Capstone Green Energy Holdings Inc
For the period ended Mar 31, 2024. Filed Sep 27, 2024.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Sep 27, 2024
CEPL$2.93+12.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-03-31; filed 2024-06-13.
0001558370-24-009109
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-03-31; filed 2024-09-27.
0001558370-24-013052
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 147 previous paragraphs and 75 current paragraphs.
22 unchanged; 36 reworded; 16 added; 86 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 29 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
Recent Developments
Current report
Refer to Note 3— Chapter 11 Proceedings and Emergence in the Notes to Consolidated Financial Statements for a summary of our voluntary filing under Chapter 11 of the Bankruptcy Code, our emergence therefrom and our delisting of our common stock from the Nasdaq. Refer to Note 12— Debt for details regarding our Exit Note Purchase Agreement and Note 14— Commitments and Contingencies for details regarding our Service Agreements and the Trademark Licensing Agreement.
Current report
For Fiscal 2024, net revenue was $91.2 million, a 23% increase from the prior year. The increase was led by product and accessories revenue, which were up 40% to $49.1 million primarily due to an increase in product sales. Cost of goods sold totaled $76.9 million and delivered $14.3 million of gross profit in Fiscal 2024. Gross profit increased from $9.1 million at Fiscal 2023, primarily due to the shift of sales mix to our higher margin rental business, higher product and parts pricing, higher sales volume, greater cost absorption and product mix.
Current report
During Fiscal 2024, we had net income of $7.4 million and our basic and diluted net income per share was $0.39, compared to a $24.5 million loss and $1.43 net loss per share, respectively, in Fiscal 2023. The $31.9 million increase to net income during Fiscal 2024 was primarily due to the impact of the Chapter 11 reorganization, inclusive of a gain on settlement of debt upon emergence from Chapter 11 on December 7, 2023 of $35.3 million. See Note 3— Chapter 11 Proceedings and Emergence in the Notes to Consolidated Financial Statements for further discussion of our outstanding indebtedness and the post emergence financing.
Current report
Transportation
Current report
Our technology can also be used to support Electric Vehicle (“EV”) market by providing power solutions to charge vehicles. Our products can fill a void in the EV market for vehicle charging capacity and charging convenience. Our customers have applied our products in EV applications for fleets and remote location charging stations. We are continuing to pursue global EV charging opportunities to fill the demand for power in this market segment.
Current report
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Current report
Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors. In addition, there are other items within our financial statements that require estimation but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
Current report
interests in accordance with the governing documents. The net income attributable to noncontrolling interests in the Operating Subsidiary on the Consolidated Statements of Operations is associated with the increase or decrease in the noncontrolling interest holders’ contractual claims on the respective entities’ balance sheets assuming a hypothetical liquidation at the end of that reporting period when compared with their claims on the respective entities’ balance sheets assuming a hypothetical liquidation at the beginning of that reporting period, after removing the impact of any contributions or distributions. Separately, the Company will also determine whether an adjustment should be recorded to remeasure the redemption feature attached to the Preferred Units to their maximum redemption value through retained earnings. Refer to Note 10— Temporary Equity for details on remeasuring the redemption value of the Preferred Units.
Current report
For Fiscal 2024, revenue from microturbine products and accessories increased $14.1 million, or 40%, to $49.1 million from $35.0 million for Fiscal 2023. The $14.1 million increase was primarily driven by an increase in megawatts shipped during the year ended March 31, 2024 compared to the same period last year. Megawatts shipped were 40.5 megawatts and 29.0 megawatts during the year ended March 31, 2024 and 2023, respectively. Average revenue per megawatt shipped was approximately $1.2 million and $1.1 million during the year ended March 31, 2024 and 2023, respectively, illustrating the effect of previously announced Product price increases. The timing of shipments is variable
Current report
Research and Development (“R&D”) Expenses. R&D expenses for Fiscal 2024 and 2023 was $2.5 million and $2.4 million, respectively.
Current report
of increases of approximately $7.7 million in legal fees, $2.4 million in accounting fees, $1.1 million in consulting expenses incurred primarily for restatement activities and $1.1 million in stock-based compensation expense, partially offset by decreases of $3.8 million of net credit loss expense, $0.7 million in facility costs, $0.3 million in travel related costs, and $0.2 million in marketing costs.
Current report
Cash Flows
Current report
Debt Refer to Note 12— Debt in the Notes to Consolidated Financial Statements for information related to our notes.
Current report
Lease Commitments Refer to Note 13— Leases in the Notes to Consolidated Financial Statements for information related to our leases.
Current report
The Company has assessed its position and hired a new CEO, is refocusing its marketing efforts, and is expanding the professional staff to focus on market development for its products. The success of these efforts is uncertain and may not result in improvement in the liquidity position.
Removed paragraphs (86)
Previous report
Post Fiscal 2023 Developments
Previous report
Voluntary Petition for Bankruptcy
Previous report
As previously reported in the Company’s Current Report on Form 8-K filed with the SEC on September 28, 2023, the Company and its wholly owned direct subsidiaries, Capstone Turbine International, Inc. and Capstone Turbine Financial Services, LLC. (together with the Company, the “Debtors”), commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Chapter 11 proceedings are jointly administered under the captionIn re Capstone Green Energy Corporation, Inc., et al.(the “Chapter 11 Cases”). The Debtors continue to operate their business in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. At hearings before the Bankruptcy Court on September 29, 2023, the Debtors obtained approval from the Bankruptcy Court of certain “first day” motions containing customary relief intended to assure the Debtors’ ability to continue their ordinary course operations during the Chapter 11 Cases.
Previous report
Concurrent with the petition, the Debtors entered into the Transaction Support Agreement (“TSA”) with the pre-petition senior secured creditor, Broad Street Credit Holdings, LLC. (“Broad Street”), and Goldman Sachs Specialty Lending Group, L.P. (the “Collateral Agent”). The TSA, among other things, provided that Broad Street and the Collateral Agent would support the Debtors’ restructuring efforts as set forth in, and subject to the terms and conditions of, the TSA. The TSA contained customary conditions, representations, and warranties of the parties and is subject to a number of conditions, including, among others, the accuracy of the representations and warranties of the parties and compliance with the obligations set forth in the TSA. The TSA also provided for termination by the parties upon the occurrence of certain events.
Previous report
See additional discussion in Note 17– Subsequent Events in the Notes to Consolidated Financial Statements.
