conflict of interest in that we may be obligated to enforce contractual rights that a PPA Entity has against us in our capacity as a service provider. By way of example, the PPA Entity may have a right to payment from us under a warranty provided under the applicable operations and maintenance agreement, and we may be financially motivated to avoid or delay this liability by failing to promptly enforce this right on behalf of the PPA Entity. While we do not believe that we had any conflicts of interest with our PPA Entities as of ~~March 31,~~June 30, 2019, conflicts of interest may arise in the future which cannot be foreseen at this time. In the event that prospective future Equity Investors and debt financing partners perceive there to exist any such conflicts, it could harm our ability to procure financing for our PPA Entities in the future, which could have a material adverse effect on our business.

If we are unable to attract and retain key employees and hire qualified management, technical, engineering, and sales personnel, our ability to compete and successfully grow our business could be harmed.

We believe that our success and our ability to reach our strategic objectives are highly dependent on the contributions of our key management, technical, engineering, and sales personnel. The loss of the services of any of our key employees could disrupt our operations, delay the development and introduction of our products and services and negatively impact our business, prospects, and operating results. In particular, we are highly dependent on the services of Dr. Sridhar, our Chairman and President and Chief Executive Officer, and other key employees. None of our key employees is bound by an employment agreement for any specific term. We cannot assure you that we will be able to successfully attract and retain senior leadership necessary to grow our business. Furthermore, there is increasing competition for talented individuals in our field, and competition for qualified personnel is especially intense in the San Francisco Bay Area where our principal offices are located. Our failure to attract and retain our executive officers and other key management, technical, engineering, and sales personnel could adversely impact our business, our prospects, our financial condition, and our operating results. In addition, we do not have “key person” life insurance policies covering any of our officers or other key employees.

A breach or failure of our networks or computer or data management systems could damage our operations and our reputation.

Our business is dependent on the security and efficacy of our networks and computer and data management systems. For example, all of our Energy Servers are connected to and controlled and monitored by our centralized remote monitoring service, and we rely on our internal computer networks for many of the systems we use to operate our business generally. Although we take protective measures and endeavor to modify them as circumstances warrant, the security of our infrastructure, including the network that connects our Energy Servers to our remote monitoring service, may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber-attacks that could have a material adverse impact on our

business and our Energy Servers in the field. A breach or failure of our networks or computer or data management systems due to intentional actions such as cyber-attacks, negligence, or other reasons could seriously disrupt our operations or could affect our ability to control or to assess the performance in the field of our Energy Servers and could result in disruption to our business and potentially legal liability. In addition, if certain of our IT systems failed, our production line might be affected, which could impact our business and operating results. These events, in addition to impacting our financial results, could result in significant costs or reputational consequences.

Our headquarters and other facilities are located in an active earthquake zone, and an earthquake or other types of natural disasters or resource shortages could disrupt and harm our results of operations.

We conduct a majority of our operations in the San Francisco Bay area in an active earthquake zone, and certain of our facilities are located within known flood plains. The occurrence of a natural disaster such as an earthquake, drought, flood, localized extended outages of critical utilities or transportation systems, or any critical resource shortages could cause a

significant interruption in our business, damage or destroy our facilities, our manufacturing equipment, or our inventory, and cause us to incur significant costs, any of which could harm our business, our financial condition, and our results of operations. The insurance we maintain against fires, earthquakes and other natural disasters may not be adequate to cover our losses in any particular case.

Expanding operations internationally could expose us to additional risks.

Although we currently primarily operate in the United States, we will seek to expand our business internationally. We currently have operations in Japan, China, India, and the Republic of Korea, collectively our Asia Pacific region. Managing any international expansion will require additional resources and controls including additional manufacturing and assembly facilities. Any expansion internationally could subject our business to risks associated with international operations, including:

conformity with applicable business customs, including translation into foreign languages and associated expenses;

lack of availability of government incentives and subsidies;

challenges in arranging, and availability of, financing for our customers;

potential changes to our established business model;

cost of alternative power sources, which could be meaningfully lower outside the United States;

availability and cost of natural gas;

difficulties in staffing and managing foreign operations in an environment of diverse culture, laws, and customers, and the increased travel, infrastructure, and legal and compliance costs associated with international operations;

installation challenges which we have not encountered before which may require the development of a unique model for each country;

compliance with multiple, potentially conflicting and changing governmental laws, regulations, and permitting processes including environmental, banking, employment, tax, privacy, and data protection laws and regulations such as the EU Data Privacy Directive;

compliance with U.S. and foreign anti-bribery laws including the Foreign Corrupt Practices Act and the U.K. Anti-Bribery Act;

difficulties in collecting payments in foreign currencies and associated foreign currency exposure;

restrictions on repatriation of earnings;

compliance with potentially conflicting and changing laws of taxing jurisdictions where we conduct business and compliance with applicable U.S. tax laws as they relate to international operations, the complexity and adverse consequences of such tax laws, and potentially adverse tax consequences due to changes in such tax laws; and

regional economic and political conditions.

As a result of these risks, any potential future international expansion efforts that we may undertake may not be successful.

We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors and may make it more difficult to compare our performance with other public companies.

We are an emerging growth company ("EGC") as defined in the U.S. legislation Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGC, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these exemptions for so long as we are an EGC, which could be until December 31, 2023, the last day of the fiscal year following the fifth anniversary of our IPO. We cannot predict if investors will find our Class A common stock less attractive because we rely on these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock, and our stock price may be more volatile.

An EGC may elect to provide financial statements in conformance with the U.S. GAAP requirement for transition periods to comply with new or revised accounting standards. With our not making this election, Section 102(b)(2) of the JOBS

Act allows us to delay our adoption of new or revised accounting standards until those standards apply to private companies. As a result, our financial statements may not be comparable to companies that comply with public company revised accounting standards effective dates.

Risks Relating to Ownership of Our Common Stock

The stock price of our Class A common stock has been and may continue to be volatile.

The market price of our Class A common stock has been and may continue to be volatile. In addition to factors discussed in this Quarterly Report on Form 10-Q, the market price of our Class A common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

overall performance of the equity markets;

actual or anticipated fluctuations in our revenue and other operating results;

changes in the financial projections we may provide to the public or our failure to meet these projections;

failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors;

recruitment or departure of key personnel;

the economy as a whole and market conditions in our industry;

new laws, regulations, subsidies, or credits or new interpretations of them applicable to our business;

negative publicity related to problems in our manufacturing or the real or perceived quality of our products;

rumors and market speculation involving us or other companies in our industry;

announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, or capital commitments;

lawsuits threatened or filed against us;

other events or factors including those resulting from war, incidents of terrorism or responses to these events;

the expiration of contractual lock-up or market standoff agreements; and

sales or anticipated sales of shares of our Class A common stock by us or our stockholders.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

Sales of substantial amounts of our Class A common stock in the public markets, or the perception that they might occur, could cause the market price of our Class A common stock to decline.

