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font-size: 10pt;"><div style="text-align: left;"><table cellpadding="0" cellspacing="0" class="DSPFListTable" style="width: 100%; font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><tr><td style="width: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top; font-weight: bold; align: right;">1.</td><td style="text-align: left; width: auto; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top; font-weight: bold;">Significant Accounting Policies</td></tr></table></div><div><br /></div><div style="text-align: left; font-family: ''Times New Roman'', Times, serif; margin-left: 27pt; font-size: 10pt; font-weight: bold;">Organization and Basis of presentation</div><div><br /></div><div style="text-align: justify; text-indent: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">Active Power, Inc. and its subsidiaries (hereinafter referred to as &#8220;we&#8221;, &#8220;us&#8221;, &#8220;Active Power&#8221; or the &#8220;Company&#8221;) manufacture and provide critical power quality and modular infrastructure solutions that provide business continuity and protect customers in the event of an electrical power disturbance. Our products and solutions are designed to deliver continuous clean power, protecting customers from voltage fluctuations, such as surges and sags, and frequency fluctuations, and also to provide ride-through, or temporary, power to bridge the gap between a power outage and the restoration of utility power. Our target customers are those global enterprises requiring &#8220;power insurance&#8221; because they have zero tolerance for downtime in their mission critical operations. The Uninterruptible Power Supply (&#8220;UPS&#8221;) products we manufacture use kinetic energy to provide short-term power as a cleaner alternative to electro-chemical battery-based energy. We sell stand-alone UPS products as well as complete continuous power and infrastructure solutions, including containerized continuous power systems that we brand as PowerHouse&#8482;. We sell our products globally through our direct sales force, manufacturer&#8217;s representatives, Original Equipment Manufacturer (&#8220;OEM&#8221;) channels and IT partners. Our current principal markets are the Americas, Europe Middle East and Africa (&#8220;EMEA&#8221;), and Asia.</div><div><br /></div><div style="text-align: justify; text-indent: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">The accompanying condensed consolidated balance sheet as of December 31, 2012, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements and pursuant to the rules and regulations of the SEC for interim reporting, and include the accounts of the Company and its consolidated subsidiaries. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring items) necessary to present fairly the consolidated financial position of the Company and its consolidated results of operations and cash flows. These interim financial statements should be read in conjunction with the financial statements and accompanying notes included in the Company&#8217;s Annual Report on Form 10-K for the year ended December 31, 2012. Please refer to our filings on Form 10-Q/A for the periods ended March 31, 2013 and June 30, 2013, for information regarding the restatements of our financial results for the periods ended March 31, 2013 and June 30, 2013, respectively, and the impact of such restatements on our unaudited condensed financial statements for the period ended September 30, 2013.</div></div> 755000 597000 432000 590000 13000 61000 684000 0 684000 0 0 0 0 189000 -267041000 322000 -144000 19000 288619000 -200000 361000 19000 23332000 290193000 25999000 -262817000 <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><div style="text-align: left;"><table cellpadding="0" cellspacing="0" class="DSPFListTable" style="width: 100%; font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><tr><td style="width: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top; font-weight: bold; align: right;">6.</td><td style="text-align: left; width: auto; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top; font-weight: bold;">Subsequent Events</td></tr></table></div><div><br /></div><div style="text-align: justify; text-indent: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">On October 29, 2013, we received $0.2 million in cash from Qiyuan Network System Limited, as an additional payment towards the outstanding amount owed on previous shipments made by us. We will recognize revenue for this cash payment in the fourth quarter of 2013. We also accepted a return of goods from such customer on November 4, 2013 that we will put back into inventory in the amount of $1.6 million in the fourth quarter of 2013.</div><div><br /></div><div style="text-align: justify; text-indent: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">On September 10, 2013, a purported class action complaint was filed in the United States District Court for the Western District of Texas against the Company and certain of its current and former executives. The case is captioned Don Lee v. Active Power, Inc., et. al., Civil Action No. 1:3-cv-00797. The complaint alleges that on April 30, 2013, the Company announced during a conference call that it had entered into a strategic distribution partnership with Digital China. &#160;However, on September 5, 2013, after the close of trading, the Company disclosed that its partnership was with Qiyuan Network System Limited, which is neither an affiliate nor a subsidiary of Digital China. &#160;The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, and seeks unspecified damages on behalf of all stockholders.</div><div><br /></div><div style="text-align: justify; text-indent: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">On September 13 and October 14, 2013, two separate stockholders filed complaints in the District Court of Travis County, Texas purporting to bring derivative actions on behalf of the Company against certain current and former officers and directors of the Company. &#160;The first derivative action is captioned Okumura v. Almgren, et. al., Cause No. D-1-GN-13-003230 and the second derivative action is captioned David B. Shaev IRA v. Milner, et. al., Cause No. D-1-GN-13-003557. &#160;The allegations of each derivative complaint mirror those of the class action complaint, and they assert claims for breach of fiduciary duty, unjust enrichment, and/or abuse of control and seek damages on behalf of the Company. &#160;Defendants have entered into an agreement with each of the plaintiffs to stay both of the derivative actions pending the outcome of the motion to dismiss in the securities class action described above.