Previous report
Emergence from Voluntary Chapter 11 Proceedings
Previous report
The Bankruptcy Court confirmed the Plan on November 14, 2023, and the Debtors satisfied all conditions required for Plan effectiveness and emerged from the Chapter 11 Cases ("Emergence") on December 7, 2023 (the “Effective Date”). On or following the Effective Date and pursuant to the terms of the Plan, the following occurred or became effective:
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▪Restructuring: Capstone Green Energy Corporation was reorganized pursuant to the TSA and became a private company (“Reorganized PrivateCo”) that continues to own assets consisting of (i) all of the Company’s right, title, and interest in and to certain trademarks of the Company and (ii) assets owned by the Company relating to distributor support services ((i) and (ii) together, the “Retained Assets”) and certain income tax attributes that remained with Reorganized PrivateCo. Capstone Turbine International became a publicly-traded company and was renamed Capstone Green Energy Holdings, Inc. This entity is the successor entity for purposes of SEC registration. Pre-petition equity holders received 100% of the common equity in this public entity, subject to dilution for any equity incentive plans implemented as part of the reorganization. All equity of the predecessor entity was cancelled, and the predecessor entity became a reorganized private company. The reorganized private company equity is owned 100% by the pre-petition senior secured lender in exchange for the satisfaction of $35.0 million of its pre-petition claims, and $10.0 million of its DIP claim. A new subsidiary to the public entity was created, issuing 100% of its common equity to the public entity, and 100% of its preferred equity to the reorganized private entity. The new subsidiary ("Operating Subsidiary”) conducts the legacy Capstone business (other than in respect of the Retained Assets). The preferred equity is convertible at the option of the holder at any time to 37.5% of the common equity deemed outstanding, making the common equity of Operating Subsidiary subject to dilution to 62.5% ownership.
Previous report
▪Exit Financing: The DIP Facility converted into an Exit Facility for an aggregate principal amount of $27.0 million, consisting of (1) $7.0 million new money notes, (2) a roll-up of secured obligations under the pre-petition debt in the amount of $8.0 million, and (3) a roll-up of the DIP new money notes of $12.0 million, subject to the terms and conditions set forth in the Exit Facility Agreement. The new money notes mature two years from the Effective Date, and the roll-up debts mature three years from the Effective Date. Interest is calculated using a SOFR rate plus an applicable margin, and a portion is paid-in-kind until the third year following emergence. In the original Plan, the Exit Facility was to be for an aggregate principal amount of $25.0 million, with only $5.0 million in new money notes. The final approved Plan increased the new money notes to $7.0 million upon the confirmation of the Plan by Bankruptcy Court.
Previous report
Exit Facility Agreement
Previous report
In connection with the emergence form the Chapter 11 Cases, on the Effective Date, Operating Subsidiary entered into an Exit Note Purchase Agreement (the “Exit Note Purchase Agreement”), by and among Operating Subsidiary, as the issuer, the Company and Capstone Financial Services, as the guarantors (the “Guarantors”), Purchaser and the Collateral Agent (each as defined in the Exit Note Purchase Agreement). The Exit Note Purchase Agreement provides for:
Previous report
(i) a roll up of the $12.6 million DIP New Money Notes (plus any accrued unpaid interest);
Previous report
(ii) a roll up of $8.0 million of DIP Roll Up Notes (plus any accrued unpaid interest) (collectively with the roll up of the $12.6 million DIP New Money Notes, the “Exit Roll Up Notes”); and
Previous report
(iii) an additional $7.0 million new money committed delayed draw term loan facility (the “Exit New Money Notes” and, together with the Exit Roll Up Notes, the “Notes”), of which $3.0 million was drawn at closing.
Previous report
The Exit Note Purchase Agreement also provides for a $10.0 million uncommitted incremental facility. The proceeds of the $7.0 million of Exit New Money Notes were used to fund restructuring expenses and for working capital, for general corporate purposes and to pay interest, premiums, fees and expenses payable under the other Note Documents (as defined in the Exit Note Purchase Agreement). The Notes bear interest at a rate equal to the Adjusted Term SOFR (as defined in the Exit Note Purchase Agreement) plus 7.00% per annum. A portion of the interest on the Notes is paid-in-kind until the third year following the Effective Date. As of May 31, 2024, we had $29.7 million in borrowing outstanding under the Notes.
Previous report
The Exit Roll Up Notes mature on December 7, 2026, and the Exit New Money Notes mature on December 7, 2025.
Previous report
The Notes issued pursuant to the Exit Note Purchase Agreement are secured by a lien on substantially all of the present and future property and assets of New Subsidiary and each Guarantor, subject to customary exceptions and exclusions. The Exit Note Purchase Agreement also includes conditions precedent, representations and warranties,
Previous report
affirmative and negative covenants, events of default, and other customary provisions, including financial covenants with respect to minimum consolidated liquidity and minimum consolidated adjusted EBITDA.
Previous report
The minimum liquidity covenant will be tested at all times from and after June 30, 2024, and will require the Company and its subsidiaries to maintain a minimum average Consolidated Liquidity (as defined in the Exit Note Purchase Agreement) during any seven consecutive day period of no less than:
Previous report
(i) from June 30, 2024 to March 30, 2025, $2,000,000;
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(ii) from March 31, 2025 to June 29, 2025, $2,500,000;
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(iii) from June 30, 2025 to September 29, 2025, $3,000,000;
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(iv) from September 30, 2025 to March 30, 2026, $3,500,000; and
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(v) from March 31 2026 to December 7, 2026, $4,000,000.
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The minimum consolidated adjusted EBITDA covenant will be tested on the last day of each fiscal quarter, commencing with March 31, 2024, and will require the Company and its subsidiaries to maintain a minimum Consolidated Adjusted EBITDA (as defined in the Exit Note Purchase Agreement) as at the end of any fiscal quarter (i) from the Closing Date, December 7, 2023 until September 30, 2024, for the period of the fiscal quarters then ended in such calendar year and (ii) from October 1, 2024, for the four fiscal quarter period then ended, of no less than the correlative amount indicated below (with corresponding calendar quarters also included as reference):
Previous report
As of March 31, 2024, we were not in compliance with the minimum adjusted EBITDA covenant contained in the Exit Note Purchase Agreement. In anticipation of such default, we obtained a waiver from the Purchaser and the Collateral Agent on March 27, 2024. There can be no assurance that the Purchase and the Collateral Agent will waive any future defaults that may occur. If future defaults occur, the Purchaser and the Collateral Agent can exercise their rights and remedies under the Exit Note Purchase Agreement (and other security related documents), including a right to accelerate the maturity of our repayment obligations under the Notes.
