Capstone Green Energy Holdings Inc
For the period ended Jun 30, 2024. Filed Oct 17, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Oct 17, 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-Q
Period ended 2023-12-31; filed 2024-09-09.
0001558370-24-012687
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-10-17.
0001558370-24-013373
Item 2. 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 95 previous paragraphs and 69 current paragraphs.
33 unchanged; 28 reworded; 7 added; 27 removed; 7 previous and 1 current paragraphs rearranged.
Tables are not compared: 43 previous and 34 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 (7)
Current report
During the three months ended June 30, 2024, our net loss decreased by $1.8 million, or 32%, to $3.9 million and our basic and diluted loss per share decreased by 32% to $(0.21), compared to a $5.7 million net loss and $(0.31) net loss per share during the three months ended June 30, 2023. The decrease to net loss during the three months ended June 30, 2024 was primarily due to lower interest expenses, an increase in other income, net and lower operating expenses, offset by a decrease in revenue and a decrease in contribution from our higher parts, services and rentals business.
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
Sales to Lone Star Power Solutions, LLC, Cal Microturbine, E-Finity Distribution Generation and Optimal Group Australia Pty Ltd, accounted for 16%, 13%, 11% and 11% of our revenue for the three months ended June
Current report
30, 2024, respectively. Sales to Horizon Power Systems, Optimal Group Australia Pty Ltd and E-Finity Distribution Generation, accounted for 15%, 13% and 10% of our revenue for the three months ended June 30, 2023, respectively.
Current report
The improvement of $0.4 million in product and accessories gross profit was primarily due to higher product pricing and product mix during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.
Current report
operating assets and liabilities of $1.2 million and non-cash adjustments (primarily representing depreciation and amortization, non-cash lease expenses and stock-based compensation expense) of $2.1 million.
Current report
Financing Activities Net cash used in financing activities during the three months ended June 30, 2024 and 2023 was for repayment of notes payable and lease obligations.
Removed paragraphs (27)
Previous report
Recent Developments
Previous report
Refer to Note 3— Chapter 11 Proceedings and Emergence in the Notes to Condensed 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 13— Debt for details regarding our Exit Facility and Note 15— Commitments and Contingencies for details regarding our Service Agreements and the Trademark Licensing Agreement.
Previous report
During the three months ended December 31, 2023 our net income increased by 483% to $24.2 million and our basic and diluted income per share increased by 469% to $1.27 compared to a $6.3 million net loss and $(0.35), respectively, in the same period of the previous fiscal year. The increase to net income during the three months ended December 31, 2023 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 Condensed Consolidated Financial Statements for further discussion of our outstanding indebtedness and the post emergence financing.
Previous report
Our technology can also be used in Hybrid Electric Vehicle (“HEV”) applications. Our customers have applied our products in HEV applications such as transit buses and Class 7 and 8 work trucks. In these applications, the microturbine acts as an onboard battery charger to recharge the battery system as needed. The benefits of microturbine-powered HEV hybrids include extended range, fuel economy gains, quieter operation, reduced emissions, and higher reliability when compared with traditional internal combustion engines.
Previous report
Additionally, our technology has been used in marine applications. Our customers have applied our products in the commercial vessel and luxury yacht market segments. The application for our marine products is for use as a ship auxiliary engine. In this application, the microturbines provide power to the vessel’s electrical loads and, in some cases, the vessel can utilize the exhaust energy to increase the overall efficiency of the application, thereby reducing overall fuel consumption and emissions. Another feasible application is similar to our HEV application where the vessel is driven by an electric propulsion system and the microturbine serves as an on board range extender. Transportation is a developing market segment for us. We have experienced continued development in these vertical markets and remain focused on the development of these applications.
Previous report
For the three months ended December 31, 2023, revenue from microturbine products and accessories decreased $5.9 million, or 53%, to $5.2 million from $11.1 million for the three months ended December 31, 2022. The $5.9 million decrease was primarily driven by a decrease in megawatts and units shipped during the three months ended December 31,
Previous report
Sales to Cal Microturbine accounted for 17% of our revenue for the three months ended December 31, 2023, respectively. RSP Systems and Cal Microturbine, two of our domestic distributors, accounted for 21% and 14% of revenue for the three months ended December 31, 2022, respectively.