</div><div><br /></div><div style="text-align: justify; text-indent: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">As of November 18, 2013 we cannot assess the potential outcome of these lawsuits.</div></div> <div style="font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><div style="text-align: left;"><table cellpadding="0" cellspacing="0" class="DSPFListTable" style="width: 100%; font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><tr><td style="width: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top; font-weight: bold; align: right;">2.</td><td style="text-align: left; width: auto; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top; font-weight: bold;">Supplemental Balance Sheet Information</td></tr></table></div><div><br /></div><div style="text-align: left; font-family: ''Times New Roman'', Times, serif; margin-left: 27pt; font-size: 10pt; font-weight: bold;">Restricted Cash</div><div><br /></div><div style="text-align: left; text-indent: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">Our restricted cash balance of $0.5 million as of September 30, 2013 consists primarily of secured performance and deposit guarantees given to customers. 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If title and risk of loss pass at some other point in time, we recognize such revenue for our customers when the product is delivered to the customer and title and risk of loss have passed. &#160;We may enter into bill-and-hold arrangements and when this occurs delivery may not be present, but other criteria are reviewed to determine the proper timing of revenue recognition.</td></tr></table></div><div><br /></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" class="DSPFListTable" style="width: 100%; font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><tr><td style="width: 27pt;"></td><td style="width: 18pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top; align: right;">&#9679;</td><td style="text-align: left; width: auto; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top;">We recognize installation and service and maintenance revenue at the time the service is performed.</td></tr></table></div><div><br /></div><div style="text-align: justify;"><table cellpadding="0" cellspacing="0" class="DSPFListTable" style="width: 100%; font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><tr><td style="width: 27pt;"></td><td style="width: 18pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top; align: right;">&#9679;</td><td style="text-align: justify; width: auto; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top;">We recognize revenue associated with extended maintenance agreements (&#8220;EMAs&#8221;) over the life of the contracts using the straight-line method, which approximates the expected timing in which applicable services are performed. Amounts collected in advance of revenue recognition are recorded as a current or long-term liability based on the time from the balance sheet date to the future date of revenue recognition.</td></tr></table></div><div><br /></div><div style="text-align: justify;"><table cellpadding="0" cellspacing="0" class="DSPFListTable" style="width: 100%; font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><tr><td style="width: 27pt;"></td><td style="width: 18pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top; align: right;">&#9679;</td><td style="text-align: justify; width: auto; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top;">We recognize revenue on certain rental programs over the life of the rental agreement using the straight-line method. Amounts collected in advance of revenue recognition are recorded as a current or long-term liability based on the time from the balance sheet date to the future date of revenue recognition.</td></tr></table></div><div><br /></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" class="DSPFListTable" style="width: 100%; font-family: 'Times New Roman', Times, serif; font-size: 10pt;"><tr><td style="width: 27pt;"></td><td style="width: 18pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top; align: right;">&#9679;</td><td style="text-align: left; width: auto; font-family: ''Times New Roman'', Times, serif; font-size: 10pt; vertical-align: top;">Shipping costs reimbursed by the customer are included in revenue.</td></tr></table></div><div><br /></div><div style="text-align: justify; text-indent: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">When collectability is not reasonably assured, we defer revenue and will recognize revenue on a cost recovery basis as payments are received.</div><div><br /></div><div style="text-align: justify; text-indent: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">Multiple element arrangements (&#8220;MEAs&#8221;) are arrangements to sell products to customers that frequently include multiple deliverables. Our most significant MEAs include the sale of one or more of our CleanSource&#174; UPS or PowerHouse products, combined with one or more of the following products: design services, project management, commissioning and installation services, spare parts or consumables, and EMAs. Delivery of the various products or performance of services within the arrangement may or may not coincide. Certain services related to design and consulting may occur prior to delivery of product and commissioning and installation typically take place within six months of product delivery, depending upon customer requirements. EMAs, consumables, and repair, maintenance or consulting services generally are delivered over a period of one to five years. 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We generally determine selling price based on amounts charged separately for the delivered and undelivered elements to similar customers in stand-alone sales of the specific elements. When arrangements include an EMA, we recognize revenue related to the EMA at the stated contractual price on a straight-line basis over the life of the agreement.</div><div><br /></div><div style="text-align: justify; text-indent: 27pt; font-family: ''Times New Roman'', Times, serif; font-size: 10pt;">Any taxes imposed by governmental authorities on our revenue-producing transactions with customers are shown in our consolidated statements of operations on a net-basis; that is, excluded from our reported revenues.</div></div> 620000 320000 211000 39000 238000 -99000 200000 144000 18400000 19115000 19337000 19188000 P1Y 282000 246000 118000 80000 P18M 1 P12M 4 1 P36M P12M P6M P5Y 20000 0 49000 20000 1600000