Previous report
Operating Subsidiary LLC Agreement
Previous report
In connection with the Emergence, on the Effective Date, Operating Subsidiary, Reorganized PrivateCo and the Company entered into the Operating Subsidiary LLC Agreement. Pursuant to the Operating Subsidiary LLC Agreement, the Company owns Common Units with an aggregate value representing 62.5% equity ownership in the Operating Subsidiary and Reorganized PrivateCo owns Preferred Units with an aggregate value representing non-dilutable 37.5% equity ownership in the Operating Subsidiary on an as-converted basis. The Preferred Units rank senior in certain respects to the Common Units and subordinate to Operating Subsidiary’s existing and future indebtedness, and the Preferred Units will be entitled to vote with the Common Units on an as-converted basis. Additionally, pursuant to the Operating Subsidiary LLC Agreement, Operating Subsidiary may not undertake certain actions without the prior written approval of
Previous report
Reorganized PrivateCo. Subject to certain exceptions, Operating Subsidiary may not, among other things: (1) alter or change the rights, preferences or privileges of the Preferred Units or amend any of Operating Subsidiary’s governing documents; (2) make any change in corporate form, including conversion to a corporation; (3) increase the authorized number of Preferred Units; (4) issue any Common Units or equivalents to any person or group of persons (other than the Company), or approve the sale by the Company of Common Units or equivalents to any person or group of persons, such that after the issuance or sale, as applicable, such person or group of persons would own an aggregate number of Common Units in excess of 25% of the actually outstanding Common Units on the date of the Operating Subsidiary LLC Agreement; (5) create any new class of units with preference over, or parity with, the Preferred Units; (6) authorize, issue or reclassify any securities issued by Operating Subsidiary, its subsidiaries and controlled affiliates (the “Restricted Entities”), other than issuances of Common Units to the Company; (7) sell, issue, sponsor, create or distribute any digital tokens, cryptocurrency or other blockchain-based assets; (8) incur new third party indebtedness exceeding $5.0 million, other than (A) debt contemplated by the TSA, (B) lease or other obligations relating to the rental of equipment to customers or otherwise for energy-as-a-service (EaaS) business activity and (C) debt permitted under the DIP Note Purchase Agreement; (9) declare or pay distributions other than (A) for tax purposes and (B) distributions from Operating Subsidiary’s subsidiaries or controlled affiliate to Operating Subsidiary or its wholly owned subsidiaries; (10) effectuate any liquidation event; (11) acquire any business, ownership of any equity securities in any person other than a wholly owned subsidiary, or enter into a joint venture arrangement; (12) conduct any public offering or direct listing on a national securities exchange; (13) enter into any merger or other transaction resulting in Operating Subsidiary’s equity interests being listed or quoted for trading on an exchange or otherwise subject to registration; (14) commence, settle, defend or make any material decisions with respect to any material settlement or litigation; (15) make any material change to the nature of Operating Subsidiary’s Existing Business (as defined in the Operating Subsidiary LLC Agreement); or (16) enter into any affiliated party transaction except for (A) payments to holders of Common Units (including the Company) in accordance with the terms of the Services Agreement (described below) and (B) compensation arrangements.
Previous report
Pursuant to the Operating Subsidiary LLC Agreement, the Company, its subsidiaries and controlled affiliates (other than the Restricted Entities) (the “Unrestricted Entities”) may not, without the consent of the holders of a majority of the Preferred Units held by the Preferred Members (the “Preferred Requisite Members” which, on the effective date of the Operating Subsidiary LLC Agreement is solely Reorganized PrivateCo), engage in any business opportunities, make any investments or enter into any transactions, including any of the foregoing which are or would reasonably be expected to be within the scope of, or would reasonably be deemed to be beneficial to, the Existing Business of Operating Subsidiary; provided that such consent shall not be unreasonably withheld, conditioned or delayed, including in circumstances in which any Unrestricted Entity proposes to engage in any such business opportunities, make any such investments or enter into any such transactions and (i) where the business opportunity, investment or transaction (the “New Opportunity”) would constitute a change in the Existing Business if the Restricted Entities were to engage in such New Opportunity, make such investments or enter into such transactions and the Preferred Requisite Members do not consent to such change following Operating Subsidiary’s request reasonably in advance of such New Opportunity for the Preferred Requisite Members to be able to reasonably consider such request, or (ii) the New Opportunity is not within the scope of the Existing Business and either (A) the New Opportunity is first presented to Operating Subsidiary, Operating Subsidiary proposes such New Opportunity to the Preferred Requisite Members reasonably in advance of such New Opportunity for the Preferred Requisite Members to be able to reasonably consider such proposal, and the Preferred Members (as defined in the Operating Subsidiary LLC Agreement) do not agree to fund their proportionate share of the cost thereof, or (B) the New Opportunity is funded entirely with the proceeds of financing transactions by, or through the issuance of securities of, any Unrestricted Entity.
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Pursuant to the Operating Subsidiary LLC Agreement, at any time during the six-month period following the sixth anniversary of the effective date of the Operating Subsidiary LLC Agreement, the Preferred Requisite Members may elect to have all, but not less than all, of the then outstanding Preferred Units redeemed (a “Redemption Request”). In such event, Operating Subsidiary will redeem all, but not less than all, of the Preferred Units, except Operating Subsidiary may not make such payment if (a) such payment is prohibited by the Delaware Limited Liability Company Act. or (b) Operating Subsidiary is, or by such payment would be, insolvent (together, the “Redemption Exceptions”). The aggregate price for Preferred Units will be an amount equal to the greater of (i) the $10,449,863, plus declared but unpaid distributions, or (ii) the fair market value of the Preferred Units on an as-converted to Common Units basis at the time of such redemption (the “Redemption Price”). If a Redemption Exception prevents Operating Subsidiary from redeeming all Preferred Units, Operating Subsidiary will redeem the maximum possible number of Preferred Units from the Preferred Members without triggering any Redemption Exceptions. At any time thereafter when the Redemption Exceptions do not
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prevent Operating Subsidiary from redeeming Preferred Units that remain issued and outstanding, Operating Subsidiary will immediately use its funds to redeem the balance of the Preferred Units that Operating Subsidiary became obligated to redeem (but which it has not yet redeemed) at the then applicable Redemption Price. Operating Subsidiary may raise new capital to fund the Redemption Price.
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Pursuant to the Operating Subsidiary LLC Agreement, each Preferred Member has the right to all or any portion of such Preferred Member’s pro rata portion, at such Preferred Member’s sole discretion, of new securities that any Restricted Entity may from time to time propose to issue or sell to any party, subject to the terms and certain exceptions set forth in the Operating Subsidiary LLC Agreement. Members may not transfer their Units (as defined in the Operating Subsidiary LLC Agreement), provided that all, but not less than all, Preferred Units held by the Preferred Members may be transferred only if: (i) transferred to the same transferee (or its Affiliates) as part of the same transaction or series of related transactions, in which case (A) the Preferred Members must cause the recipient(s) of such Preferred Units to comply with the terms of the Operating Subsidiary LLC Agreement, and (B) if such recipient(s) are competitors of the Company only if first converted into Common Units; or (ii) transferred to more than one unaffiliated transferees as part of the same transaction or series of related transactions, in which case (A) the Preferred Members will cause the recipients of such Preferred Units to comply with the terms of the Operating Subsidiary LLC Agreement, (B) if such recipients are competitors of the Company only if first converted into Common Units, and (C) one transferee must continue to hold a sufficient number of Preferred Units so that such transferee qualifies as the Preferred Requisite Member. Each Preferred Member has a right of first refusal if any Common Member (the “Offering Member”) receives a bona fide offer that the Offering Member desires to accept to transfer all or any portion of such Offering Member’s Units (the “Offered Units”). Each time the Offering Member receives an offer for a transfer of all or any portion of such Offering Member’s Units, the Offering Member is required to first make an offering of the Offered Units to the Preferred Members, in accordance with the terms set forth in the Operating Subsidiary LLC Agreement and subject certain exceptions set forth therein, prior to transferring such Offered Units. Additionally, subject to certain exceptions set forth in the Operating Subsidiary LLC Agreement, the Company has a right of first offer if the Preferred Members wish to transfer Preferred Units to a third party. Each Preferred Member is permitted to participate in any proposed transfer by a Common Member of any Units to any Person, in accordance with the terms set forth in the Operating Subsidiary LLC Agreement and subject to certain exceptions set forth therein.
