Property and Equipment

6 Months Ended

Jun. 30, 2011

Property and Equipment

Property and Equipment

Note 5.  Property and Equipment

Details of our property and equipment follow:

	Estimated	As of:
	Useful Life	June 30, 2011			December 31, 2010
Construction in Progress	Varied	$	2,984,130		$	41,227,183
Land		192,487			192,487
Smart Energy 25 flywheels	20 years	36,950,636			6,241,732
Smart Energy Matrix™ installations - fungible	20 years	13,085,600			2,526,337
Smart Energy Matrix™ installations - non-fungible	20 years	8,515,478			—
Machinery and equipment	5 - 10 years	2,857,305			2,696,752
Service vehicles	5 years	16,763			16,763
Furniture and fixtures	7 years	728,771			798,263
Office equipment and software	3 years	1,170,871			1,084,720
Leasehold improvements	Lease term	7,888,067			7,804,606
Equipment under capital lease obligations	Lease term	540,059			563,783
Total		$	74,930,167		$	63,152,626
Less accumulated depreciation and amortization		(8,401,263		)	(6,960,421		)
Property and equipment, net		$	66,528,904		$	56,192,205

The “Land” shown in the schedule above represents the cost of land for our Stephentown, New York frequency regulation plant. The Smart Energy 25 flywheels shown above represent the cost of the flywheels and electronic control modules in service. Smart Energy Matrix™ installations, otherwise referred to as “balance of plant,” represent the ancillary equipment required to operate our systems; construction costs charged by the contractor; equipment installation, testing and commissioning expenses; and capitalizable soft costs, such as permits, interconnection costs and capitalized interest.  The balance of plant costs are separated between those that are considered “fungible” and those that are “non-fungible.”  Fungible equipment is equipment that can be relocated to other sites, whereas non-fungible costs represent either equipment that cannot be moved, or “soft” costs such as capitalized interest.  The Smart Energy Matrix™ costs shown above also relate to equipment and costs in Stephentown or Tyngsboro.

The components of “Construction in progress” (CIP), which represent costs related to assets that have not yet been placed into service and for which no depreciation expense has been taken, were as follows:

	As of:
	June 30, 2011		December 31, 2010
Materials to build production flywheels	$	2,208,090	$	757,913
Smart Energy 25 flywheels	213,998		23,481,822
Smart Energy Matrix™ in progress	326,421		16,455,318
Deposits and other costs related to the acquisition of land for frequency regulation systems	49,581		48,587
Machinery and equipment	169,696		103,590
Software	—		121,620
Leasehold improvements	16,344		258,333
Construction in progress	$	2,984,130	$	41,227,183

As of June 30, 2011, and December 31, 2010, approximately $2,798,000 and $40,744,000, respectively, of the total shown as CIP represent completed flywheels not yet in service, materials to build flywheels and other costs related to the Smart Energy Matrix™ installations at sites where we may build frequency regulation plants in the future.

Under the terms of our Tyngsboro facility lease, we will incur certain exit costs at termination of our lease.  Estimated exit costs of approximately $267,000 relating to certain non-fungible equipment included in the Smart Energy Matrix™ system operating outside of our facility were previously expensed and carried in accrued expenses.  Machinery and equipment and leasehold improvements include approximately $54,000 in estimated exit costs as of June 30, 2011, and December 31, 2010, that are being depreciated over the remaining life of the lease.  In addition, we paid the Town of Stephentown, New York, $75,000 to be held in escrow to cover any land clearing or exit costs at that site.  This amount is included in “Property and Equipment, net” on our balance sheet as of June 30, 2011.