Commitment and Contingencies

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies

Commitments and Contingencies

14. Commitments and Contingencies

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 an agreement negotiated between Air Products and Chemicals, Inc. 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.

Litigation

During the third quarter of 2014 the company accrued a $2.4 million liability relating to litigation dating back to 2008 with Soroof Trading Development Company Ltd.

Customer Concentration

Concentrations of credit risk with respect to receivables exist due to the limited number of select customers that the Company has initial commercial sales arrangements with and with government agencies. To mitigate credit risk, the Company performs appropriate evaluation of a prospective customer’s financial condition.

At September 30, 2014, four customers comprise approximately 80.3% of the total accounts receivable balance, with each customer individually representing 33.5%, 26.9%, 11.5% and 8.4% of total accounts receivable, respectively. At December 31, 2013, five customers comprise approximately 78.3% of the total accounts receivable balance, with each customer individually representing 30.8%, 26.9%, 10.2%, 5.8% and 4.6% of total accounts receivable, respectively.

For the nine months ended September 30, 2014, contracts with two customers comprise approximately 36.6% of total consolidated revenues, with each customer representing 24.9% and 11.7%, respectively. For the nine months ended September 30, 2013, contracts with three customers comprise approximately 38.6% of total consolidated revenues, with each customer representing 14.9%, 13.5% and 10.2%, respectively.

Product Warranty

The GenDrive contracts we enter into generally provide a one to two year product warranty to customers from date of installation, and the ReliOn contracts we enter into generally provide a two to five year product warranty. We currently estimate the costs of satisfying warranty claims based on an analysis of past experience and provide for future claims in the period the revenue is recognized. Factors that affect our warranty liability include the number of installed units, estimated material costs, estimated travel, and labor costs.

The following table summarizes product warranty activity recorded during the nine months ended September 30, 2014 and 2013:

	September 30, 2014			September 30, 2013
Beginning balance - January 1	$	1,608,131		$	2,671,409
Additions for ReliOn acquisition	233,528			—
Additions for current period deliveries	735,907			590,056
Reductions for payments made	(1,271,046		)	(1,848,240		)
Ending balance - June 30	$	1,306,520		$	1,413,225