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Services Agreement between the Company and Operating Subsidiary
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In connection with the emergence from the Chapter 11 Cases, on the Effective Date, the Company entered into a Services Agreement (the “Services Agreement”) by and among the Company and Operating Subsidiary. The Services Agreement provides, among other things, that the Company will provide certain services to Operating Subsidiary, in its capacity as a majority equity holder of Operating Subsidiary, and in consideration for the services provided by the Company, Operating Subsidiary will reimburse the Company for its reasonable audit, board and executive compensation expenses incurred in connection with being a publicly traded company (the “New Capstone Services Fee”). The New Capstone Services Fee for the Company’s fiscal year 2023 will not exceed $2,500,000, in the aggregate (the “Services Fee Cap”), which amount will be prorated based on the number of days in such fiscal year following execution of the Services Agreement. Effective as of April 1 of each year, beginning with April 1, 2024, the Services Fee Cap will increase for each fiscal year by an amount equal to the greater of (a) 3.5000% and (b) the Consumer Price Index, as set by the U.S. Bureau of Labor Statistics and available on March 31 of each year; provided that such increase effective on April 1, 2024, shall be equal to 1.7500%.
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Services Agreement between Reorganized PrivateCo and Operating Subsidiary
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In connection with the emergence from the Chapter 11 Cases, on the Effective Date, Operating Subsidiary entered into a Services Agreement (the “Reorganized PrivateCo Services Agreement”) by and among Reorganized PrivateCo and Operating Subsidiary. The Reorganized PrivateCo Services Agreement provides that, among other things, Operating Subsidiary will provide certain services to Reorganized PrivateCo, and Reorganized PrivateCo will provide to Operating Subsidiary’s distributors on a subcontracted basis and, where applicable, to Operating Subsidiary, certain ongoing services and transition services related to Reorganized PrivateCo’s distributor support services business. Reorganized PrivateCo will pay to Operating Subsidiary a service fee (the “Reorganized PrivateCo Services Fee”) of an amount in cash equal to 90% of Reorganized PrivateCo’s Income (as defined in the Reorganized PrivateCo Services Agreement) less itemized expenses incurred and actually paid in cash by Reorganized PrivateCo in direct support of Operating Subsidiary’s
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distributors and in Reorganized PrivateCo’s performance of the services (excluding the Reorganized PrivateCo Services Fees).
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Trademark License Agreement
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In connection with the emergence from the Chapter 11 Cases, on the Effective Date, the Company entered into a Trademark License Agreement (the “Trademark License Agreement”) by and between Reorganized PrivateCo, as licensor, and the Company, as licensee. The Trademark License Agreement provides that, among other things, Reorganized PrivateCo grants the Company a non-exclusive, royalty-bearing, non-transferable, non-sublicensable (except to the Company’s affiliates), worldwide, perpetual (subject to the terms and conditions of the Trademark License Agreement), irrevocable (subject to the terms and conditions of the Trademark License Agreement), limited license, under all of its right, title and interest in and to the Capstone Trademarks (as defined in the Trademark License Agreement) to use the Capstone Trademarks solely in connection with the Business (as defined in the Trademark License Agreement). In consideration for the license, the Company pays to Reorganized PrivateCo an annual royalty of $100,000. Reorganized PrivateCo may not assign the Capstone Trademarks to any third party without the Company’s consent, not to be unreasonably withheld, delayed or conditioned (subject to the terms and conditions of the Trademark License Agreement). If Reorganized PrivateCo does not use any of the Capstone Trademarks for six consecutive months, then the Capstone Trademarks will be assigned to the Company for no further consideration.
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Reworded paragraphs (36)
Previous wording
We are the market leader in microturbine energy systems based on the number of microturbines sold annually. Generally, power purchased from the electric utility grid is less costly than power produced by distributed generation technologies. Utilities may also charge fees to interconnect to their power grids. However, we can provide economic benefits to end users in instances where the waste heat from our microturbines have value (CHP and CCHP), where fuel costs are low (renewable energy/renewable fuels), where the costs of connecting to the grid may be high or impractical (such as remote power applications), where reliability and power quality are of critical importance, or in situations where peak shaving could be economically advantageous because of highly variable electricity prices. Our microturbines can be interconnected to other distributed energy resources to form “microgrids” (also called “distribution networks”) located within a specific geographic area and provide power to a group of buildings. Because our microturbines can provide a reliable source of power and can operate on multiple fuel sources, management believes they offer a level of flexibility not currently offered by other technologies such as reciprocating engines. We are currently exploring energy conversion options for the smaller end of the power spectrum.
Current wording
We are the market leader in microturbine energy systems based on the number of microturbines sold annually and total installed base. Generally, power purchased from the electric utility grid is less costly than power produced by distributed generation technologies in simple cycle mode. Utilities may also charge fees to interconnect to their power grids. However, when considering and including the waste heat from our microturbine (CHP and CCHP) the economic benefit improves significantly. Further, our highly efficient, low emission, resilient technology can produce thermal energy at a lower carbon footprint. These benefits can be especially realized when fuel costs are low, where the costs of connecting to the grid may be high or impractical (such as remote power applications or new grid services need to be provided), where reliability and power quality are of critical importance, or in situations where peak shaving could be economically advantageous because of highly variable electricity prices. Our microturbines are an inverter-based technology and can be interconnected to other distributed energy resources to form “microgrids” (also called “distribution networks”) located within a specific geographic area and provide power to a group of buildings. Because our microturbines can provide a reliable source of power and can operate on multiple fuel sources, management believes they help solve the “Energy Trilemma” of resiliency, sustainability and affordability. Management also believes our products and services offer a level of flexibility not currently offered by other technologies such as reciprocating engines. We are currently exploring energy conversion options for the smaller end of the power spectrum.
Previous wording
Our products continue to gain interest in all our major vertical markets (energy efficiency, renewable energy, natural resources, critical power supply, and microgrids). In the energy efficiency market, we continue to expand our market presence in hotels, office buildings, hospitals, retail and industrial applications globally. The renewable energy market is fueled by landfill gas and biogas from sources such as wastewater, food processing, agricultural waste and livestock manure. Our product sales in the oil and gas and other natural resources market are driven by our microturbines’ reliability, emissions profile and ease of installation. Given the volatility of the oil and gas market, our business strategy is to ensure diversification by also targeting projects within the energy efficiency and renewable energy markets.
Current wording
In the energy efficiency market, we continue to expand our market presence in hotels, office buildings, hospitals, retail and industrial applications globally. The renewable energy market is fueled by landfill gas, biodiesel and biogas from sources such as food processing, agricultural waste and livestock manure. Our product sales in the oil and gas and other natural resources market is driven by our microturbines’ reliability, emissions profile and ease of installation. Given the volatility of the oil and gas market, our business strategy is to ensure diversification by also targeting projects within the energy efficiency and renewable energy markets.
Previous wording
We continue to focus on improving our products based on customer input and building brand awareness and new channels to market by developing a diversified network of strategic distribution partners. Our focus is on products and solutions that provide near -term opportunities to drive repeatable business rather than discrete projects for niche markets. In addition, management closely monitors operating expenses and strives to improve manufacturing efficiencies while simultaneously lowering direct material costs and increasing average selling prices. The key drivers to our success are revenue growth, higher average selling prices, lower direct material costs, positive new order flow and reduced cash usage.