The market price of our Class A common stock could decline as a result of sales of a large number of shares of our Class A common stock in the public market as and when our Class B common stock converts to Class A common stock. The perception that these sales might occur may also cause the market price of our common stock to decline. We had a total of 59,407,578 shares of our Class A common stock and 53,806,485 shares of our Class B common stock outstanding as of ~~March 31,~~June 30, 2019. The lock up for our Class B shares expired on January 21, 2019 and these shares are now freely tradeable once converted into Class A shares, except for any shares purchased by our “affiliates” as defined in Rule 144 under the Securities Act of 1933, as amended ("Securities Act").

Further, as of ~~March 31,~~June 30, 2019, we had an aggregate of $296.2 million in convertible debt under which the outstanding principal and interest may be converted, at the option of the holders, into an aggregate of 26.3 million shares of Class B common stock. Upon conversion into Class A common stock, these shares are freely ~~tradable,~~tradeable, except to the extent these shares are held by our “affiliates” as defined in Rule 144 under the Securities Act.

In addition, as of ~~March 31,~~June 30, 2019, we had options and RSUs outstanding that, if fully exercised or settled, would result in the issuance of ~~23,140,981~~22,636,373 shares of Class B common stock. We have filed a registration statement on Form S-8 to register shares reserved for future issuance under our equity compensation plans. Subject to the satisfaction of applicable vesting requirements the shares issued upon exercise of outstanding stock options or settlement of outstanding RSUs will be available for immediate resale in the United States in the open market.

Moreover, certain holders of our common stock have rights, subject to some conditions, to require us to file registration statements for the public resale of such shares or to include such shares in registration statements that we may file for us or other stockholders.

The dual class structure of our common stock and the voting agreements among certain stockholders have the effect of concentrating voting control of our Company with KR Sridhar, our Chairman and Chief Executive Officer, and also with those stockholders who held our capital stock prior to the completion of our IPO including our directors, executive officers and significant stockholders, which limits or precludes your ability to influence corporate matters including the election of directors and the approval of any change of control transaction, and may adversely affect the trading price of our Class A common stock.

Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. As of ~~March 31,~~June 30, 2019 and after giving effect to the voting agreements between KR Sridhar, our Chairman and Chief Executive Officer, and certain holders of Class B common stock, our directors, executive officers, significant stockholders of our common stock, and their respective affiliates collectively held a substantial majority of the voting power of our capital stock. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore are able to control all matters submitted to our stockholders for approval until the earliest to occur of (i) immediately prior to the close of business on July 27, 2023, (ii) immediately prior to the close of business on the date on which the outstanding shares of Class B common stock represent less than five percent (5%) of the aggregate number of shares of Class A common stock and Class B common stock then outstanding, (iii) the date and time or the occurrence of an event specified in a written conversion election delivered by KR Sridhar to our Secretary or Chairman of the Board to so convert all shares of Class B common stock, or (iv) immediately following the date of the death of KR Sridhar. This concentrated control limits or precludes Class A stockholders’ ability to influence corporate matters while the dual class structure remains in effect, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that Class A stockholders may feel are in their best interest as one of our stockholders.

Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions such as certain transfers effected for estate planning purposes. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those remaining holders of Class B common stock who retain their shares in the long-term.

The conversion of the 6% Convertible Promissory Note could result in a significant stockholder with substantial voting control.

The holders of the 6% Convertible Promissory Notes have the options to convert the outstanding principal and interest under the 6% Convertible Promissory Note to Class B common stock at conversion price of $11.25 at any time after the IPO

and prior to maturity of the 6% Convertible Promissory Note in December 2020. As of ~~March 31,~~June 30, 2019, an aggregate of 21,321,100 shares of Class B common stock is issuable to the Canada Pension Plan Investment Board (“CPPIB”) upon the conversion of the outstanding principal and interest under the 6% Convertible Promissory Note. This, along with 312,575 shares of Class B common stock CPPIB which CPPIB acquired from the exercise of a warrant at IPO, would result in CPPIB having approximately ~~25.13%~~0.00% of the total voting power with respect to all shares of our Class A and Class B common stock, voting as a single class and would provide CPPIB significant influence over matters presented to the stockholders for approval and may result in voting decisions by CPPIB which are not in the best interests of our stockholders generally.

The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.

S&P Dow Jones and FTSE Russell have recently announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, namely, to exclude companies with multiple classes of shares of common stock from being added to such indices. In addition, several shareholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of our common stock may prevent the inclusion of our Class A common stock in such indices and may cause shareholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for our Class A common stock. Any actions or publications

by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A common stock.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price of our Class A common stock and trading volume could decline.

The market price for our Class A common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If industry analysts cease coverage of us, the trading price for our Class A common stock would be negatively affected. In addition, if one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, our Class A common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Class A common stock could decrease, which might cause our Class A common stock price and trading volume to decline.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid any cash dividends on our capital stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

Provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, may limit attempts by our stockholders to replace or remove our current management, may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees, and may limit the market price of our Class A common stock.

Provisions in our restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our restated certificate of incorporation and amended and restated bylaws include provisions that:

our board of directors will be classified into three classes of directors with staggered three year terms;

permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships;

require super-majority voting to amend some provisions in our restated certificate of incorporation and amended and restated bylaws;

authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;

only the chairman of our board of directors, our chief executive officer, or a majority of our board of directors will be authorized to call a special meeting of stockholders;

prohibit stockholder action by written consent, which thereby requires all stockholder actions be taken at a meeting of our stockholders;

a dual class common stock structure in which holders of our Class B common stock may have the ability to control the outcome of matters requiring stockholder approval even if they own significantly less than a majority of the outstanding shares of our common stock, including the election of directors and significant corporate transactions such as a merger or other sale of our company or substantially all of its assets;

the board of directors is expressly authorized to make, alter, or repeal our bylaws; and

establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

In addition, our restated certificate of incorporation and our amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our restated certificate of incorporation or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. Our restated certificate of incorporation and our amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum

that it finds favorable for disputes with us or any of our directors, officers, or other employees, which thereby may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our restated certificate of incorporation and our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, our operating results, and our financial condition.

On December 19, 2018, the Delaware Chancery Court issued an opinion that invalidated provisions in a Delaware corporation’s certificate of incorporation or bylaws that purport to limit to federal court the forum in which a stockholder could bring a claim under the Securities Act, which creates some uncertainty about the enforceability of exclusive forum provisions generally. If a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business and financial condition.

Moreover, Section 203 of the Delaware General Corporation Law may discourage, delay, or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 - OTHER INFORMATION

~~The following information is being provided herein in lieu of a Current Report on Form 8-K:~~

~~Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers~~

~~Effective May 9,~~On August 8, 2019, ~~Kelly Ayotte resigned from our~~the Company's Board of Directors ~~for personal reasons, effective May 10, 2019. Ms. Ayotte's resignation was not a result~~approved an amendment and restatement of ~~any disagreement or dispute with us.~~the Company's Bylaws to affect the following changes:

~~Item 5.07 Submission of Matters to a Vote of Security Holders~~

~~The Annual Meeting of Stockholders of Bloom Energy was held on May 9, 2019 (the “Annual Meeting”). Holders of our Class A common stock were entitled to one vote for each share held as~~Provides that the Chairman of the ~~close~~Board or a person designated by the Board shall chair meetings of ~~business on March 11, 2019 (the “Record Date”) and holders~~stockholders; provides additional information regarding procedures for meeting (Section 1.6)

Clarifies the definition of ~~our Class B common stock were entitled~~irrevocable proxy (Section 1.7)

Clarifies fixing of record date (Section 1.8)

Provides list of documents required to ~~ten votes~~be submitted by a stockholder who nominates an individual for ~~each share held~~election as a director (Section 1.11.1(b)(x))

Changes notification deadlines for shareholder proxy matters to conform to Delaware law (Section 1.11.1(b)(iv)

Removed paragraph requiring all securities class actions be brought in federal court (Section 11)

Other nonmaterial, clarifying amendments.

