Debt and Lease Arrangement

9 Months Ended

Sep. 30, 2011

Leases [Abstract]

Debt and Lease Arrangement

10. Debt and Lease Arrangement

In March 2009, the Company signed a $1.7 million promissory note issued by Key Equipment Finance Inc. (Key Equipment) for the purpose of financing GenDrive products leased to Central Grocers, beginning on April 1, 2009. Monthly installments of $32,900 were due through March 2014 and the note was subject to interest at a fixed rate of 7.23% per annum on a 360-day year. The Company was initially required to pledge $1.8 million in cash to collateralize the debt, which was to decrease over time in accordance with decreases in the outstanding balance of the debt. This note was also secured by the equipment that was leased to Central Grocers as described in the Master Security Agreement and Collateral Schedule No. 01 dated as of March 20, 2009, together known as the Master Security Agreement. The promissiory note was paid in full during the year ended December 31, 2010.

On April 1, 2009, the Company began leasing the GenDrive products to Central Grocers. The terms of the arrangement were 60 monthly installments of $32,900. Upon expiration of the 60 months (initial term of the lease), Central Grocers had the option to renew the lease for an additional five years at mutually agreed upon pricing, to purchase all equipment for a purchase price equal to the then fair market value thereof, or to return the equipment to the Company. The Company shall provide maintenance in accordance with the lease agreement.

In December 2010, the Company assigned all of its rights, title and interest in the lease to Somerset Capital Group, Ltd. (Somerset), but the Company will continue to provide maintenance in accordance with the lease agreement. In conjunction with the assignment of the lease, the Key Equipment promissory note was completely paid off by the Company and the collateralized cash was released to the Company. The Company sold all of the equipment under the lease to Somerset.

During 2010, the Company entered into the second phase of leased assets with Central Grocers. The terms of the arrangement were 60 monthly installments of $24,640. Upon expiration of the 60 months (initial term of the lease), Central Grocers had the option to renew the lease for an additional five years at mutually agreed upon pricing, to purchase all equipment for a purchase price equal to the then fair market value thereof, or to return the equipment to the Company. The Company shall provide maintenance in accordance with the lease agreement.

In December 2010, the Company assigned all of its rights, title and interest in the second phase lease to Somerset, but the Company will continue to provide maintenance in accordance with the lease agreement. The Company sold all of the equipment under the second phase lease to Somerset.

In July 2009, the Company signed a standby letter of credit with Key Bank in the amount of $525,000. The standby letter of credit is required by the agreement negotiated between Air Products and Chemicals, Inc. (Air Products) and the Company to supply hydrogen infrastructure and hydrogen to Central Grocers at their distribution center. This standby letter of credit with Key Bank was cancelled in September 2011, and replaced with a standby letter of credit with Silicon Valley Bank, as noted below. The standby letter of credit with Key Bank was collateralized by cash held in a restricted account and was recorded as restricted cash in the condensed consolidated balance sheets as of December 31, 2010.

In September 2011, the Company signed a letter of credit with Silicon Valley Bank in the amount of $525,000. The standby letter of credit is required by the agreement negotiated between Air Products and the Company to supply hydrogen infrastructure and hydrogen to Central Grocers at their distribution center. There are no collateral requirements associated with this letter of credit.

In October 2009, the Company entered into a 15 month financing arrangement for an electrolyzer with Proton Energy Systems, Inc. The outstanding balance of the debt as of December 31, 2010 was approximately $10,000 and was recorded as current portion of long term debt in the condensed consolidated balance sheets. This debt was paid in full during the first quarter of 2011.