Current wording
We continue to focus on improving our products based on customer input, building brand awareness and new channels to market by developing a diversified network of strategic distribution partners. Our focus is on products and solutions that provide near term opportunities to drive repeatable business rather than discrete projects for niche markets. In addition, management closely monitors operating expenses and strives to improve manufacturing efficiencies while simultaneously lowering direct material costs and increasing average selling prices. The key drivers to our success are revenue growth, higher average selling prices, lower direct material costs, positive new order flow, reduced cash usage and expansion of the Energy-as-a-Service (“EaaS”) business.
Previous wording
Focus on Vertical Markets Within the distributed generation markets that we serve, we focus on vertical markets that we identify as having the greatest near-term potential. In our primary products and applications (energy efficiency, renewable energy, natural resources, critical power supply, microgrid and transportation products), we identify specific targeted vertical market segments. Within each of these segments, we identify what we believe to be the critical factors to success and base our plans on those factors. Given the volatility of the oil and gas market, we have refocused our business strategy on targeting projects within the energy efficiency and renewable energy markets.
Current wording
Focus on Vertical Markets. Within the distributed generation markets that we serve, we focus on vertical markets that we identify as having the greatest near-term potential. In our primary products and applications (energy efficiency, natural resources, renewable energy, critical power supply, microgrid and transportation products), we identify specific targeted vertical market segments. Within each of these segments, we identify what we believe to be the critical factors to success and base our plans on those factors. Given the volatility of the oil and gas market, we have refocused our business strategy to target projects within the energy efficiency and renewable energy markets.
Previous wording
The following table summarizes our percentage of product revenues by vertical markets for which we had product revenues for the periods presented:
Current wording
The following table summarizes our percentage or product revenues by vertical markets for which we had product revenues for the periods presented:
Previous wording
Energy efficiency refers to the proper utilization of both electrical and thermal energies in the power production process. In such applications, our microturbines are able to maximize the availability of usable energy to provide a significant economic advantage to customers while reducing their on-site emissions. CHP and CCHP can improve site economics by capturing the exhaust heat created from a single combustion process to increase the efficiency of the total system, from approximately 30% to 80% or more. Compared with more traditional, independent generation sources, the increase in operational efficiency also reduces greenhouse gas emissions through the displacement of other separate systems, which can also reduce operating costs.
Current wording
Energy efficiency refers to the proper utilization of both electrical and thermal energies in the power production process. In such applications, our microturbines are able to maximize the availability of usable energy to provide a significant economic advantage to customers while reducing their on-site emissions. CHP and CCHP can improve site economics by capturing the waste heat created from a single combustion process to increase the efficiency of the total system, from approximately 30% to approximately 85% for hot water and chilled water to as much as 90% or more for some steam and direct drying applications. Compared with more traditional, independent generation sources, the increase in operational efficiency also reduces greenhouse gas emissions through the displacement of other separate systems, which can also reduce operating costs and industrial waste.
Previous wording
a highly efficient and reliable source of power. In some cases, these oil and gas or mining operations have no electric utility grid and rely solely on power generated on-site. There are numerous locations, on a global scale, where the drilling, production, compression and transportation of natural resources and other extraction and production processes create fuel byproducts, which are traditionally burned or released into the atmosphere. Our microturbines can turn these fuel byproducts, such as flare gas or associated gas, into a useable fuel to provide prime power to these sites.
Current wording
Our microturbines are installed in the natural resource market for use in both onshore and offshore applications, including oil and gas exploration, production, and at compression and transmission sites as a highly efficient and reliable source of power. In some cases, these oil and gas or mining operations have no electric utility grid and rely solely on power generated on-site. There are numerous locations, on a global scale, where the drilling, production, compression and transportation of natural resources and other extraction and production processes create fuel byproducts, which are traditionally burned or released into the atmosphere. Our microturbines can turn these fuel byproducts, such as flare gas, or associated gas, into a useable fuel to provide prime power to these sites.
Previous wording
Microgrid is a group of interconnected loads and distributed energy resources that acts as a single controllable energy entity with respect to the grid. Distributed energy resources typically include other dual-mode microturbines, reciprocating engines, solar photovoltaic (PV), wind turbine, fuel cells and battery storage. Microgrids can be connected to larger electricity grids; however, in the event of a widespread outage, the microgrid will disconnect from the main grid and continue to operate independently to maintain the electricity supply to the homes and businesses that are connected to the microgrid’s electricity network. Our microturbines have the ability to meet the needs of microgrid end-users by lowering their overall cost to operate and by providing a versatile dispatchable technology that is fuel flexible and scalable enough to fit a wide variety of applications. We have seen continued development in the microgrid market segment.
Current wording
Microgrid is a group of interconnected loads and distributed energy resources that acts as a single controllable energy entity with respect to the grid. Distributed energy resources typically include other dual-mode microturbines, reciprocating engines, solar photovoltaic (PV), wind turbines, fuel cells and battery storage. Microgrids can be connected to larger electricity grids; however, in the event of a widespread outage, the microgrid will disconnect from the main grid and continue to operate independently to maintain the electricity supply to the homes and businesses that are connected to the microgrid’s electricity network. Our microturbines have the ability to meet the needs of microgrid end-users by lowering their overall cost to operate and by providing a versatile dispatchable technology that is fuel flexible and scalable enough to fit a wide variety of applications. We have seen continued development in the microgrid market segment.
Previous wording
Net product orders were approximately $35.5 million and $29.4 million for Fiscal 2023 and 2022, respectively. Ending backlog was approximately $42.8 million at March 31, 2023 compared to $40.5 million at March 31, 2022. Book-to-bill ratio was 1.1:1 and 0.9:1 for Fiscal 2023 and 2022, respectively. Book-to-bill ratio is the ratio of new orders we received to units shipped and billed during a period.
Current wording
Net product orders were approximately $20.1 million and $35.5 million for Fiscal 2024 and 2023, respectively. Ending backlog was approximately $14.2 million at March 31, 2024 compared to $42.8 million at March 31, 2023. The book-to-bill ratio was 0.4:2 and 1.1:1 for Fiscal 2024 and 2023, respectively. Book-to-bill ratio is the ratio of new orders we received to units shipped and billed during a period.
Previous wording
OEMs and national accounts. We continue to refine our distribution channels to address our specific targeted markets.
Current wording
we currently have 8 distributors, OEMs and national accounts. Outside of the United States and Canada, we currently have 44 distributors, OEMs and national accounts. We continue to refine our distribution channels to address our specific targeted markets.
Previous wording
We offer new and remanufactured parts through our global distribution network. Service revenue was approximately 29% and 35% of total revenue in Fiscal 2023 and Fiscal 2022, respectively.
Current wording
We offer new and remanufactured parts through our global distribution network. Service revenue was approximately 22% and 29% of total revenue in Fiscal 2024 and Fiscal 2023, respectively.