Previous report
Production and service center labor and overhead expense increased by $0.6 million during the third quarter of Fiscal 2024 compared to the third quarter of Fiscal 2023. The increase was primarily because of an increase of $0.6 million in depreciation and rent expense related to our rental business.
Previous report
The $0.2 million decrease in product and accessories gross profit was primarily the result of a decrease in volume of product shipments in the three months ended December 31, 2023.
Previous report
Nine Months Ended December 31, 2023 and 2022
Previous report
Revenue. Revenue for the nine months ended December 31, 2023 increased $7.0 million, or 12%, to $66.9 million from $59.9 million for the nine months ended December 31, 2022. The $7.0 million increase was primarily driven by increases of $5.1 million in Europe, $3.8 million in Latin America and $2.1 million in Asia and Australia, partially offset by a decrease of $2.2 million in Russia and $1.8 million in the United States and Canada. The increases were primarily attributable to an increase in our EaaS long-term rental services and product deliveries for projects during the nine months ended December 31, 2023. The decreases in the United States and Canada were primarily attributable to a decrease in our product shipments into the energy efficiency vertical markets in those regions compared to the same period last year. The decrease in Russia were the result of United States sanctions.
Previous report
For the nine months ended December 31, 2023, revenue from microturbine products and accessories increased $3.0 million, or 10%, to $33.5 million from $30.5 million for the nine months ended December 31, 2022. The $3.0 million increase was primarily due to higher product sales during the nine months ended December 31, 2023 compared to the same period last year. Megawatts shipped were 27.6 megawatts and 25.1 megawatts during the nine months ended December 31, 2023 and 2022, respectively. Average revenue per megawatt shipped was approximately $1.2 million and $1.1 million during the nine months December 31, 2023 and 2022, respectively.
Previous report
Sales to E-Finity Distribution Generation, LLC and Cal Microturbine accounted for 14% and 11% of our revenue for the nine months ended December 31, 2023, respectively. Sales to Cal Microturbine and RSP Systems accounted for 16% and 13%of our revenue for the nine months ended December 31, 2022, respectively.
Previous report
Gross Profit. Gross Profit was approximately $11.7 million, or 18% of revenue, for the nine months ended December 31, 2023 compared to a gross profit of $7.6 million, or 13% of revenue, for the nine months ended December 31, 2022. The increase 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. Effective January 2023, we increased our sales prices and are negotiating with vendors to reduce these costs.
Previous report
Production and service center labor and overhead expense increased $2.0 million in the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022 primarily due to increases of approximately $2.3 million in depreciation and rent expense related to our rental business, $0.5 million in facilities costs, and $0.2 million in labor costs, partially offset by decreases of $0.7 million in freight expense and $0.3 million of supplies expense.
Previous report
Product and accessories gross margin as a percentage of product and accessories revenue increased to (8)% during the nine months ended December 31, 2023, from (9)% during the nine months ended December 31, 2022, primarily due to higher margin accessories revenue and increase in Product prices in the nine months ended December 31, 2023. Parts, service and rentals gross margin as a percentage of parts and service revenue increased to 43% during the nine months ended December 31, 2023, compared to 35% during the nine months ended December 31, 2022 primarily as a result of higher margin rental revenue and Parts price increases.
Previous report
Research and Development (“R&D”) Expenses. R&D expenses increased $0.2 million, or 10%, to $1.9 million from $1.7 million as a result ofhigher labor costs incurred during the nine months ended December 31, 2023.
Previous report
Selling, General, and Administrative (“SG&A”) Expenses. SG&A expenses increased $10.1 million, or 65%, to $25.7 million from $15.6 million primarily as a result of increases of approximately $8.6 million in legal and accounting fees incurred primarily for the restatement activities, $1.4 million in consulting expense and $1.3 million in stock-based compensation expense, partially offset by decreases of $0.5 million in facilities costs, $0.4 million in net credit loss expense and $0.3 million in marketing and travel costs during the nine months ended December 31, 2023 compared to the same period last year. See our Annual Report on Form 10-K/A for the fiscal year ended March 31, 2022 and our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 for details on the Restatement.