A copy of the ~~close of business on the Record Date. The Class A common stock~~Amended and ~~Class B common stock voted~~Restated Bylaws is filed herewith as a single class on all proposals voted on at the Annual Meeting. A total of 44,877,757 votes of Class A common stock and a total of 325,231,760 votes of Class B common stock were represented at the meeting in person or by proxy, representing 61.49% of the voting power of the Class A common stock and the Class B common stock entitled to vote at the Annual Meeting, which constituted a quorum. The voting results for each item of business properly presented at the Annual Meeting, as certified by Bloom Energy's independent inspector of elections, are set forth below:


~~Proposal No. 1~~	~~The election of three (3) Class I directors for a term of three years.~~

Name For Against Abstain Broker Non-Vote
General Colin L. Powell 342,420,751 11,567,911 15,495 16,105,360
Scott Sandell 347,365,560 6,581,612 56,985 16,105,360
KR Sridhar 347,617,863 6,297,666 88,628 16,105,360


~~Proposal No. 2~~	~~The proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019.~~

For Against Abstain
369,915,455 102,936 91,126
Exhibit 3.2.

ITEM 6 - EXHIBITS

Index to Exhibits

The exhibits listed below are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.

Incorporated by Reference
Exhibit Number Description Form File No. Exhibit Filing Date
3.1
Restated Certificate of Incorporation. 10-Q 001-38598 3.1 9/7/2018
3.2
Restated Bylaws, as adopted April 27, 2018 and as effective July 27, 2018 10-Q 001-38598 3.2 9/7/2018
31.1
* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
** Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS * XBRL Instance Document
101.SCH * XBRL Taxonomy Extension Schema Document
101.CAL * XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF * XBRL Taxonomy Extension Definition Linkbase Document
101.LAB * XBRL Taxonomy Extension Label Linkbase Document
101.PRE * XBRL Taxonomy Extension Presentation Linkbase Document



			Incorporated by Reference
Exhibit Number		Description	Form	File No.	Exhibit	Filing Date
3.1		Restated Certificate of Incorporation.	10-Q	001-38598	3.1	9/7/2018
3.2	*	Amended and Restated Bylaws, effective August 8, 2019
10.1	*	Equity Capital Contribution Agreement between the Company, SP Diamond State Class B Holdings, LLC, Diamond State Generation Partners, LLC, and Diamond State Generation Holdings, LLC, dated June 14, 2019 †
10.2	*	Third Amended and Restated Limited Liability Company Agreement of Diamond State Generation Partners LLC dated June 14, 2019†
10.3	*	Fuel Cell System Supply and Installation Agreement between the Company and Diamond State Generation Partners LLC, dated June 14, 2019 †
10.4	*	Amended and Restated Master Operations and Maintenance Agreement between the Company and Diamond State Generation Partners LLC, dated June 14, 2019 †
10.5	*	Repurchase Agreement between the Company and Diamond State Generation Partners LLC, dated June 14, 2019 †
10.6	*	Third Amended and Restated Limited Liability Company Agreement of Diamond State Generation Holdings, LLC dated June 14, 2019 †
10.7	*	Annex 1 (Definitions) to Equity Capital Contribution Agreement (Ex 10.1) and Limited Liability Agreements (Exs. 10.2 and 10.6) †
10.8	*	Purchase, Use and Maintenance Agreement between the Company and 2018 ESA Project Company, LLC dated June 28, 2019 †
10.9	*	Annexes to Purchase, Use and Maintenance Agreement between the Company and 2018 ESA Project Company, LLC dated June 28, 2019 †
31.1	*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



31.2	*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	**	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	*	XBRL Instance Document
101.SCH	*	XBRL Taxonomy Extension Schema Document
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document



^	Executive Compensation Plans and Arrangements.
*	Filed herewith.
**	The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
†	~~Confidential treatment requested with respect to portions~~Portions of this ~~exhibit.~~exhibit are redacted as permitted under Regulation S-K, Rule 601.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



BLOOM ENERGY CORPORATION


Date:	~~May 14,~~August 13, 2019	By:	/s/ KR Sridhar
			KR Sridhar
			Founder, President, Chief Executive Officer and Director
			(Principal Executive Officer)

Date:	~~May 14,~~August 13, 2019	By:	/s/ Randy Furr
			Randy Furr
			Executive Vice President and
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

8092



(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: ~~March 31,~~June 30, 2019
or
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to ____________



Delaware	77-0565408
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

4353 North First Street, San Jose, California	95134
(Address of principal executive offices)	(Zip Code)

(408) 543-1500
(Registrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Securities Exchange Act
Title of Each Class⁽¹⁾	Trading Symbol	Name of each exchange on which registered
Class A Common Stock $0.0001 par value	~~New York Stock Exchange~~
~~Class B Common Stock $0.0001 par value~~BE	New York Stock Exchange



	Page
PART I - FINANCIAL INFORMATION
Item 1 - Condensed Consolidated Financial Statements	4
Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Operations	5
Condensed Consolidated Statements of Comprehensive Loss	6
Condensed Consolidated Statements of Convertible Redeemable Preferred Stock, Redeemable Noncontrolling Interest, Stockholders' Deficit and Noncontrolling Interest	7
Condensed Consolidated Statements of Cash Flows	89
Notes to Condensed Consolidated Financial Statements	910
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	3643
Item 3 - Quantitative and Qualitative Disclosures About Market Risk	5464
Item 4 - Controls and Procedures	5465

PART II - OTHER INFORMATION
Item 1 - Legal Proceedings	5566
Item 1A - Risk Factors	5566
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	7789
Item 3 - Defaults Upon Senior Securities	7789
Item 4 - Mine Safety Disclosures	7789
Item 5 - Other Information	7789
Item 6 - Exhibits	7990

