Commitments and Contingencies

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

11. Commitments and Contingencies

968 Albany Shaker Road Associate, LLC Lease

On March 27, 2013, the Company completed a sale-leaseback transaction of its property located at 968 Albany Shaker Road, Latham, New York, for an aggregate purchase price of $2,725,000 payable in cash at closing and $1,750,000 with 5% annual interest is payable over 15 years in equal monthly installments of $13,839. The sale-leaseback transaction is being accounted for in accordance with applicable accounting guidance provided under Accounting Standards Codification (ASC) 840, Leases. Due to the Company’s continuing involvement with the property, the transaction has been accounted for as a financing. Accordingly, approximately $2,544,000 and $54,000 have been recorded as finance obligation and current portion finance obligation (other current liabilities), respectively, in the condensed consolidated balance sheet as of March 31, 2013.

In connection with the sale-leaseback transaction, we also entered into an agreement with the buyer, pursuant to which the Company leases from the buyer a portion of the premises sold for a term of 15 years. Monthly payments relating to this agreement are $38,297, $41,243, and $44,189, for years 1-5, 6-10, and 11-15, respectively.

As part of the terms of the transaction, the Company issued two standby letters of credit to the benefit of the landlord/lessor that can be drawn by the beneficiary in the event of default on the lease by Plug Power. The standby letters total $750,000 and are 100% collateralized by cash balances of the Company. This cash is restricted from use by the Company for any other purpose than to collateralize the standby letters. The standby letters are renewable for a period of ten years and can be cancelled in part or in full if certain covenants are met and maintained by the Company. Accordingly, as of March 31, 2013, $750,000 has been recorded to restricted cash in the condensed consolidated balance sheet.

Other 

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. (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.

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 March 31, 2013, five customers comprise approximately 88.6% of the total accounts receivable balance, with each customer individually representing 31.7%, 24.1%, 16.9%, 8.7% and 7.2% of total accounts receivable, respectively. At December 31, 2012, four customers comprise approximately 82.2% of the total accounts receivable balance, with each customer individually representing 63.1%, 7.7%, 6.3% and 5.1% of total accounts receivable, respectively.

For the three months ended March 31, 2013, contracts with two customers comprise approximately 58.3% of total consolidated revenues, with each customer representing 42.7% and 15.6%, respectively. For the three months ended March 31, 2012, contracts with two customers comprise approximately 58.7% of total consolidated revenues, with each customer representing 48.1% and 10.6%, respectively.

Product Warranty

The product and service revenue contracts we entered into generally provide a one to two-year product warranty to customers from date of installation. 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. During the year ended December 31, 2012, we adjusted our reserve for additional warranty claims arising from GenDrive component quality issues that were identified. These were isolated quality issues that were identified in GenDrive units that are being used at customer sites. These units are in the process of being retro-fitted with replacement components that will improve the reliability of our GenDrive products for our customers.

The following table summarizes product warranty activity recorded during the three months ended March 31, 2013 and 2012:

	March 31, 2013		March 31, 2012
Beginning balance - January 1	$	2,671,409	$	1,210,909
Additions for current period deliveries	167,362		144,879
Warranty costs incurred during the period	(965,878)		(264,641)
Ending balance - March 31	$	1,872,893	$	1,091,147