Previous wording
Our manufacturing designs include the use of conventional technology, which has been proven in high- volume automotive and turbocharger production for many years. Many components used in the manufacture of our products are readily fabricated from commonly available raw materials or off -the -shelf items available from multiple supply sources; however, certain items are custom made to meet our specifications and require longer lead times. We believe that, in most cases, adequate capacity exists at our suppliers and that alternative sources of supply are available or could be developed within a reasonable period of time; however, it may be more challenging to transition to another supplier from
Current wording
Our manufacturing designs include the use of conventional technology, which has been proven in high- volume automotive and turbocharger production for many years. Many components used in the manufacture of our products are readily fabricated from commonly available raw materials or off-the-shelf items available from multiple supply sources; however, certain items are custom made to meet our specifications and require longer lead times. We believe that in most cases, adequate capacity exists at our suppliers and that alternative sources of supply are available or could be developed within a reasonable period of time; however, it may be more challenging to transition to another supplier from single source suppliers with long lead times. We regularly reassess the adequacy and abilities of our suppliers to meet our future needs.
Previous wording
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosures of contingent liabilities. On an on-going basis, we evaluate our estimates, including but not limited to those related to bad debts, inventories, warranty obligations, and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Current wording
Our discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosures of contingent liabilities. On an on-going basis, we evaluate our estimates, including but not limited to those related to credit losses, inventories, warranty obligations, redeemable noncontrolling interests valuations and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Previous wording
The following table summarizes our revenue by geographic markets (amounts in millions):
Current wording
The following table summarizes our revenue by geographic markets (in millions):
Previous wording
were offset by decreases in revenue of $4.1 million from the Asian and Australian markets, $2.0 million from the Latin American markets, and $0.4 million from the Middle East and African markets. The increases in the United States and Canada, and Europe and Russia were primarily attributable to an increase in our EaaS long-term rental services and product shipments into the energy efficiency vertical markets compared to the same period last year. The decreases in Latin America, the Middle East and Africa, and Asia and Australia are primarily attributable to decreases in product shipments into the natural resources and renewable energy vertical markets in those regions compared to the same period last year.
Current wording
Revenue. Revenue for Fiscal 2024 increased $17.3 million, or 23%, to $91.2 million from $73.9 million for Fiscal 2023. The change in revenue for Fiscal 2024 compared to Fiscal 2023 included increases in revenue of $8.9 million from the United States and Canadian markets, $6.7 million in the European market, $3.0 million from the Latin American markets and $1.8 million from the Asian and Australian markets. These overall increases in revenue were offset by decreases in revenue of $2.9 million from the Russian market and $0.2 million from the Middle East and African markets. The increases in the United States and Canada, Europe, Latin America and Asia and Australia were primarily attributable to an increase in our EaaS long-term rental services and product deliveries for projects during the year ended March 31, 2024. The decrease in Russia was a result of United States sanctions and the decrease in the Middle East and Africa was primarily attributable to decreases in product shipments into the energy efficiency vertical markets compared to the same period last year.
Previous wording
For Fiscal 2023, revenue from microturbine products and accessories increased $2.3 million, or 7%, to $35.0 million from $32.7 million for Fiscal 2022. The $2.3 million increase was primarily driven by an increase in units shipped, specifically our C1000S Series and C65 Series microturbine systems during Fiscal 2023 compared to the prior year. Average revenue per megawatt shipped was approximately $1.1 million in each of Fiscal 2023 and 2022. The timing of shipments is subject to change based on several variables (including customer deposits, payments, availability of credit and delivery schedule changes), most of which are not within our control and can affect the timing of our revenue. Accessories revenue increased $0.4 million, or 29%, to $1.8 million from $1.4 million for Fiscal 2022, primarily due to product configurations for projects that required increased accessories in Fiscal 2023 compared to Fiscal 2022.
Current wording
and based on several factors (including customer deposits, payments, availability of credit and delivery schedule changes), most of which are not within our control and can affect the timing of revenue recognition.
Previous wording
Parts, service and rentals revenue (which is part of our EaaS business line and includes revenue from our parts shipments, FPP contracts, rentals, Distributor Support Subscription fees, and other service revenue) for Fiscal 2023 increased $7.6 million, or 24%, to $38.9 million from $31.3 million for Fiscal 2022. The $7.6 million increase was primarily driven by an increase in rental revenue as a result of our EaaS business plan, and an increase in revenue from our FPP contracts, partially offset by lower engineering service revenue and spare parts.
Current wording
Parts, service and rentals revenue (which are part of our EaaS business line and includes revenue from our parts shipments, factory protection plan (“FPP”) contracts, rentals, Distributor Support Subscription fees, and other service revenue) for Fiscal 2024 increased $3.2 million, or 8%, to $42.1 million from $38.9 million for Fiscal 2023. The $3.2 million increase was driven by an increase in rental revenue as a result of our EaaS business plan, and an increase in revenue from our FPP contracts, partially offset by lower engineering service revenue and spare parts. Refer to Note 14— Commitments and Contingencies— Related Party Transactions, in the Notes to Consolidated Financial Statements for information related to Reorganized PrivateCo’s retained assets and distributor support services business in connection with the Company’s emergence from the Chapter 11 Cases.
Previous wording
Sales to E-Finity and RSP Systems accounted for 12% and 11%, respectively, of our revenue for the fiscal year ended March 31, 2023. Sales to E-Finity accounted for 18% of our revenue for the year ended March 31, 2022.
Current wording
Sales to Cal Microturbine and E-Finity Distributed Generation (“E-Finity”) accounted for 16% and 13%, respectively, of our revenue for Fiscal 2024. Sales to E-Finity and RSP Systems accounted for 12% and 11%, respectively, of our revenue for Fiscal 2023.
Previous wording
Gross Profit Cost of goods sold includes direct material costs, production and service center labor and overhead, inventory charges and provision for estimated product warranty expenses. Gross profit was approximately $9.1 million, or 12% of revenue, for Fiscal 2023, compared to gross profit of $5.6 million, or 9% of revenue, for Fiscal 2022. The increase in gross profit of $3.5 million during Fiscal 2023 compared to Fiscal 2022 was primarily because of an increase in revenue, partially offset by higher direct material costs of $6.2 million, an increase in service center labor and overhead expense of $2.4 million and higher inventory charges of $0.3 million.
Current wording
Gross Profit. Cost of goods sold includes direct material costs, production and service center labor and overhead, inventory charges and provision for estimated product warranty expenses. Gross profit was approximately $14.3 million, or 16% of revenue, for Fiscal 2024, compared to gross profit of $9.1 million, or 12% of revenue, for Fiscal 2023. The increase during Fiscal 2024 compared to Fiscal 2023 was primarily the result of an increase in product pricing and increased revenue from our higher margin rental business and lower inventory charges, partially offset by higher production and service center labor and overhead expense. Starting in January 2023, we increased our sales prices and negotiated with vendors to reduce material costs.
Previous wording
Production and service center labor and overhead expense increased $2.4 million during Fiscal 2023 compared to Fiscal 2022 primarily because of increases of approximately $3.3 million in depreciation and rent expense related to our rental business, partially offset by a $0.9 million decrease in labor costs due to the implementation of an expense reduction plan, primarily as a result of higher margin rental revenue in Fiscal 2023.