Signatures	8092


	March 31,			December 31,			June 30,			December 31,
	2019			2018			2019			2018

Assets
Current assets:
Cash and cash equivalents¹	$	320,414		$	220,728		$	308,009		$	220,728
Restricted cash¹	18,419			28,657			23,706			28,657
Short-term investments	—			104,350			—			104,350
Accounts receivable¹	84,070			84,887			38,296			84,887
Inventories	116,544			132,476			104,934			132,476
Deferred cost of revenue	66,316			62,147			86,434			62,147
Customer financing receivable¹	5,717			5,594			5,817			5,594
Prepaid expense and other current assets¹	28,362			33,742			25,088			33,742
Total current assets	639,842			672,581			592,284			672,581
Property, plant and equipment, net¹	475,385			481,414			406,610			481,414
Customer financing receivable, non-current¹	65,620			67,082			64,146			67,082
Restricted cash, non-current¹	31,101			31,100			39,351			31,100
Deferred cost of revenue, non-current	72,516			102,699			59,213			102,699
Other long-term assets¹	34,386			34,792			60,975			34,792
Total assets	$	1,318,850		$	1,389,668		$	1,222,579		$	1,389,668
Liabilities, Redeemable Noncontrolling Interest, Stockholders’ Deficit and Noncontrolling Interests
Current liabilities:
Accounts payable¹	$	64,425		$	66,889		$	61,427		$	66,889
Accrued warranty	16,736			19,236			12,393			19,236
Accrued other current liabilities¹	67,966			69,535			109,722			69,535
Deferred revenue and customer deposits¹	89,557			94,158			129,321			94,158
Current portion of recourse debt	15,683			8,686			15,681			8,686
Current portion of non-recourse debt¹	19,486			18,962			7,654			18,962
Current portion of non-recourse debt from related parties¹	2,341			2,200			2,889			2,200
Total current liabilities	276,194			279,666			339,087			279,666
Derivative liabilities, net of current portion¹	11,166			10,128			13,079			10,128
Deferred revenue and customer deposits, net of current portion¹	201,863			241,794			181,221			241,794
Long-term portion of recourse debt	357,876			360,339			362,424			360,339
Long-term portion of non-recourse debt¹	284,541			289,241			219,182			289,241
Long-term portion of recourse debt from related parties	27,734			27,734			27,734			27,734
Long-term portion of non-recourse debt from related parties¹	33,417			34,119			32,643			34,119
Other long-term liabilities¹	58,032			55,937			58,417			55,937
Total liabilities	1,250,823			1,298,958			1,233,787			1,298,958
Commitments and contingencies (Note 13)
Redeemable noncontrolling interest	58,802			57,261			505			57,261
Stockholders’ deficit	(105,439		)	(91,661		)	(115,785		)	(91,661		)
Noncontrolling interest	114,664			125,110			104,072			125,110
Total liabilities, redeemable noncontrolling interest, stockholders' deficit and noncontrolling interest	$	1,318,850		$	1,389,668		$	1,222,579		$	1,389,668


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2019			2018

Revenue:
Product	$	141,734		$	121,307		$	179,899		$	108,654		$	321,633		$	229,961
Installation	22,258			14,118			17,285			26,245			39,543			40,363
Service	23,290			19,907			23,659			19,975			46,949			39,882
Electricity	13,425			14,029			12,939			14,007			26,364			28,036
Total revenue	200,707			169,361			233,782			168,881			434,489			338,242
Cost of revenue:
Product	124,000			80,355			131,952			70,802			255,952			151,157
Installation	24,166			10,438			22,116			37,099			46,282			47,537
Service	27,557			24,253			19,599			19,260			47,156			43,513
Electricity	9,229			10,649			18,442			8,949			27,671			19,598
Total cost of revenue	184,952			125,695			192,109			136,110			377,061			261,805
Gross profit	15,755			43,666			41,673			32,771			57,428			76,437
Operating expenses:
Research and development	28,859			14,731			29,772			14,413			58,631			29,144
Sales and marketing	20,463			8,262			18,359			8,254			38,822			16,516
General and administrative	39,074			14,988			43,662			15,359			82,736			30,347
Total operating expenses	88,396			37,981			91,793			38,026			180,189			76,007
Gain (loss) from operations	(72,641		)	5,685			(50,120		)	(5,255		)	(122,761		)	430
Interest income	1,885			415			1,700			444			3,585			859
Interest expense	(15,962		)	(21,379		)	(16,725		)	(22,525		)	(32,687		)	(43,904		)
Interest expense to related parties	(1,612		)	(2,627		)	(1,606		)	(2,672		)	(3,218		)	(5,299		)
Other income (expense), net	265			(75		)	(222		)	(855		)	43			(930		)
Loss on revaluation of warrant liabilities and embedded derivatives	—			(4,034		)	—			(19,197		)	—			(23,231		)
Net loss before income taxes	(88,065		)	(22,015		)	(66,973		)	(50,060		)	(155,038		)	(72,075		)
Income tax provision	208			333			258			128			466			461
Net loss	(88,273		)	(22,348		)	(67,231		)	(50,188		)	(155,504		)	(72,536		)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests	(3,832		)	(4,632		)	(5,015		)	(4,512		)	(8,847		)	(9,143		)
Net loss attributable to Class A and Class B common stockholders	$	(84,441	)	$	(17,716	)	$	(62,216	)	$	(45,677	)	$	(146,657	)	$	(63,393	)
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted	$	(0.76	)	$	(1.70	)	$	(0.55	)	$	(4.34	)	$	(1.30	)	$	(6.05	)
Weighted average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted	111,842			10,403			113,622			10,536			112,737			10,470


	Convertible Redeemable Preferred Stock			Redeemable Noncontrolling Interest			Class A and Class B Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Gain (Loss)				Accumulated Deficit				Stockholders' Deficit			Noncontrolling Interest			Three Months Ended June 30, 2019
	Shares	Amount		Amount			Shares	Amount					Accumulated Other Comprehensive Gain (Loss)
Balances at December 31, 2018	—	$	—	$	57,261		109,421,183	$	11	Additional Paid-In Capital		$	2,480,597			$	Accumulated Deficit			131	Stockholders' Deficit			Noncontrolling Interest				$	(2,572,400	)		$	(91,661	)		$	125,110
																											Convertible Redeemable Preferred Stock							Redeemable Noncontrolling Interest				Class A and Class B Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Gain (Loss)				Accumulated Deficit				Stockholders' Deficit				Noncontrolling Interest
																											Shares			Amount				Amount				Shares	Amount					Accumulated Other Comprehensive Gain (Loss)				Accumulated Deficit				Stockholders' Deficit				Noncontrolling Interest
Balances at March 31, 2019																											—			$	—			$	58,802			113,214,063	$	11	Additional Paid-In Capital		$	2,551,256			$	5			$	(2,656,711	)		$	(105,439	)		$	114,664
Issuance of restricted stock awards	—	—		—			2,960,462	—		—			—				—				—			—			—			—				—				543,636	—		—			—				—				—				—
ESPP purchase	—	—		—			696,036	—		6,916			—				—				6,916			—
Exercise of stock options	—	—		—			136,382	—		577			—				—				577			—			—			—				—				191,644	—		828			—				—				828				—
Stock-based compensation expense	—	—		—			—	—		63,166			—				—				63,166			—			—			—				—				—	—		51,195			—				—				51,195				—
Unrealized gain on available for sale securities	—	—		—			—	—		—			17				—				17			—			—			—				—				—	—		—			9				—				9				—
Change in effective and ineffective portion of interest rate swap agreement	—	—		—			—	—		—			(143		)		—				(143		)	(2,048		)	—			—				—				—	—		—			(162		)		—				(162		)		(3,340		)
Distributions to noncontrolling interests	—	—		(282		)	—	—		—			—				—				—			(2,613		)	—			—				(3,255		)		—	—		—			—				—				—				(1,595		)
Mandatory redemption of noncontrolling interests																											—			—				(55,684		)		—	—		—			—				—				—				—
Cumulative effect of hedge accounting standard adoption	—	—		—			—	—		—			—				130				130			(130		)	—			—				—				—	—		—			—				—				—				—
Net income (loss)	—	—		1,823			—	—		—			—				(84,441		)		(84,441		)	(5,655		)	—			—				642				—	—		—			—				(62,216		)		(62,216		)		(5,657		)
Balances at March 31, 2019	—	$	—	$	58,802		113,214,063	$	11	$	2,551,256		$	5			$	(2,656,711	)		$	(105,439	)	$	114,664
Balances at June 30, 2019																											—			$	—			$	505			113,949,343	$	11	$	2,603,279		$	(148	)		$	(2,718,927	)		$	(115,785	)		$	104,072



