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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 8-K

                                 CURRENT REPORT
                       PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

         Date of Report (Date of earliest event reported): July 26, 2006

                               ACTIVE POWER, INC.
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             (Exact Name of Registrant as Specified in Its Charter)

                                    000-30939
                            ------------------------
                            (Commission File Number)

                Delaware                               74-2961657
      ----------------------------                 -------------------
      (State of Other Jurisdiction                    (IRS Employer
            of Incorporation)                      Identification No.)

 2128 W. Braker Lane, BK12, Austin, Texas                 78758
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 (Address of Principal Executive Offices)              (Zip Code)

                                 (512) 836-6464
              ----------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

                                       N/A
          -------------------------------------------------------------
          (Former Name or Former Address, if Changed Since Last Report)

     Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registration under any of
the following provisions (see General Instruction A.2. below):

[ ]  Written communications pursuant to Rule 425 under the Securities
     Act (17 CFR 230.425)

[ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange
     Act (17 CFR 240.14a-12)

[ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
     Exchange Act (17 CFR 240.14d-2(b))

[ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
     Exchange Act (17 CFR 240.13e-4(c))

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ITEM 2.02     RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On July 26, 2006, Active Power, Inc. issued a press release reporting its
results of operations for its fiscal quarter ended June 30, 2006. A copy of the
press release is furnished herewith as Exhibit 99.1.

In accordance with General Instruction B.2 of Form 8-K, the information
contained in this Current Report, including the exhibit attached hereto, shall
not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended, or otherwise subject to the liabilities of that section,
nor shall such information be deemed incorporated by reference into any filing
under the Securities Exchange Act of 1934, as amended, or the Securities Act of
1933, as amended, regardless of any general incorporation language in such
filing, except as shall be expressly set forth by specific reference in such
filing.

ITEM 9.01.    EXHIBITS AND FINANCIAL STATEMENTS.

(d)    EXHIBITS

       Exhibit 99.1   Press Release dated July 26, 2006



                                    SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                       ACTIVE POWER, INC.


Dated: July 26, 2006                   By: /s/ Jim Clishem
                                           -------------------------------------
                                           Jim Clishem
                                           President and Chief Executive Officer
                                                                    Exhibit 99.1

                        PRESS RELEASE DATED JULY 26, 2006

                  ACTIVE POWER ANNOUNCES SECOND QUARTER RESULTS

           YEAR-TO-DATE REVENUE UP 36%. EMEA REVENUE GROWTH OVER 100%

AUSTIN, Texas (July 26, 2006) -- Active Power, Inc. (NASDAQ: ACPW) today
announced results for its second quarter ended June 30, 2006. Revenue for the
second quarter of fiscal 2006 was $5.5 million, up 17% from the same period last
year and down 2% from the previous quarter. For the six-month period ended June
30, 2006 revenues were $11.0 million compared to $8.1 million in 2005, an
increase of 36%.

Net loss for the second quarter of 2006 was $6.0 million, or 12 cents per share,
compared to a net loss of $5.6 million, or 12 cents per share, for the same
period last year and a net loss of $6.0 million, or 12 cents per share in the
previous quarter. Net loss for this quarter includes $787,000, or 2 cents per
share, for stock-based compensation. Excluding the effects of stock-based
compensation expense, which we began reporting in 2006, our loss for the quarter
was 7% lower than the $5.6 million loss recorded in the second quarter of 2005.

Cash and investments usage for the quarter was $4.0 million, as compared to $4.5
million for the same period last year and $5.0 million for the previous quarter.
Cash and investments at June 30, 2006 were $33.0 million.

"In the second quarter we began to see positive results from the sales resources
that we've placed in our Europe, Middle East and Africa (EMEA) sales team," said
Jim Clishem, President and CEO of Active Power. "International sales were up
over 100% in Q2 as compared to the previous quarter. Bookings for this region
look strong for Q3 and the remainder of 2006 as the expanding global data center
market continues to value the small footprint and energy efficiency of our
flywheel systems."

"We are transitioning the business to place emphasis and apply resources to
higher margin sales of equipment and services, while also reducing expenses that
don't directly correlate to this goal. We believe that the cost reduction
measures we took this week will allow us to realign our resources and better
position Active Power for profitable growth in the future."