Current wording
Production and service center labor and overhead expense increased $2.1 million during Fiscal 2024 compared to Fiscal 2023 primarily because of increases of approximately $2.9 million in depreciation and rent expense related to our rental business, partially offset by decreases of $0.8 million in freight expense and $0.5 million in supplies expense.
Previous wording
The $0.5 million decrease in product and accessories gross profit during Fiscal 2023 compared to Fiscal 2022 was primarily due to high costs driven by material cost increases from key vendors.
Current wording
The improvement of $2.7 million in product and accessories gross profit during Fiscal 2024 compared to Fiscal 2023 was primarily due to higher product pricing, improved cost absorption and product mix in Fiscal 2024.
Previous wording
Product and accessories gross margin as a percentage of product and accessories revenue decreased to (14)% during Fiscal 2023 from (13)% during Fiscal 2022, primarily due to higher product material costs in Fiscal 2023 driven by price increases from key vendors. Parts, service and rentals gross margin as a percentage of parts, service and rentals revenue increased to 36% for Fiscal 2023 compared to 32% for Fiscal 2022 primarily due to lower overhead costs and higher margin rental revenue in Fiscal 2023.
Current wording
Product and accessories gross margin as a percentage of product and accessories revenue improved to (4)% during Fiscal 2024 from (14)% during Fiscal 2023, primarily due to higher margin product revenue in Fiscal 2024. Parts, service and rentals gross margin as a percentage of parts, service and rentals revenue increased to 39% for Fiscal 2024 compared to 36% for Fiscal 2023 primarily due to lower overhead costs and increased higher margin rental business in Fiscal 2024.
Previous wording
Selling, General and Administrative (“SG&A”) Expenses SG&A expenses for Fiscal 2023 increased $2.9 million to $25.1 million from $22.2 million for Fiscal 2022. The net increase in SG&A expenses was primarily as a result of increases of approximately $3.9 million of net bad debt expense, $1.2 million in consulting expense, $0.5 million in allocated costs for shared-services facilities, partially offset by decreases of $1.2 million in labor costs, $0.8 million in legal fees, and $0.7 million in marketing related costs.
Current wording
Selling, General and Administrative (“SG&A”) Expenses. SG&A expenses for Fiscal 2024 increased $7.0 million to $32.2 million from $25.1 million for Fiscal 2023. The net increase in SG&A expenses was primarily as a result
Previous wording
Interest Expense Interest expense for Fiscal 2023 increased to $6.2 million from $5.0 million in Fiscal 2022, due to rising interest rates. See Liquidity and Capital Resources below for additional discussion on our interest expense.
Current wording
Interest Expense. Interest expense for Fiscal 2024 decreased to $5.5 million from $6.2 million in Fiscal 2023. The decrease in interest expense was primarily due to a lower average debt balance during Fiscal 2024 due to restructuring compared to the $51.0 million pre-petition notes during Fiscal 2023. See Liquidity and Capital Resources below for additional discussion on our interest expense.
Previous wording
Income Tax Provision Income tax expense decreased $12,000, or 63%, to $7,000 during Fiscal 2023 from $19,000 during Fiscal 2022. Income tax expense incurred was related to state and foreign taxes. The effective income tax rate of -0.1% differs from the federal and state blended statutory rate of approximately 25.28% primarily as a result of maintaining a full valuation allowance against net deferred tax assets. At March 31, 2023, we had federal and state net operating loss carryforwards of approximately $538.8 million and $185.6 million, respectively, which may be utilized to reduce future taxable income, subject to any limitations under Section 382 of the Internal Revenue Code of 1986. We provided a valuation allowance for 100% of our net deferred tax asset of $153.2 million at March 31, 2023 because the realization of the benefits of these favorable tax attributes in future income tax returns is not deemed more likely than not. Similarly, at March 31, 2022, the net deferred tax asset was fully reserved.
Current wording
At March 31, 2024, we had federal and state net operating loss carryforwards of approximately $0.6 million and $0.2 million, respectively, which may be utilized to reduce future taxable income, subject to any limitations under Section 382 of the Internal Revenue Code of 1986. We provided a valuation allowance for 100% of our net deferred tax asset of $0.1 million at March 31, 2024 as the realization of the benefits of these favorable tax attributes in future income tax returns is not deemed more likely than not. Similarly, at March 31, 2023, the net deferred tax asset had a 100% valuation allowance.
Previous wording
Our cash requirements depend on many factors, including the execution of our business strategy and plan. Our cash and cash equivalents balances decreased $9.7 million during Fiscal 2023, compared to a decrease of $27.0 million during Fiscal 2022. The decrease in cash and cash equivalents during Fiscal 2023 was primarily due to the net loss and an increase in inventory purchases, partially offset by improved collections of accounts receivable and net proceeds from the August 2022 public offering. Cash used in investing activities was primarily to continue the expansion of the rental fleet.
Current wording
Our cash requirements depend on many factors, including the execution of our business strategy and plan. Our cash balance decreased $10.8 million during Fiscal 2024, compared to a decrease of $9.7 million during Fiscal 2023. The decrease in cash during Fiscal 2024 was primarily due to cash used in operating activities, partially offset by net cash provided by financing activities and a decrease in cash used in investing activities.
Previous wording
Operating Activities During Fiscal 2023, net cash used by operating activities was $7.9 million, consisting of a net loss for the period of $24.5 million, partially offset by changes in operating assets and liabilities of $5.3 million and non-cash adjustments (primarily warranty provision, accounts receivable allowances, depreciation and amortization, stock-based compensation and inventory provision) of $11.3 million. During Fiscal 2022, net cash used by operating activities was $27.5 million, consisting of a net loss for the period of $22.4 million and changes in operating assets and liabilities of $8.8 million, partially offset by non-cash adjustments (primarily warranty provision, accounts receivable allowances, depreciation and amortization, stock-based compensation and inventory provision) of $3.7 million.
Current wording
Operating Activities During Fiscal 2024, net cash used by operating activities was $27.7 million, consisting of net income for the period of $7.4 million, offset by changes in operating assets and liabilities of $12.5 million and non-cash adjustments (primarily representing non-cash reorganization items, net, depreciation and amortization, non-cash lease expense, stock-based compensation expense and paid-in-kind interest expense) of $22.5 million. During Fiscal 2023, net cash used by operating activities was $7.9 million, consisting of a net loss for the period of $24.5 million and changes in operating assets and liabilities of $5.3 million, partially offset by non-cash adjustments (primarily representing provision for credit loss expense, depreciation and amortization, non-cash lease expense and stock-based compensation expense) of $11.3 million.
Previous wording
The following is a summary of the significant sources (uses) of cash from operating activities (amounts in thousands):
Current wording
The following is a summary of the significant sources (uses) of cash from operating activities (in thousands):
Previous wording
The change in non-cash operating activities during Fiscal 2023 compared to Fiscal 2022 was primarily driven by an increase of $3.9 million in bad debt reserve in Fiscal 2023 as compared to the gain on extinguishment of debt resulting from the forgiveness of the PPP Loan during the first quarter of Fiscal 2022. Also contributing to the change was an increase in depreciation expense related to the additions to our rental fleet during Fiscal 2023. The change in accounts receivable was primarily the result of improved collections in Fiscal 2023 compared to Fiscal 2022. The change in inventory was primarily the result of an increase in raw materials in Fiscal 2023 to secure inventory with longer lead times, compared to Fiscal 2022 and increased finished goods. The change in accounts payable and accrued expenses was primarily due to higher accounts payable payments to vendors during Fiscal 2023 compared to Fiscal 2022. The change in other operating assets and liabilities during Fiscal 2023 compared to Fiscal 2022 was primarily driven by the decrease in our accrued warranty reserve during Fiscal 2022, as we had additional spend for the reliability repair program and an increase in deferred revenue in Fiscal 2023.