Previous report
Interest Expense. Interest expense for the nine months ended December 31, 2023 and 2022 was $4.6 million and $4.5 million, respectively. The increase was primarily due to higher interest rates during the nine months ended December 31, 2023, partially offset by a decrease in interest accruing on $30.0 million of borrowings under the DIP facility compared
Previous report
Financing Activities During the nine months ended December 31, 2023, we generated cash of approximately $17.6 million from financing activities, compared to cash generated during the nine months ended December 31, 2022 of approximately $6.5 million. The funds generated from financing activities during the nine months ended December 31, 2023 were primarily the result of $12.0 million of funding under the DIP Facility, cash of $3.0 million received from the issuance of additional pre-petition senior secured notes under the A&R Note Purchase Agreement during the second quarter of Fiscal 2024 (“Pre-Funding Advance”) and $3.0 million of funding under the Exit Facility during the third quarter
Previous report
of Fiscal 2024, partially offset by issuance costs of $0.2 million. See Note 3— Chapter 11 Proceedings and Emergence in the Notes to Condensed Consolidated Financial Statements and Note 13— Debt for further discussion of the outstanding debt and the post emergence financing. The funds generated from financing activities during the nine months ended December 31, 2022 were primarily the result of net proceeds net proceeds from the issuance of common stock and warrants of $7.3 million, offset by $0.8 million in repayments of lease obligations.
Previous report
Depending on the timing of our future sales and collection of related receivables, managing inventory costs and the timing of inventory purchases and deliveries required to fulfill the backlog, our future working capital requirements may vary materially from those now planned. The amount of capital that we will need in the future to fund our operations will require us to achieve significantly increased sales volume, which is dependent on many factors, including:
Previous report
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.
Previous report
In May 2023, we implemented an expense reduction plan to align our cost structure. The cost reductions focused on non-operating, discretionary expenses and employee costs. Beginning May 12, 2023, nine employees were furloughed for a period of 180 days, the Sales Solutions Team was abandoned, and the effort in Energy Storage Products business was discontinued. Furloughed employees were able to return to work in November 2023.
Previous report
As of December 31, 2023, we had 51.2 MW of rental units in our fleet and under contract. The EaaS rental unit timeline includes a delay between the time of manufacture and the time revenue from that unit is realized. The microturbine rental unit is built, allocated by a signed rental contract, and then commissioned at the customer site, at which point it begins to generate revenue.
Previous report
Our accounts receivable balance, net of allowances, was $5.6 million and $7.1 million as of December 31, 2023 and March 31, 2023, respectively. DSO decreased by 11 days to 35 days as of December 31, 2023 compared to 46 days as of March 31, 2023, primarily due to an increase in revenue.
Previous report
No assurance can be given that future credit loss expense will not increase above current operating levels. Increased credit loss expense or delays in collecting accounts receivable could have a material adverse effect on cash flows and results of operations. In addition, our ability to access the capital markets has been severely restricted or made very expensive at a time when we need, or would like, to do so, which has had a material adverse impact on our liquidity and financial resources. Certain industries in which our customers do business and certain geographic areas have been and could continue to be adversely affected by the previously referenced economic and geopolitical considerations.
Reworded paragraphs (28)
Previous wording
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation****s
Current wording
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Previous wording
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included in this Form 10-Q and the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for Fiscal 2023. All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are approximate.
Current wording
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included in this Form 10-Q and the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for our fiscal year ended March 31, 2024 (“Fiscal 2024”). All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are approximate.
Previous wording
All references in this Quarterly Report on Form 10-Q to “the Company,” “we,” “us,” “our,” or “Capstone” are to Capstone Green Energy Corporation and its consolidated subsidiaries prior to the Effective Date (as defined Note 3**-**Chapter 11 Proceedings and Emergence) and to Capstone Green Energy Holdings, Inc. and its consolidated subsidiaries following the Effective Date.
Current wording
All references in this Quarterly Report on Form 10-Q to “the Company,” “we,” “us,” “our,” or “Capstone” are to Capstone Green Energy Corporation and its consolidated subsidiaries for the three months ended June 30, 2023 and to Capstone Green Energy Holdings, Inc. and its consolidated subsidiaries as of June 30, 2024 and March 31, 2024 and for the three months ended June 30, 2024.