	Six Months Ended June 30, 2019

	Convertible Redeemable Preferred Stock			Redeemable Noncontrolling Interest			Class A and Class B Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Gain (Loss)			Accumulated Deficit			Stockholders' Deficit			Noncontrolling Interest
	Shares	Amount		Amount			Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Gain (Loss)			Accumulated Deficit			Stockholders' Deficit			Noncontrolling Interest
Balances at December 31, 2018	—	$	—	$	57,261		109,421,183	$	11	$	2,480,597	$	131		$	(2,572,400	)	$	(91,661	)	$	125,110
Issuance of restricted stock awards	—	—		—			3,504,098	—		—		—			—			—			—
ESPP purchase	—	—		—			696,036	—		6,916		—			—			6,916			—
Exercise of stock options	—	—		—			328,026	—		1,405		—			—			1,405			—
Stock-based compensation expense	—	—		—			—	—		114,361		—			—			114,361			—
Unrealized gain on available for sale securities	—	—		—			—	—		—		26			—			26			—
Change in effective and ineffective portion of interest rate swap agreement	—	—		—			—	—		—		(305		)	—			(305		)	(5,388		)
Distributions to noncontrolling interests	—	—		(3,537		)	—	—		—		—			—			—			(4,208		)
Mandatory redemption of noncontrolling interests	—	—		(55,684		)	—	—		—		—			—			—			—
Cumulative effect of hedge accounting standard adoption	—	—		—			—	—		—		—			130			130			(130		)
Net income (loss)	—	—		2,465			—	—		—		—			(146,657		)	(146,657		)	(11,312		)
Balances at June 30, 2019	—	$	—	$	505		113,949,343	$	11	$	2,603,279	$	(148	)	$	(2,718,927	)	$	(115,785	)	$	104,072


	Convertible Redeemable Preferred Stock			Redeemable Noncontrolling Interest			Common Stock¹			Additional Paid-In Capital			Accumulated Other Comprehensive Gain (Loss)				Accumulated Deficit				Stockholders' Deficit				Noncontrolling Interest			Three Months Ended June 30, 2018
	Shares	Amount		Amount			Shares	Amount					Accumulated Other Comprehensive Gain (Loss)
Balances at December 31, 2017	71,740,162	$	1,465,841	$	58,154		10,353,269	$	1	Additional Paid-In Capital		$	150,803			$	Accumulated Deficit			(162	Stockholders' Deficit			)	Noncontrolling Interest				$	(2,330,647	)		$	(2,180,005	)		$	155,372
																												Convertible Redeemable Preferred Stock							Redeemable Noncontrolling Interest				Common Stock¹			Additional Paid-In Capital				Accumulated Other Comprehensive Gain (Loss)			Accumulated Deficit				Stockholders' Deficit				Noncontrolling Interest
																												Shares			Amount				Amount				Shares	Amount						Accumulated Other Comprehensive Gain (Loss)			Accumulated Deficit				Stockholders' Deficit				Noncontrolling Interest
Balances at March 31, 2018																												71,740,162			$	1,465,841			$	58,176			10,424,982	$	1	Additional Paid-In Capital			$	158,604		$	117			$	(2,348,363	)		$	(2,189,641	)		$	149,759
Revaluation of common stock warrants																												—			—				—							(66		)									(66		)		—
Issuance of restricted stock awards	—	—		—			68,098	—		120			—				—				120				—			—			—				—				—	—		—				—			—				—				—
Exercise of stock options	—	—		—			3,615	—		67			—				—				67				—			—			—				—				145,659	—		623				—			—				623				—
Stock-based compensation expense	—	—		—			—	—		7,614			—				—				7,614				—			—			—				—				—	—		7,642				—			—				7,642				—
Unrealized loss on available for sale securities	—	—		—			—	—		—			(9		)		—				(9		)		—
Unrealized gain on available for sale securities																												—			—				—				—	—						100			—				100				—
Change in effective portion of interest rate swap agreement	—	—		3			—	—		—			288				—				288				2,576			—			—				(1		)		—	—		—				—			—				—				987
Distributions to noncontrolling interests	—	—		(1,472		)	—	—		—			—				—				—				(2,066		)	—			—				(4,741		)		—	—		—				—			—				—				(3,296		)
Net income (loss)	—	—		1,491			—	—		—			—				(17,716		)		(17,716		)		(6,123		)	—			—				1,506				—	—		—				—			(45,677		)		(45,677		)		(6,017		)
Balances at March 31, 2018	71,740,162	$	1,465,841	$	58,176		10,424,982	$	1	$	158,604		$	117			$	(2,348,363	)		$	(2,189,641	)		$	149,759
Balances at June 30, 2018																												71,740,162			$	1,465,841			$	54,940			10,570,641	$	1	$	166,803			$	217		$	(2,394,040	)		$	(2,227,019	)		$	141,433



	Six Months Ended June 30, 2018

	Convertible Redeemable Preferred Stock			Redeemable Noncontrolling Interest			Common Stock¹			Additional Paid-In Capital			Accumulated Other Comprehensive Gain (Loss)			Accumulated Deficit			Stockholders' Deficit			Noncontrolling Interest
	Shares	Amount		Amount			Shares	Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Gain (Loss)			Accumulated Deficit			Stockholders' Deficit			Noncontrolling Interest
Balances at December 31, 2017	71,740,162	$	1,465,841	$	58,154		10,353,269	$	1	$	150,803		$	(162	)	$	(2,330,647	)	$	(2,180,005	)	$	155,372
Revaluation of common stock warrants	—	—		—			—	—		(66		)	—			—			(66		)	—
Issuance of restricted stock awards	—	—		—			3,615	—		67			—			—			67			—
Exercise of stock options	—	—		—			213,757	—		743			—			—			743			—
Stock-based compensation expense	—	—		—			—	—		15,256			—			—			15,256			—
Unrealized gain on available for sale securities	—	—		—			—	—		—			91			—			91			—
Change in effective portion of interest rate swap agreement	—	—		2			—	—		—			288			—			288			3,563
Distributions to noncontrolling interests	—	—		(6,213		)	—	—		—			—			—			—			(5,362		)
Net income (loss)	—	—		2,997			—	—		—			—			(63,393		)	(63,393		)	(12,140		)
Balances at June 30, 2018	71,740,162	$	1,465,841	$	54,940		10,570,641	$	1	$	166,803		$	217		$	(2,394,040	)	$	(2,227,019	)	$	141,433



Level 1		Quoted prices in active markets for identical assets or liabilities. Financial assets utilizing Level 1 inputs typically include money market securities and U.S. Treasury securities.