Current wording
The change in non-cash operating activities during Fiscal 2024, compared to Fiscal 2023 was primarily driven by the non-cash reorganization items, net, which included our gain on debt extinguishment and our provision for credit loss expense, partially offset by increases in non-cash lease expenses, paid-in-kind interest expense and stock-based compensation expense. The change in accounts receivable was primarily the result of delayed collections in Fiscal 2024, compared to Fiscal 2023. The change in inventory compared to Fiscal 2023 was primarily the result of a decrease in finished goods during Fiscal 2024. The change in accounts payable and accrued expenses was primarily due to higher payments to vendors during Fiscal 2024, compared to Fiscal 2023. The change in other operating assets and liabilities during Fiscal 2024, compared to Fiscal 2023, was primarily driven by the decreases in our deferred revenue attributable to customer deposits, FPP contracts and DSS program.
Previous wording
Investing Activities Net cash used in investing activities of $8.2 million and $9.9 million during Fiscal 2023 and 2022, respectively, related primarily to the additions to our rental fleet of approximately $7.9 million and $8.7 million, respectively. The remaining amounts in Fiscal 2022 were primarily for sustaining our production and facilities.
Current wording
Investing Activities Net cash used in investing activities was $4.7 million and $8.2 million during Fiscal 2024 and 2023, respectively, which the decrease was primarily due to fewer additions to our rental fleet during Fiscal 2024.
Previous wording
Financing Activities During Fiscal 2023, we generated approximately $6.4 million in cash from financing activities compared to cash generated during Fiscal 2022 of approximately $10.4 million. The funds generated from financing activities during the fiscal year ended March 31, 2023 were primarily the result of net proceeds from the August 2022 public offering, which were partially offset by financing related to additions to our rental fleet. The funds generated from financing activities during the fiscal year ended March 31, 2022 were primarily the result of net proceeds from our June 2021 common stock offering.
Current wording
Financing Activities During Fiscal 2024, we generated approximately $21.6 million in cash from financing activities compared to cash generated during Fiscal 2023 of approximately $6.4 million. The funds generated from financing activities during Fiscal 2024 were primarily the result of $12.0 million of funding under the DIP facility, $7.0 million of funding under the Exit Facility, net of issuance fees of $0.2 million and $3.0 million received from the issuance of additional pre-petition senior secured notes under the A&R Note Purchase Agreement. See Note 3— Chapter 11 Proceedings and Emergence in the Notes to Consolidated Financial Statements and Note 12— Debt for further discussion of the outstanding debt and post emergence financing. The funds generated from financing activities during Fiscal 2023 were primarily the result of net proceeds from the issuance of common stock and warrants of $7.3 million, partially offset by $0.8 million in repayments of lease obligations.
Previous wording
Going Concern In connection with preparing the consolidated financial statements for the fiscal year ended March 31, 2023, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about our ability to meet our obligations as they became due for the next twelve months from the date of issuance of our Fiscal 2023 consolidated financial statements. As of March 31, 2023, we had cash and cash equivalents of $12.8 million, and $51.0 million in borrowings were outstanding under the Notes. We incurred a net loss of $24.5 million and used cash from operating activities of $7.9 million during the Fiscal 2023.
Current wording
Going Concern In connection with preparing the Consolidated Financial Statements for the fiscal year ended March 31, 2024, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about our ability to meet our obligations as they became due for the next twelve months from the date of issuance of our Fiscal 2024 consolidated financial statements. As of March 31, 2024, we had cash of $2.1 million and a working capital deficit of $38.5 million. We incurred a loss from operations of $20.4 million and used cash from operating activities of $27.7 million during the Fiscal 2024.
Previous wording
Management evaluated these conditions in relation to our ability to meet our obligations as they become due. Our ability to continue current operations and to execute on management’s plan is dependent on our ability to generate cash flows from operations.
Current wording
Management evaluated these conditions in relation to our ability to meet our obligations as they become due. Our ability to continue current operations and to execute on management’s plan is dependent on our ability to generate cash flows.
Previous wording
We reduced our outstanding debt via proceedings in U.S. Chapter 11 Bankruptcy Court. On September 28, 2023, the Company filed for a prepackaged financial restructuring with its senior lender, Goldman Sachs, under the U.S. Chapter 11 Bankruptcy laws, as further discussed in Note 17 – Subsequent Events in the Notes to Consolidated Financial Statements. The Company emerged from Bankruptcy on December 7, 2023 and affected the financial and organizational restructuring.
Current wording
On September 28, 2023, we filed for a prepackaged financial restructuring with our Senior Lender, Goldman Sachs under the U.S. Chapter 11 Bankruptcy laws. We emerged from Bankruptcy on December 7, 2023, and effected a financial and organizational restructuring. See Note 3— Chapter 11 Proceedings and Emergence in the Notes to Consolidated Financial Statements for additional information.
Previous wording
In spite of these efforts and given our current cash position, lack of liquidity, limits to accessing capital and debt funding options, and economic and market risk, there is substantial doubt regarding the Company’s ability to continue as a going concern and our ability to meet our financial obligations as they become due over the next twelve months from the date of issuance of our Fiscal 2023 financial statements
Current wording
In spite of these efforts and given our current cash position, lack of liquidity, limits to accessing capital and debt funding options, and current economic and market risks, there is substantial doubt regarding our ability to continue as a going concern and our ability to meet our financial obligations as they become due over the next twelve months from the date of issuance of our financial statements as of, and for the period ended March 31, 2024.
Previous wording
Refer to Note 2 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements for information regarding new accounting standards.
Current wording
Refer to Note 2— Basis of Presentation, Summary of Significant Accounting Policies and Going Concern in the Notes to Consolidated Financial Statements for information regarding new accounting standards.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Income Tax Provision. Income tax expense increased from $7,000 during Fiscal 2023 to $14,000 during Fiscal 2024. Income tax expense incurred was related to state taxes. The effective income tax rate of 0.19% differs from the federal and state blended rate primarily as a result of maintaining a full valuation allowance against net deferred tax assets.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Our microturbines are installed in the natural resource market for use in both onshore and offshore applications, including oil and gas exploration, production, and at compression and transmission sites as
Previous report — wording carried elsewhere
single source suppliers with long lead times. We regularly reassess the adequacy and abilities of our suppliers to meet our future needs.
Previous report — wording carried elsewhere
Revenuefor Fiscal 2023 increased $9.9 million, or 15%, to $73.9 million from $64.0 million for Fiscal 2022. The change in revenue for Fiscal 2023 compared to Fiscal 2022 included increases in revenue of $16.2 million from the United States and Canadian markets and $0.2 million from the European and Russian markets. These overall increases in revenue