Previous wording
This Form 10-Q includes certain forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). These statements can be identified by the fact that they do not relate strictly to historical or current facts. Words such as “expect,” “anticipate,” “should,” “believe,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend” and variations of these terms and similar expressions are intended to identify these forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among others, statements relating to our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs and other similar matters. These forward-looking statements are based on management's current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
Current wording
This Form 10-Q contains or refers to certain statements that are not historical fact and are “forward-looking” statements as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements can be identified by the fact that they do not relate strictly to historical or current facts. Words such as “expect,” “anticipate,” “should,” “believe,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend” and variations of these terms and similar expressions are intended to identify these forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among others, statements relating to our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs and other similar matters. These forward-looking statements are based on management's current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
Previous wording
Our products continue to gain interest in all our major vertical markets (energy efficiency, natural resources, renewable energy, critical power supply, microgrid and transportation products). 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,
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
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.
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 principally target projects within the energy efficiency and renewable energy markets.
Previous 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.
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 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 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
Current wording
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 versatile dispatchable technology that is fuel flexible and scalable enough to fit a wide variety of applications.
Previous wording
Net product orders were approximately $5.9 million and $1.7 million for the three months ended December 31, 2023 and 2022, respectively. Ending backlog was approximately $18.7 million at December 31, 2023 compared to $42.8 million at March 31, 2023. The book-to-bill ratio was 1.2:1 and 0.8:1 for the three months ended December 31, 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 $3.4 million and $2.8 million for the three months ended June 30, 2024 and 2023, respectively. Ending backlog was approximately $12.4 million at June 30, 2024, compared to $14.2 million at March 31, 2024. The book-to-bill ratio was 0.7:1 and 0.2:1 for the three months ended June 30, 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
We offer new and remanufactured parts through our global distribution network. Service revenue in the third quarter of Fiscal 2024 was approximately 32% of total revenue.
Current wording
We offer new and remanufactured parts through our global distribution network. Service revenue in the first quarter of Fiscal 2025 and Fiscal 2024 was approximately 29% and 21% of total revenue, respectively.
Previous wording
We have continued to develop our new hydrogen products. In March 2022, we released a commercially available hydrogen-based combined heat and power (CHP) product, which can safely run on a 30% hydrogen-70% natural gas mix. In continuing these efforts, we are testing a 100% hydrogen gas combustion system through our research and development partnership with Argonne National Laboratory.
Current wording
We have continued to develop our new hydrogen products. In March 2022, we released a commercially available hydrogen-based combined heat and power product, which can safely run on a 30% hydrogen-70% natural gas mix. In continuing these efforts, we are testing a 100% hydrogen gas combustion system through our research and development partnership with Argonne National Laboratory.
Previous wording
The preparation of the financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.
Current wording
Our discussion and analysis of our financial condition and results of operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these Condensed 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 inventories, credit losses and redeemable noncontrolling interests valuations. 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
Critical accounting estimates are defined as follows: the estimate requires management to make assumptions about matters that were highly uncertain at the time the estimate was made; different estimates reasonably could have been used; or if changes in the estimate are reasonably likely to occur from period to period and the change would have a material impact on our financial condition or results of operations.
Current wording
Critical accounting estimates are defined as follows: (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.
Previous wording
Note 2— Basis of Presentation, Significant Accounting Policies and Going Concern in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended March 31, 2023 describe the significant accounting estimates and methods used in the preparation of our Condensed Consolidated Financial Statements.
Current wording
Item 7 of our Annual Report on Form 10-K for the year ended March 31, 2024 describe the significant accounting estimates used in the preparation of our Condensed Consolidated Financial Statements.
Previous wording
Revenue. Revenue for the three months ended December 31, 2023 decreased $6.4 million to $14.6 million from $21.0 million for the three months ended December 31, 2022. The $6.4 million decrease was primarily driven by decreases in revenue of $7.4 million in the United States and Canada and $0.5 million in Russia, partially offset by increases of $0.7 million in Latin America, $0.5 million in Asia and Australia and $0.3 million in Europe. The decreases in the United States and Canada were primarily attributable to a decrease of product deliveries for projects during the three months ended December 31, 2023 and the decrease in Russia was a result of United States sanctions. The increases in Latin America, Asia and Australia and Europe were due to an increase in our EaaS long-term rental services and 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 the three months ended June 30, 2024 decreased $8.3 million to $15.6 million from $23.9 million for the three months ended June 30, 2023. The $8.3 million decrease was primarily driven by decreases in revenue of $3.5 million in Europe, $3.1 million in the United States and Canada, $1.5 million in Asia and Australia and $0.3 million in Latin America, offset by an increase of $0.1 million in the Middle East and Africa. The decreases in Europe, United States and Canada, Asia and Australia and Latin America were primarily due to decreases in product deliveries for projects during the three months ended June 30, 2024. The increase in the Middle East and Africa was primarily due to an increase in our revenue from our parts shipments to the region, compared to the three months ended June 30, 2023.
