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f+
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer | |
|
|
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares outstanding of the registrant’s common stock as of August 10, 2022 was
CAPSTONE GREEN ENERGY CORPORATION
INDEX
2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
June 30, |
| March 31, |
| |||
2022 |
| 2022 |
| |||
Assets | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net of allowances of $ |
| |
| | ||
Inventories, net |
| |
| | ||
Prepaid expenses and other current assets |
| |
| | ||
Total current assets |
| |
| | ||
Property, plant, equipment and rental assets, net |
| |
| | ||
Non-current portion of accounts receivable | |
| | |||
Non-current portion of inventories |
| |
| | ||
Other assets |
| |
| | ||
Total assets | $ | | $ | | ||
Liabilities and Stockholders’ Equity | ||||||
Current Liabilities: | ||||||
Accounts payable and accrued expenses | $ | | $ | | ||
Accrued salaries and wages |
| |
| | ||
Accrued warranty reserve |
| |
| | ||
Deferred revenue |
| |
| | ||
Current portion of notes payable and lease obligations |
| |
| | ||
Total current liabilities |
| |
| | ||
Deferred revenue - non-current | | | ||||
Term note payable, net | | | ||||
Long-term portion of notes payable and lease obligations |
| |
| | ||
Total liabilities |
| |
| | ||
Commitments and contingencies (Note 14) | ||||||
Stockholders’ Equity: | ||||||
Preferred stock, $ | ||||||
Common stock, $ |
| |
| | ||
Additional paid-in capital |
| |
| | ||
Accumulated deficit |
| ( |
| ( | ||
Treasury stock, at cost; |
| ( |
| ( | ||
Total stockholders’ equity |
| |
| | ||
Total liabilities and stockholders' equity | $ | | $ | | ||
See accompanying notes to condensed consolidated financial statements
3
CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended | |||||||
June 30, |
| ||||||
| 2022 |
| 2021 |
| |||
Revenue: | |||||||
Product and accessories | $ | |
| $ | | ||
Parts, service and rentals | | | |||||
Total revenue | | | |||||
Cost of goods sold: | |||||||
Product and accessories | | | |||||
Parts, service and rentals | | | |||||
Total cost of goods sold |
| |
| | |||
Gross margin |
| |
| | |||
Operating expenses: | |||||||
Research and development |
| |
| | |||
Selling, general and administrative |
| |
| | |||
Total operating expenses |
| |
| | |||
Loss from operations |
| ( |
| ( | |||
Other income |
| |
| | |||
Interest income |
| |
| | |||
Interest expense |
| ( |
| ( | |||
Gain (loss) on debt extinguishment | — | | |||||
Loss before provision for income taxes |
| ( |
| ( | |||
Provision for income taxes |
| |
| | |||
Net loss | ( | ( | |||||
Net loss per common share attributable to common stockholders—basic and diluted | ( | ( | |||||
Weighted average shares used to calculate basic and diluted net loss per common share attributable to common stockholders |
| |
| | |||
See accompanying notes to condensed consolidated financial statements
4
CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
Additional | Total | ||||||||||||||||||
Common Stock | Paid-in | Accumulated | Treasury Stock | Stockholders’ | |||||||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Shares |
| Amount |
| Equity | ||||||
Balance, March 31, 2022 | | $ | | $ | | $ | ( |
| | $ | ( | $ | | ||||||
Purchase of treasury stock | — | — |
| — |
| — |
| |
| ( |
| ( | |||||||
Vested restricted stock awards | | — |
| |
| — |
| — |
| — |
| | |||||||
Stock-based compensation | — | — |
| |
| — |
| — |
| — |
| | |||||||
Net loss | — | — |
| — |
| ( |
| — |
| — |
| ( | |||||||
Balance, June 30, 2022 | | $ | | $ | | $ | ( |
| | $ | ( | $ | | ||||||
Additional | Total | ||||||||||||||||||
Common Stock | Paid-in | Accumulated | Treasury Stock | Stockholders’ | |||||||||||||||
Shares | Amount | Capital | Deficit | Shares | Amount | Equity | |||||||||||||
Balance, March 31, 2021 |
| | $ | | $ | | $ | ( |
| | $ | ( | $ | | |||||
Purchase of treasury stock | — | — | — | — | | ( | ( | ||||||||||||
Vested restricted stock awards | | — | | — | — | — | | ||||||||||||
Stock-based compensation | — | — | | — | — | — | | ||||||||||||