Recent Business Highlights:
- ---------------------------

     o    Shipped equipment to eight countries in Q2. International sales
          accounted for 46% of our total revenue in Q2, and we believe that
          sales through our EMEA channel will continue to be a growth driver for
          the remainder of 2006. We have already received bookings in July for
          over 11 MW of flywheel equipment from this channel, including a 4 MW
          order for a major airport in Asia that we expect to ship in Q3.



     o    Announced an order from TNT Express ICS for a 1650 kVA turnkey power
          system that includes UPS, generator, switchgear and related
          components, services and installation. The system has been shipped and
          installed and is currently providing increased power protection for
          TNT Express ICS's Worldwide Data Centre in Atherstone, Warwickshire,
          UK.

     o    Shipped the final three megawatt-class UPS systems against the
          11-megawatt order from Caterpillar announced at the end of January.
          These flywheel UPS systems will be used to protect a large datacenter
          in the United States. Installation of these systems is on-going. We
          continue to see an increase in sales activity for our megawatt-class
          UPS systems.

     o    Promoted Jim Clishem to be our President and CEO. Jim brings a wealth
          of management experience, particularly in the sales and marketing
          disciplines, to help complete our transition to a more commercially
          directed company.

     o    This week we took actions to reduce operating expenses in order to
          strengthen our financial position while remaining focused on
          increasing higher margin sales. We also realigned resources to harvest
          our technologies and provide support for a more focused multi-channel
          sales strategy with an increased commitment to selling the Active
          Power branded products and services. As part of this effort, we
          implemented cost reduction measures, including a headcount reduction
          across the entire company, that we believe will result in
          approximately $1 million of savings per quarter beginning in Q4. We
          expect to incur approximately $500 thousand in expenses in Q3 related
          to this initiative.

     o    Grew service revenue 22% over the same period last year. We continue
          to focus our efforts on expanding our Active Power branded sales
          channel. Not only does this channel yield better margin on our
          equipment, but it provides us with a better relationship with end-user
          customers and the ability to capture service contracts and revenue.
          Our Active Power branded sales channel accounted for 63% of total
          revenue in Q2 as compared to 34% in Q1 of 2006.

     o    Signed the first CoolAir(TM) UPS usage plan agreement with Georgia
          State University (GSU). The usage agreement, in contrast to a standard
          purchase agreement, eliminates a large upfront capital expenditure for
          our customers and allows them to use the CoolAir equipment at a fixed,
          predictable price that includes extended warranty and maintenance
          coverage.

     o    Continued our success in traditionally strong markets for our
          products. In Q2 we shipped systems to seven data centers around the
          world, seven healthcare or hospital facilities, six industrial
          processing customers and four broadcast entities.

     o    Received an order and shipped a production-level CoolAir DC unit to
          one of the leading producers of photovoltaic modules in Europe.



     o    Received Electrical Construction & Maintenance (EC&M) magazine's
          Product of the Year Award in the Power Conditioning Equipment category
          for CoolAir DC. The honor was given to CoolAir DC by a panel of
          industry experts that reviews the premier products based on innovation
          and commercial availability.

Outlook:
- --------

Active Power expects Q3 2006 revenue to be approximately $5.5 to $6.5 million,
and Q3 earnings per share to be a loss of approximately 12 to 14 cents, which
includes approximately 2 cents per share for stock-based compensation expenses.
We expect cash and investments usage in Q3 to be in the range of $6.0 to $7.0
million due in part to the increase in CoolAir related inventory, and that our
cash usage will decrease significantly from these levels in Q4.

CONFERENCE CALL:

The Company will host a conference call today, Wednesday, July 26, at 11:00 a.m.
Eastern Time, to further review the Company's fiscal Q2 results. A replay of the
webcast will be available until August 9th. Investors may access the live
broadcast and replay through our web site: www.activepower.com.

ABOUT ACTIVE POWER:

Active Power, Inc. (www.activepower.com) designs, manufactures and markets
battery-free power quality products that provide the consistent, reliable
electric power required by today's digital economy. An ISO 9001-certified
company, Active Power is the first to commercialize a flywheel energy storage
system, CleanSource(R), that provides a highly reliable, low-cost and non-toxic
replacement for lead-acid batteries used in conventional power quality
installations. Active Power has also recently developed a new battery-free
extended runtime product line (CoolAir(TM)) based on its proprietary thermal and
compressed air storage technology.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:

This release may contain forward-looking statements that involve risks and
uncertainties. Among the important factors that could cause actual results to
materially differ from those in the forward-looking statements are: the
potential for significant losses to continue; inability to accurately predict
revenue and budget for expenses for future periods; fluctuations in revenue and
operating results; overall market performance; decreases and/or delays in
capital spending; limited product offerings; inability to expand and integrate
new distribution channels; inability to manage new and existing product
distribution relationships; our dependence on our relationship with
Caterpillar(R); competition; delays in research and development; dependence on
sole or limited source suppliers; inability to increase product sales; inventory
risks; dependence upon key personnel; inability to protect our intellectual
property rights; potential future acquisitions; potential Sarbanes-Oxley Section
404 compliance issues; the volatility of our stock price regardless of our
actual financial performance; and other factors detailed in our filings with the
Securities and Exchange Commission. Additional risks and uncertainties that we
are unaware of or that we currently deem immaterial also may become important
factors that affect us. Active Power expressly disclaims any obligation to
release publicly any updates or revisions to the information contained in this
press release or to update or revise any forward-looking statements to reflect
any changes in expectations, or any change in events or circumstances on which
those statements are based, unless otherwise required by law.

Active Power and our Active Power logo and CleanSource are registered trademarks
of Active Power, Inc. All other trademarks are the properties of their
respective companies.

ACTIVE POWER CONTACTS:
Michael Chibib, Investors, 512.744.9453, mchibib@activepower.com
Derek Jones, Corporate Communications, 512.744.9210, djones@activepower.com



                               ACTIVE POWER, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                      (Thousands, except per share amounts)
                                   (unaudited)

THREE SIX MONTHS ENDED MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- ---------------------------- 2006 2005 2006 2005 ------------ ------------ ------------ ------------ Product revenue $ 4,835 $ 4,157 $ 9,879 $ 7,088 Service and spares revenue 631 517 1,156 1,024 ------------ ------------ ------------ ------------ Total revenue 5,466 4,674 11,035 8,112 Cost of product revenue 5,021 4,119 10,158 7,364 Cost of service and spares revenue 567 497 1,143 1,041 ------------ ------------ ------------ ------------ Total cost of revenue 5,588 4,616 11,301 8,405 Gross Margin (122) 58 (266) (293) Operating expenses: Research and development 2,039 2,807 4,264 5,038 Selling and marketing 2,616 1,889 5,275 3,326 General & administrative 1,853 1,686 3,347 3,823 ------------ ------------ ------------ ------------ Total operating expenses 6,508 6,382 12,886 12,187 ------------ ------------ ------------ ------------ Operating loss (6,630) (6,324) (13,152) (12,480) Interest income 382 418 776 796 Gain due to change in market value of investment rights 253 (19) 332 (61) Other income (expense) - 321 - 814 ------------ ------------ ------------ ------------ Net loss $ (5,995) $ (5,604) $ (12,044) $ (10,931) ============ ============ ============ ============ Net loss per share, basic & diluted $ (0.12) $ (0.12) $ (0.24) $ (0.23) Shares used in computing net loss per share, basic & diluted 49,648 48,586 49,516 47,361 Comprehensive loss: Net loss $ (5,995) $ (5,604) $ (12,044) $ (10,931) Translation loss on subsidiaries in foreign currencies (3) - (3) - Unrealized gain (loss) on investments in marketable securities 13 58 22 (43) Realized loss on investments in marketable securities - 7 - 7 ------------ ------------ ------------ ------------ Comprehensive loss $ (5,985) $ (5,539) $ (12,025) $ (10,967) ============ ============ ============ ============
ACTIVE POWER, INC. CONDENSED BALANCE SHEETS (Thousands)
JUNE 30, DECEMBER 31, 2006 2005 ------------ ------------ (unaudited) Assets Current assets: Cash and cash equivalents $ 14,585 $ 7,590 Restricted cash 116 116 Short-term investments in marketable securities 16,380 31,364 Accounts receivable, net 4,083 5,769 Inventories 8,002 4,242 Prepaid expenses and other 407 596 ------------ ------------ Total current assets 43,573 49,677 Property and equipment, net 7,848 7,530 Long-term investments in marketable securities 1,952 2,970 Deposits and other 188 188 ------------ ------------ Total assets $ 53,561 $ 60,365 ============ ============ Liabilities and stockholders' equity Current liabilities: Accounts payable $ 2,952 $ 2,264 Accrued expenses 3,982 3,780 Deferred revenue 365 205 ------------ ------------ Total current liabilities 7,299 6,249 Stockholders' equity: Common stock 50 49 Treasury stock (5) (5) Deferred stock compensation - (293) Additional paid-in capital 239,024 235,147 Accumulated deficit (192,733) (180,689) Other accumulated comprehensive income (74) (93) ------------ ------------ Total stockholders' equity 46,262 54,116 ------------ ------------ Total liabilities and stockholders' equity $ 53,561 $ 60,365 ============ ============
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