Previous wording
2023 compared to the same period last year. Megawatts shipped were 4.4 megawatts and 8.2 megawatts during the three months ended December 31, 2023 and 2022, respectively. Product demand was adversely affected by the Chapter 11 Bankruptcy as customers assess the long-term viability of the Company. Average revenue per megawatt shipped was approximately $1.2 million and $1.2 million during the three months ended December 31, 2023 and 2022, respectively, illustrating the effect of previously announced Product price increases. The timing of shipments is variable 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.
Current wording
Revenue from microturbine products and accessories for the three months ended June 30, 2024, decreased $7.8 million, or 59%, to $5.4 million from $13.2 million for the three months ended June 30, 2023. The $7.8 million decrease was primarily driven by a decrease in megawatts and units shipped during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. Megawatts shipped were 4.0 megawatts and 11.0 megawatts during the three months ended June 30, 2024 and 2023, respectively. Product demand was adversely affected by the Chapter 11 Bankruptcy as customers assessed the long-term viability of the Company. Average revenue per megawatt shipped was approximately $1.3 million and $1.2 million during the three months ended June 30, 2024 and 2023, respectively. The timing of shipments is variable 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 are part of our EaaS business line and includes revenue from our parts shipments, FPP contracts, rentals, Distributor Support Subscription fees, and other service revenue) decreased $0.5 million, or 5%, to $9.4 million for three months ended December 31, 2023 from $9.9 million for the three months ended December 31, 2022. The $0.5 million decrease was primarily driven by decreases of $0.4 million in distributor support services, $0.3 million in spare parts and $0.2 million in engineering service revenue, partially offset by an increase of $0.4 million in rentals during the three months ended December 31, 2023 compared to the same period last year. Refer to Note 15 – Commitments and Contingencies — Related Party Transactions, in the Notes to Condensed Consolidated Financial Statements for information related to Reorganized PrivateCo’s retained assets and distributor services business connected to our emergence from the Chapter 11 Cases.
Current wording
Parts, service and rentals revenue (which are part of our EaaS business line and includes revenue from our parts shipments, FPP contracts, rentals, Distributor Support Subscription (“DSS”) fees, and other service revenue) decreased $0.5 million, or 5%, to $10.2 million for three months ended June 30, 2024 from $10.7 million for the three months ended June 30, 2023. The $0.5 million decrease was primarily due to a decrease of $0.7 million in rentals as a result of lower utilization, a decrease of $0.2 million in revenue from our distributor support services as this revenue is no longer reported by us, and DSS service fees are reported as Other income and a decrease of $0.2 million in revenue from our FPP contracts, partially offset by an increase of $0.6 million in spare parts revenue during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. Refer to Note 13— Commitments and Contingencies— Related Party Transactions, in the Notes to Condensed Consolidated Financial Statements for information related to the distributor support services business in connection with our Reorganization during Fiscal 2024.
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 $3.0 million, or 21% of revenue for the three months ended December 31, 2023 compared to a gross profit of $1.7 million, or 8% of revenue for the three months ended December 31, 2022. The increase 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 expenses. Effective January 2023, we increased our sales prices and are negotiated with vendors to reduce material costs.
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 $3.8 million, or 24% of revenue for the three months ended June 30, 2024, compared to a gross profit of $3.4 million, or 14% of revenue for the three months ended June 30, 2023. The $0.4 million increase was primarily the result of increases in product pricing and relatively increased revenue from our higher margin parts and service revenue, and lower inventory and warranty charges, partially offset by higher direct material costs and production and service center labor and overhead expenses. Effective March 2024, we increased our sales prices and are negotiating with vendors to reduce material costs.