Level 2		Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Financial instruments utilizing Level 2 inputs include interest rate swaps.



Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Financial liabilities utilizing Level 3 inputs include natural gas fixed price forward contract derivatives. Derivative liability valuations are performed based on a binomial lattice model and adjusted for illiquidity and/or nontransferability and such adjustments are generally based on available market evidence.


	Fair Value Measured at Reporting Date Using								Fair Value Measured at Reporting Date Using
March 31, 2019	Level 1		Level 2		Level 3		Total
June 30, 2019									Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	217,258	$	—	$	—	$	217,258	$	202,795	$	—	$	—	$	202,795
Interest rate swap agreements	—		27		—		27		—		12		—		12
	$	217,258	$	27	$	—	$	217,285	$	202,795	$	12	$	—	$	202,807
Liabilities
Accrued other current liabilities	$	1,723	$	—	$	—	$	1,723	$	1,636	$	—	$	—	$	1,636
Derivatives:
Natural gas fixed price forward contracts	—		—		8,796		8,796		—		—		8,769		8,769
Interest rate swap agreements¹	—		5,719		—		5,719		—		9,158		—		9,158
	$	1,723	$	5,719	$	8,796	$	16,238	$	1,636	$	9,158	$	8,769	$	19,563



	Fair Value Measured at Reporting Date Using
December 31, 2018	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market funds	$	143,843	$	—	$	—	$	143,843
Short-term investments	104,350		—		—		104,350
Interest rate swap agreements	—		82		—		82
	$	248,193	$	82	$	—	$	248,275
Liabilities
Accrued other current liabilities	$	1,331	$	—	$	—	$	1,331
Derivatives:
Natural gas fixed price forward contracts	—		—		9,729		9,729
Interest rate swap agreements	—		3,630		—		3,630
	$	1,331	$	3,630	$	9,729	$	14,690


	Natural Gas Fixed Price Forward Contracts			Preferred Stock Warrants		Embedded Derivative Liability		Total			Natural Gas Fixed Price Forward Contracts			Preferred Stock Warrants		Embedded Derivative Liability		Total
Balances at December 31, 2018	$	9,729		$	—	$	—	$	9,729		$	9,729		$	—	$	—	$	9,729
Settlement of natural gas fixed price forward contracts	(527		)	—		—		(527		)	(1,610		)	—		—		(1,610		)
Changes in fair value	(406		)	—		—		(406		)	650			—		—		650
Balances at March 31, 2019	$	8,796		$	—	$	—	$	8,796
Balances at June 30, 2019											$	8,769		$	—	$	—	$	8,769


	March 31, 2019				December 31, 2018				June 30, 2019				December 31, 2018
	Net Carrying Value		Fair Value		Net Carrying Value		Fair Value		Net Carrying Value		Fair Value		Net Carrying Value		Fair Value

Customer receivables:
Customer financing receivables	$	71,337	$	51,312	$	72,676	$	51,541	$	69,963	$	52,517	$	72,676	$	51,541
Debt instruments:
Recourse
LIBOR + 4% term loan due November 2020	2,795		2,914		3,214		3,311		2,376		2,458		3,214		3,311
5% convertible promissory note due December 2020	35,136		33,832		34,706		31,546		35,576		33,524		34,706		31,546
6% convertible promissory notes due December 2020	267,289		418,999		263,284		353,368		271,503		393,395		263,284		353,368
10% notes due July 2024	96,073		99,598		95,555		99,260		96,384		96,859		95,555		99,260
Non-recourse
5.22% senior secured notes due March 2025	75,786		79,341		78,566		80,838		—		—		78,566		80,838
7.5% term loan due September 2028	35,758		41,759		36,319		39,892		35,532		41,368		36,319		39,892
LIBOR + 5.25% term loan due October 2020	23,734		25,679		23,916		25,441		23,661		25,028		23,916		25,441
6.07% senior secured notes due March 2030	81,806		88,715		82,337		85,917		81,223		90,136		82,337		85,917
LIBOR + 2.5% term loan due December 2021	122,701		125,770		123,384		123,040		121,952		123,046		123,384		123,040


	March 31,			December 31,			June 30,			December 31,
	2019			2018			2019			2018

Energy Servers	$	511,485		$	511,485		$	431,444		$	511,485
Computers, software and hardware	18,796			16,536			19,516			16,536
Machinery and equipment	100,311			99,209			102,532			99,209
Furniture and fixtures	8,669			4,337			8,986			4,337
Leasehold improvements	34,126			18,629			36,092			18,629
Building	40,512			40,512			40,512			40,512
Construction in progress	10,496			29,084			9,324			29,084
	724,395			719,792			648,406			719,792
Less: Accumulated depreciation	(249,010		)	(238,378		)	(241,796		)	(238,378		)
	$	475,385		$	481,414		$	406,610		$	481,414


	Unpaid Principal Balance		Net Carrying Value						Unused Borrowing Capacity		Unpaid Principal Balance		Net Carrying Value						Unused Borrowing Capacity
	Unpaid Principal Balance		Current		Long- Term		Total		Unused Borrowing Capacity		Unpaid Principal Balance		Current		Long- Term		Total		Unused Borrowing Capacity

LIBOR + 4% term loan due November 2020	$	2,857	$	1,683	$	1,112	$	2,795	$	—	$	2,429	$	1,681	$	695	$	2,376	$	—
5% convertible promissory note due December 2020	33,104		—		35,136		35,136		—		33,104		—		35,576		35,576		—
6% convertible promissory notes due December 2020	296,233		—		267,289		267,289		—		296,233		—		271,503		271,503		—
10% notes due July 2024	100,000		14,000		82,073		96,073		—		100,000		14,000		82,384		96,384		—
Total recourse debt	432,194		15,683		385,610		401,293		—		431,766		15,681		390,158		405,839		—
5.22% senior secured term notes due March 2025	76,827		12,151		63,635		75,786		—
7.5% term loan due September 2028	39,759		2,341		33,417		35,758		—		39,317		2,889		32,643		35,532		—
LIBOR + 5.25% term loan due October 2020	24,438		926		22,808		23,734		—		24,262		957		22,704		23,661		—
6.07% senior secured notes due March 2030	82,889		2,634		79,172		81,806		—		82,269		2,803		78,420		81,223		—
LIBOR + 2.5% term loan due December 2021	124,593		3,775		118,926		122,701		—		123,664		3,894		118,058		121,952		—
Letters of Credit due December 2021	—		—		—		—		1,220		—		—		—		—		1,220
Total non-recourse debt	348,506		21,827		317,958		339,785		1,220		269,512		10,543		251,825		262,368		1,220
Total debt	$	780,700	$	37,510	$	703,568	$	741,078	$	1,220	$	701,278	$	26,224	$	641,983	$	668,207	$	1,220



	Unpaid Principal Balance		Net Carrying Value						Unused Borrowing Capacity
	Unpaid Principal Balance		Current		Long- Term		Total		Unused Borrowing Capacity

