9. Commitments and Contingencies

Litigation

Legal matters are defended and handled in the ordinary course of business. The Company has established accruals for matters for which management considers a loss to be probable and reasonably estimable. It is the opinion of management that facts known at the present time do not indicate that such litigation, after taking into account insurance coverage and the aforementioned accruals, will have a material adverse impact on our results of operations, financial position, or cash flows.

Concentrations of credit risk

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

At September 30, 2015, three customers comprise approximately 46.6% of the total accounts receivable balance, with each customer individually representing 18.5%, 16.1% and 12.0% of total accounts receivable, respectively. At December 31, 2014, four customers comprise approximately 69.9% of the total accounts receivable balance, with each customer individually representing 30.2%, 16.0%, 13.4% and 10.3% of total accounts receivable, respectively.

For the nine months ended September 30, 2015, 56.7% of total consolidated revenues were associated primarily with one customer. For the nine months ended September 30, 2014, 36.6% of total consolidated revenues were associated primarily with two customers, with each representing 24.9% and 11.7% of total consolidated revenues, respectively.

Operating leases

As of September 30, 2015 and December 31, 2014, the Company has several non-cancelable operating leases that expire over the next six years. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease.

Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) for the years ending December 31, 2015 and thereafter, as of September 30, 2015 are (in thousands):

Remainder of 2015	$	2,104
2016	8,415
2017	8,401
2018	8,239
2019	7,583
Thereafter	10,133

Total future minimum lease payments	$	44,875

Restricted Cash

The Company has entered into sales/leaseback agreements associated with its products and services. In connection with these agreements, cash of $29.2 million is required to be held in escrow or as collateral in connection with a letter of credit, which will be released over the lease term.

The Company also has letters of credit in the aggregate amount of $1.0 million associated with an agreement to provide hydrogen infrastructure and hydrogen to a customer at its distribution center and with a finance obligation from the sale/leaseback of its building. Cash collateralizing these letters of credit is considered restricted cash.

Finance Obligation

During the three and nine months ended September 30, 2015, the Company received cash for future services to be performed associated with certain sales/leaseback agreements. This cash is reported as restricted cash on the Company’s unaudited consolidated balance sheet at September 30, 2015. The portion of cash received representing amounts related to future services amounted to $8.9 million. The short term portion of this amount of $1.5 million is included in other current liabilities, with the remaining balance included in finance obligations within the accompanying unaudited consolidated balance sheet at September 30, 2015. The amount is amortized using the effective interest method.

Extended Maintenance Contracts

One of the critical estimates that management makes is the projection of service costs related to GenDrive units under extended maintenance contracts. This estimate is important in management’s determination of whether a loss contract exists, as well as the amount of any loss. A variety of assumptions are included in the estimates of future service costs, including the life of parts, failure rates of parts, and future costs of parts. As management gains more experience with GenDrive units, these assumptions are continually updated. Recently, management, through its field service technicians and engineering professionals, combined with input from our primary stack supplier, believes it has identified the main cause of periodic stack life degradation. Stacks are a significant component of a GenDrive unit. A resolution to this matter may significantly improve the longevity of stacks and provide more insight into the life of legacy stacks that are currently components of GenDrive units in the installed base. This insight will be factored into management’s assumptions when projecting future service costs in determining whether loss contracts exist for certain of our extended maintenance contracts. At this time, management does not have sufficient information to estimate the costs related to this matter. Once the necessary information is available, management will estimate the impact of this matter, if any, on its extended maintenance contracts. This analysis could result in a charge to the Company’s consolidated statement of operations in the future