Active Power (ACPW)

10. Subsequent Events

In February 2010, we completed the sale of 13,229,500 share of our Common Stock in a firm-commitment underwritten offering to certain qualified institutional investors at a price of $0.75 per share, resulting in proceeds, net of fees and expenses, of approximately $9.0 million. These shares were registered under the Company’s previously filed shelf registration statement. The proceeds from this offering will be used for working capital requirements and general corporate purposes.

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11. Subsequent Events

In connection with the review of our historical stock option granting procedures, our Board of Directors decided on April 19, 2007, that the Company would not honor any outstanding options held by persons that the Board determined were significantly involved in the problematic practices identified by the investigation and knew or should have known that the practices were contrary to the terms of our stock option plan, Delaware law, or proper accounting practices. On April 19, 2007, the Board directed the Company’s counsel to communicate

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the Company’s demand that any such options still outstanding should be treated by any such optionee as cancelled. All such options that were still outstanding as of April 19, 2007 have now expired according to their original terms without any attempted exercises.

On April 19, 2007, the Board also decided that the Company should seek the return of profits realized upon the exercise of certain options by persons that the Board determined were significantly involved in the problematic practices identified in the investigation and knew or should have known that the practices were contrary to our stock option plan, Delaware law or proper accounting practices. On April 19, 2007, the Board directed the Company’s counsel to communicate to such persons the Company’s demand for the return of such profits, totaling $323 in the aggregate. To date, there has been no resolution of such demands.

With respect to unexercised options, the Company has further determined that we will either implement a plan to assist certain affected optionees in meeting their liabilities for the amount of tax obligations caused by incorrect treatment of outstanding options by adjusting the terms of the original option grant (in the case of out-of-the-money options) or adjusting the terms of the original option grant and paying the affected employees an amount to compensate such employees for the increase in exercise price (in the case of in-the-money options). We have determined that certain persons who were significantly involved in the problematic practices identified in our internal stock option investigation will not be afforded any such assistance. Accordingly, we anticipate recording certain expenses associated with such assistance in the second quarter of 2007 as this was the period in which such determinations were made. We currently anticipate such expenses to be approximately $300 although the exact amount will depend upon the Company’s stock price at the time these decisions are implemented.

We anticipate significant legal, professional and other expenses in 2007 as a result of our investigation of historical stock granting procedures, including potentially significant expenses for tax obligations for certain affected employees, and possible indemnification of costs to certain former directors and officers of the Company in the event of further legal or regulatory proceedings. The Company spent approximately $1.6 million during the first quarter of 2007 on the costs of this investigation.