LIBOR + 4% term loan due November 2020	$	3,286	$	1,686	$	1,528	$	3,214	$	—
5% convertible promissory notes due December 2020	33,104		—		34,706		34,706		—
6% convertible promissory notes due December 2020	296,233		—		263,284		263,284		—
10% notes due July 2024	100,000		7,000		88,555		95,555		—
Total recourse debt	432,623		8,686		388,073		396,759		—
5.22% senior secured term notes due March 2025	79,698		11,994		66,572		78,566		—
7.5% term loan due September 2028	40,538		2,200		34,119		36,319		—
LIBOR + 5.25% term loan due October 2020	24,723		827		23,089		23,916		—
6.07% senior secured notes due March 2030	83,457		2,469		79,868		82,337		—
LIBOR + 2.5% term loan due December 2021	125,456		3,672		119,712		123,384		—
Letters of Credit due December 2021	—		—		—		—		1,220
Total non-recourse debt	353,872		21,162		323,360		344,522		1,220
Total debt	$	786,495	$	29,848	$	711,433	$	741,281	$	1,220



	Remainder of 2019		2020		2021		2022		2023		Thereafter

Future minimum lease payments, less interest	$	4,256	$	6,022	$	6,415	$	6,853	$	7,310	$	39,430


Balances at December 31, 2018	$	10,935		$	10,935
Accrued warranty, net	629			3,202
Warranty expenditures during period	(2,381		)	(4,329		)
Balances at March 31, 2019	$	9,183
Balances at June 30, 2019				$	9,808


Remainder of 2019	$	24,082	$	12,365
2020	391,442		379,242
2021	153,639		140,334
2022	40,059		26,046
2023	44,209		29,450
Thereafter	127,269		113,841
	$	780,700	$	701,278


	Three Months Ended						Three Months Ended						Six Months Ended
	March 31, 2019			March 31, 2018			June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
Beginning balance	$	3,548		$	5,853		$	5,692		$	2,909		$	3,548		$	5,853
Loss (gain) recognized in other comprehensive income (loss)	2,130			(2,640		)	3,460			(982		)	5,590			(3,622		)
Amounts reclassified from other comprehensive income (loss) to earnings	61			(212		)	42			(85		)	103			(297		)
Net loss (gain) recognized in other comprehensive income (loss)	2,191			(2,852		)	3,502			(1,067		)	5,693			(3,919		)
Gain recognized in earnings	(47		)	(92		)
Gain reclassified from other comprehensive income (loss) to earnings							(48		)	(71		)	(95		)	(163		)
Ending balance	$	5,692		$	2,909		$	9,146		$	1,771		$	9,146		$	1,771


	Outstanding Options							Outstanding Options
	Number of Shares		Weighted Average Exercise Price		Remaining Contractual Life (Years)	Aggregate Intrinsic Value		Number of Shares		Weighted Average Exercise Price		Remaining Contractual Life (Years)	Aggregate Intrinsic Value

						(in thousands)							(in thousands)
Balances at December 31, 2018	14,558,420		$	25.93	6.78	$	3,084	14,558,420		$	25.93	6.78	$	3,084
Granted	743,705		11.38					981,105		11.44
Exercised	(136,382	)	4.23					(328,026	)	4.28
Cancelled	(111,693	)	25.44					(298,490	)	25.37
Balances at March 31, 2019	15,054,050		25.41		6.62	4,686
Vested and expected to vest at March 31, 2019	14,690,193		25.56		6.56	4,645
Exercisable at March 31, 2019	8,555,962		28.18		4.97	3,586
Balances at June 30, 2019								14,913,009		25.47		6.53	2,557
Vested and expected to vest at June 30, 2019								14,541,060		25.64		6.47	2,523
Exercisable at June 30, 2019								8,716,781		28.77		4.96	1,764


	Number of Awards Outstanding		Weighted Average Grant Date Fair Value		Number of Awards Outstanding		Weighted Average Grant Date Fair Value

Unvested Balance at December 31, 2018	16,784,800		$	18.74	16,784,800		$	18.74
Granted	2,525,755		12.43		2,966,254		12.36
Vested	(2,960,462	)	20.17		(3,504,098	)	20.51
Forfeited	(101,577	)	16.44		(316,053	)	17.38
Unvested Balance at March 31, 2019	16,248,516		17.52
Unvested Balance at June 30, 2019					15,930,903		17.19


Remainder of 2019	$	13,491	$	8,410
2020	18,785		16,342
2021	16,169		13,683
2022	15,673		12,979
2023	15,335		12,532
Thereafter	57,310		48,297
	$	136,763	$	112,243