Previous wording
Product and accessories gross margin as a percentage of product and accessories revenue decreased to (27)% during the three months ended December 31, 2023, from (11)% during the three months ended December 31, 2022, primarily driven by lower product sales and higher material and overhead costs in the three months ended December 31, 2023. Parts, service and rentals gross margin as a percentage of parts and service revenue increased to 47% during the three months ended December 31, 2023, compared to 29% during the three months ended December 31, 2022 primarily as a result of increases in Parts prices and higher margin rental revenue in the three months ended December 31, 2023.
Current wording
Product and accessories gross margin as a percentage of product and accessories revenue decreased to (11)% during the three months ended June 30, 2024, from (7)% during the three months ended June 30, 2023, primarily due to lower margin product revenue in the three months ended June 30, 2024. Parts, services and rentals gross margin as a percentage of parts and service revenue increased to 43% during the three months ended June 30, 2024, compared to 41% during the three months ended June 30, 2023, primarily as a result of increases in parts prices and lower overhead costs in the three months ended June 30, 2024.
Previous wording
Research and Development (“R&D”) Expenses. R&D expenses were $0.6 million and $0.6 million during the three months ended December 31, 2023 and 2022, respectively.
Current wording
Research and Development (“R&D”) Expenses. R&D expenses were $0.5 million and $0.7 million during the three months ended June 30, 2024 and 2023, respectively. The decrease of $0.2 million, or 29%, was primarily due tolower labor costs incurred during the three months ended June 30, 2024.
Previous wording
Selling, General, and Administrative (“SG&A”) Expenses. SG&A expenses increased $4.1 million, or 73%, to $9.7 million from $5.6 million primarily as a result of increases of approximately $3.7 million in legal and accounting fees incurred primarily for the restatement activities and $1.3 million in stock-based compensation expense, partially offset by decreases of $0.5 million in marketing costs and $0.4 million in net credit loss expense during the three months ended December 31, 2023 compared to the same period last year. See Fiscal Year 2022 10-K/A and Fiscal Year 2023 10-K for details of the Restatement.
Current wording
Selling, General, and Administrative (“SG&A”) Expenses. SG&A expenses were $6.8 million during the three months ended June 30, 2024 and 2023.
Previous wording
Interest Expense. Interest expense for the three months ended December 31, 2023 and 2022 was $1.1 million and $1.9 million, respectively. The decrease in interest expense wasprimarily due to interest accruing on $30.0 million of borrowings under the DIP facilityd uring the three months ended December 31, 2023 compared to the $51.0 million pre-petition notes during the three months ended December 31, 2022. See Liquidity and Capital Resources below for additional discussion on our interest expense.
Current wording
Interest Expense. Interest Expense for the three months ended June 30, 2024 and 2023 was $1.0 million and $1.7 million, respectively. The decrease in interest expense was primarily due to a lower average debt balance during the first quarter of Fiscal 2025 as a result of the Reorganization compared to the $51.0 million pre-petition debt balance during the first quarter of Fiscal 2024. See Liquidity and Capital Resources below for additional discussion on our interest expense.
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 $9.0 million during the nine months ended December 31, 2023, primarily due to cash used in operating activities, partially offset by net cash provided by financing activities.
Current wording
Our cash requirements depend on many factors, including the execution of our business strategy and plan. Our cash increased $1.9 million during the three months ended June 30, 2024, primarily due to net cash provided by operating activities, partially offset by cash used in investing activities.
Previous wording
Operating Activities During the nine months ended December 31, 2023, we used $22.1 million in cash in our operating activities, which consisted of a net income for the period of $12.7 million, offset by non-cash adjustments (primarily the reorganization items, net, paid-in-kind interest expense, depreciation and amortization of assets and stock-based compensation) of $25.9 million and cash used for working capital of $8.9 million. During the nine months ended December 31, 2022, we used $8.4 million in cash in our operating activities, which consisted of a net loss for the period of $14.2 million, cash provided from working capital of $0.4 million and non-cash adjustments (primarily depreciation and amortization, inventory provision and stock-based compensation) of $5.4 million.
Current wording
Operating Activities During the three months ended June 30, 2024, $2.1 million was provided by cash in our operating activities, which consisted of a net loss for the period of $3.9 million, partially offset by changes in operating assets and liabilities of $2.8 million and non-cash adjustments (primarily representing depreciation and amortization, non-cash lease expenses and paid-in-kind (“PIK”) interest) of $3.2 million. During the three months ended June 30, 2023, $4.8 million in cash was used in our operating activities, which consisted of a net loss for the period of $5.7 million, changes in
Previous wording
The change in non-cash operating activities during the nine months ended December 31, 2023, compared to the same period in the previous year was primarily driven by the net reorganization items, which included our gain on debt extinguishment, offset by increases in amortization expense of our right-of-use assets, stock-based compensation expense and paid-in-kind interest expense. The change in accounts receivable was primarily the result of delayed collections during the nine months ended December 31, 2023 compared to the same period in the previous fiscal year. The change in inventory compared to the nine months ended December 31, 2022, was primarily the result of a decrease in finished goods during the nine months ended December 31, 2023. The change in accounts payable and accrued expenses was primarily due to higher payments to vendors during the nine months ended December 31, 2023, compared to the same period of the previous fiscal year. The change in other operating assets and liabilities during the nine months ended December 31, 2023 compared to the same period in the previous fiscal year, was primarily driven by the decreases in deferred revenue attributable to customer deposits, FPP contracts and DSS program.
Current wording
The change in non-cash operating activities during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was primarily driven by an increase in paid-in-kind interest expense related to the interest incurred since issuing the Notes in December 2023. The change in accounts receivable was primarily the result of lower revenue levels and timing of collections during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The change in inventory was primarily the result of an increase in finished goods during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The change in accounts payable and accrued expenses was primarily due to lower payments to vendors during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The change in other operating assets and liabilities during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was primarily due to the increases in deferred revenue attributable to customer deposits, FPP contracts and the DSS program.
Previous wording
Investing Activities Net cash used in investing activities was $4.6 million and $4.0 million during the nine months ended December 31, 2023 and 2022, respectively, primarily related to the additions to our rental fleet.
Current wording
Investing Activities Net cash used in investing activities of $0.1 million and $2.2 million during the three months ended June 30, 2024 and 2023, respectively, was primarily due to investment in operating and rental fleet assets during the three months ended June 30, 2024 and 2023.
Previous wording
Going Concern In connection with preparing the Condensed Consolidated Financial Statements for the three and nine months ended December 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 financial statements. As of December 31, 2023, we had cash and cash equivalents of $3.9 million and a working capital deficit of $9.3 million. We incurred net income of $12.7 million and used cash from operating activities of $22.1 million during the nine months ended December 31, 2023.
Current wording
Going Concern In connection with preparing the Condensed Consolidated Financial Statements for the three months ended June 30, 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 financial statements. As of June 30, 2024, we had cash of $4.0 million and a working capital deficit of $12.0 million. We incurred a net loss of $3.9 million during the three months ended June 30, 2024.
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 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 December 31, 2023.
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 (“Emergence”) and effected a financial and organizational restructuring. However, 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 the financial statements as of, and for the period ended June 30, 2024.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
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-
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
our business strategy is to ensure diversification by also targeting projects within the energy efficiency and renewable energy markets.
Previous report — wording carried elsewhere
The following table summarizes our revenue by geographic markets (in millions):
Previous report — wording carried elsewhere
The following table summarizes our revenue (revenue amounts in millions):
Previous report — wording carried elsewhere
Parts, service and rentals revenue (which are part of our EaaS business line and includes revenue from our parts shipments, FPP contracts, rentals, Distributor Support Subscription fees, and other service revenue) increased $4.0 million, or 14%, to $33.4 million for nine months ended December 31, 2023 from $29.4 million for the nine months ended December 31, 2022. The $4.0 million increase was primarily driven by an increase in rental revenue as a result of our EaaS business plan during the nine months ended December 31, 2023 compared to the same period last year.
Previous report — wording carried elsewhere
The following table summarizes our gross profit (in millions except percentages):
Previous report — wording carried elsewhere
to the $51.0 million pre-petition notes. See Liquidity and Capital Resources below for additional discussion on our interest expense.
Previous report — wording carried elsewhere
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 Condensed Consolidated Financial Statements