	Three Months Ended March 31,		Change
	2019	2018	Amount	%

Product accepted during the period (in 100 kilowatt systems)	235	166	69	41.6	%


																												2019						2018												2017
	2019			2018												2017												June 30			March 31			Dec. 31			Sept. 30			June 30			March 31			Dec. 31			Sept. 30			June 30
	March 31			Dec. 31			Sept. 30			June 30			March 31			Dec. 31			Sept. 30			June 30			March 31			(in thousands except per share amounts)
Revenue:
Product	$	141,734		$	156,671		$	125,690		$	108,654		$	121,307		$	66,913		$	45,255		$	39,935		$	27,665		$	179,899		$	141,734		$	156,671		$	125,690		$	108,654		$	121,307		$	66,913		$	45,255		$	39,935
Installation	22,258			21,363			29,690			26,245			14,118			21,601			14,978			14,354			12,293			17,285			22,258			21,363			29,690			26,245			14,118			21,601			14,978			14,354
Service	23,290			21,752			20,751			19,975			19,907			19,927			19,511			18,875			18,591			23,659			23,290			21,752			20,751			19,975			19,907			19,927			19,511			18,875
Electricity	13,425			13,820			14,059			14,007			14,029			14,810			14,021			13,619			13,648			12,939			13,425			13,820			14,059			14,007			14,029			14,810			14,021			13,619
Total revenue	200,707			213,606			190,190			168,881			169,361			123,251			93,765			86,783			72,197			233,782			200,707			213,606			190,190			168,881			169,361			123,251			93,765			86,783
Cost of revenue:
Product	124,000			128,076			95,357			70,802			80,355			70,450			53,923			47,545			38,855			131,952			124,000			128,076			95,357			70,802			80,355			70,450			53,923			47,545
Installation	24,166			31,819			40,118			37,099			10,438			16,933			14,696			14,855			13,445			22,116			24,166			31,819			40,118			37,099			10,438			16,933			14,696			14,855
Service	27,557			28,475			22,651			19,260			24,253			14,012			30,058			21,308			18,219			19,599			27,557			28,475			22,651			19,260			24,253			14,012			30,058			21,308
Electricity	9,229			7,988			8,679			8,949			10,649			9,806			10,178			8,881			10,876			18,442			9,229			7,988			8,679			8,949			10,649			9,806			10,178			8,881
Total cost of revenue	184,952			196,358			166,805			136,110			125,695			111,201			108,855			92,589			81,395			192,109			184,952			196,358			166,805			136,110			125,695			111,201			108,855			92,589
Gross profit (loss)	15,755			17,248			23,385			32,771			43,666			12,050			(15,090		)	(5,806		)	(9,198		)	41,673			15,755			17,248			23,385			32,771			43,666			12,050			(15,090		)	(5,806		)
Operating expenses:
Research and development	28,859			32,970			27,021			14,413			14,731			15,181			12,374			12,368			11,223			29,772			28,859			32,970			27,021			14,413			14,731			15,181			12,374			12,368
Sales and marketing	20,463			24,983			21,476			8,254			8,262			9,346			6,561			8,663			7,845			18,359			20,463			24,983			21,476			8,254			8,262			9,346			6,561			8,663
General and administrative	39,074			47,471			40,999			15,359			14,988			14,818			13,652			14,325			12,879			43,662			39,074			47,471			40,999			15,359			14,988			14,818			13,652			14,325
Total operating expenses	88,396			105,424			89,496			38,026			37,981			39,345			32,587			35,356			31,947			91,793			88,396			105,424			89,496			38,026			37,981			39,345			32,587			35,356
Income (loss) from operations	(72,641		)	(88,176		)	(66,111		)	(5,255		)	5,685			(27,295		)	(47,677		)	(41,162		)	(41,145		)	(50,120		)	(72,641		)	(88,176		)	(66,111		)	(5,255		)	5,685			(27,295		)	(47,677		)	(41,162		)
Interest income¹	1,885			1,996			1,467			444			415			298			223			138			100			1,700			1,885			1,996			1,467			444			415			298			223			138
Interest expense¹	(17,574		)	(17,806		)	(18,819		)	(25,196		)	(24,007		)	(29,807		)	(28,899		)	(25,554		)	(24,363		)	(16,725		)	(17,574		)	(17,806		)	(18,819		)	(25,197		)	(24,007		)	(29,807		)	(28,899		)	(25,554		)
Other income (expense), net¹	265			635			(705		)	(855		)	(74		)	(123		)	(263		)	(124		)	19			(1,606		)	265			635			(705		)	(855		)	(74		)	(123		)	(263		)	(124		)
Gain (loss) on revaluation of warrant liabilities and embedded derivatives	—			(13		)	1,655			(19,198		)	(4,034		)	(15,114		)	572			(668		)	215			(222		)	—			(13		)	1,655			(19,197		)	(4,034		)	(15,114		)	572			(668		)
Net loss before income taxes	(88,065		)	(103,364		)	(82,513		)	(50,060		)	(22,015		)	(72,041		)	(76,044		)	(67,370		)	(65,174		)	(66,973		)	(88,065		)	(103,364		)	(82,513		)	(50,060		)	(22,015		)	(72,041		)	(76,044		)	(67,370		)
Income tax provision (benefit)	208			1,079			(3		)	128			333			(120		)	314			228			214			258			208			1,079			(3		)	128			333			(120		)	314			228
Net loss	(88,273		)	(104,443		)	(82,510		)	(50,188		)	(22,348		)	(71,921		)	(76,358		)	(67,598		)	(65,388		)	(67,231		)	(88,273		)	(104,443		)	(82,510		)	(50,188		)	(22,348		)	(71,921		)	(76,358		)	(67,598		)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests	(3,832		)	(4,662		)	(3,931		)	(4,511		)	(4,632		)	(4,160		)	(4,527		)	(4,123		)	(5,856		)	(5,015		)	(3,832		)	(4,662		)	(3,931		)	(4,512		)	(4,632		)	(4,160		)	(4,527		)	(4,123		)
Net loss attributable to Class A and Class B common stockholders	$	(84,441	)	$	(99,781	)	$	(78,579	)	$	(45,677	)	$	(17,716	)	$	(67,761	)	$	(71,831	)	$	(63,475	)	$	(59,532	)	$	(62,216	)	$	(84,441	)	$	(99,781	)	$	(78,579	)	$	(45,677	)	$	(17,716	)	$	(67,761	)	$	(71,831	)	$	(63,475	)
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted	$	(0.76	)	$	(0.91	)	$	(0.97	)	$	(4.34	)	$	(1.70	)	$	(6.56	)	$	(6.97	)	$	(6.22	)	$	(5.87	)	$	(0.55	)	$	(0.76	)	$	(0.91	)	$	(0.97	)	$	(4.34	)	$	(1.70	)	$	(6.56	)	$	(6.97	)	$	(6.22	)
Weighted average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted	111,842			109,416			81,321			10,536			10,403			10,333			10,305			10,209			10,143			113,622			111,842			109,416			81,321			10,536			10,403			10,333			10,305			10,209


	Payments Due By Period										Payments Due By Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(in thousands)										(in thousands)
Contractual Obligations and Other Commitments:
Recourse debt⁽¹⁾	$	432,194	$	8,286	$	360,908	$	38,000	$	25,000	$	431,766	$	7,858	$	360,908	$	38,000	$	25,000
Non-recourse debt⁽²⁾	348,506		15,796		184,173		46,268		102,269		269,512		4,507		158,668		17,496		88,841
Operating leases	48,135		5,481		13,023		8,267		21,364		47,336		4,352		13,353		8,267		21,364
Sale-leaseback leases from managed services	88,627		8,010		21,930		22,740		35,947		64,906		4,058		16,670		17,244		26,934
Other sale-leaseback related transactions	29,670		—		9,282		9,282		11,106		29,498		—		9,452		10,512		9,534
Natural gas fixed price forward contracts	8,796		3,241		5,555		—		—		8,769		4,143		4,626		—		—
Grant for Delaware facility	10,469		—		10,469		—		—		10,469		—		10,469		—		—
Interest rate swap	5,719		108		923		1,975		2,713		9,159		706		2,157		2,663		3,633
Supplier purchase commitments	5,633		3,650		1,983		—		—		4,765		4,126		639		—		—
Renewable energy credit obligations	1,699		774		925		—		—		1,506		772		734		—		—
Accrued other current liabilities⁽³⁾	1,723		1,723		—		—		—		1,636		1,636		—		—		—
Asset retirement obligations	500		500		—		—		—		500		500		—		—		—
Total	$	981,671	$	47,569	$	609,171	$	126,532	$	198,399	$	879,822	$	32,658	$	577,676	$	94,182	$	175,306


⁽¹⁾	Our 6% Notes and our credit agreements related to the building of our facility in Newark, Delaware each contain cross-default or cross-acceleration provisions. See “-Credit Facilities-Bloom Energy Indebtedness” above for more details.


⁽²⁾	Each of the debt facilities entered into by PPA Company II, PPA Company IIIa, PPA Company IIIb, PPA Company IV and PPA Company V contain cross-default provisions. See “-Credit Facilities-PPA Entities’ Indebtedness” above for more details.


⁽³⁾	Accrued other current liabilities includes a liability payable in common stock in connection with a dispute settlement with the principals of a securities placement agent.



Name	For	Against	Abstain	Broker Non-Vote
General Colin L. Powell	342,420,751	11,567,911	15,495	16,105,360
Scott Sandell	347,365,560	6,581,612	56,985	16,105,360
KR Sridhar	347,617,863	6,297,666	88,628	16,105,360