Issuance of common stock, net of issuance costs | | | | — | — | — | | ||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||||
Balance, June 30, 2021 | | $ | | $ | | $ | ( | | $ | ( | $ | | |||||||
See accompanying notes to condensed consolidated financial statements
5
CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended | ||||||||
June 30, |
| |||||||
|
| 2022 |
| 2021 |
| |||
Cash Flows from Operating Activities: | ||||||||
Net loss | $ | ( | $ | ( | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization |
| | | |||||
Amortization of financing costs and discounts |
| | | |||||
Amortization of right-of-use assets | | | ||||||
Loss (gain) on debt extinguishment | — | ( | ||||||
Inventory provision |
| | | |||||
Provision for warranty expenses |
| | | |||||
Stock-based compensation |
| | | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable |
| | ( | |||||
Inventories |
| ( | ( | |||||
Prepaid expenses, other current assets and other assets |
| ( | ( | |||||
Accounts payable and accrued expenses |
| ( | | |||||
Accrued salaries and wages and long term liabilities |
| | ( | |||||
Accrued warranty reserve |
| ( | ( | |||||
Deferred revenue |
| | ( | |||||
Net cash used in operating activities |
| ( |
| ( | ||||
Cash Flows from Investing Activities: | ||||||||
Expenditures for property, plant, equipment and rental assets |
| ( | ( | |||||
Net cash used in investing activities |
| ( |
| ( | ||||
Cash Flows from Financing Activities: | ||||||||
Repayment of notes payable and lease obligations |
| ( | ( | |||||
Cash used in employee stock-based transactions |
| ( | ( | |||||
Net proceeds from issuance of common stock and warrants |
| | | |||||
Net cash (used in) provided by financing activities |
| ( |
| | ||||
Net (decrease) increase in Cash and Cash Equivalents |
| ( |
| ( | ||||
Cash and Cash Equivalents, Beginning of Period |
| |
| | ||||
Cash and Cash Equivalents, End of Period | $ | | $ | | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | | $ | | ||||
Income taxes | $ | | $ | | ||||
Supplemental Disclosures of Non-Cash Information: | ||||||||
Acquisition of property and equipment through accounts payable and notes payable | $ | | $ | | ||||
Renewal of insurance contracts financed by notes payable | $ | | $ | | ||||
Issuance of common stock for services to be received | $ | — | $ | | ||||
Right-of-use assets obtained in exchange for lease obligations | $ | | $ | — | ||||
See accompanying notes to condensed consolidated financial statements
6
CAPSTONE GREEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business and Organization
Capstone Green Energy Corporation (“Capstone”, or the “Company”) is a provider of customized microgrid solutions, on site resilient green Energy as a Service (Eaas) solutions, and on-site energy technology systems focused on helping customers around the globe meet their environmental, energy savings, and resiliency goals. These solutions include stationary distributed power generation applications and distribution networks, including cogeneration (combined heat and power (“CHP”), integrated combined heat and power (“ICHP”), and combined cooling, heat and power (“CCHP”), renewable energy, natural resources, and critical power supply. In April 2021, the Company added additional products to its portfolio and shifted its focus to four key business lines. The Energy Conversion Products business line is driven by the Company’s industry-leading, highly efficient, low-emission, resilient microturbine energy systems, which offer scalable solutions in addition to a broad range of customer-tailored solutions, including hybrid energy systems and larger frame industrial turbines. Through the Energy as a Service business line, the Company offers rental solutions utilizing its microturbine energy systems and battery storage systems, comprehensive factory protection plan service contracts that guarantee life-cycle costs, as well as aftermarket spare parts. The Company’s two emerging business lines are Energy Storage Products and Hydrogen Energy Solutions. The Energy Storage Products business line is driven by the design and installation of microgrid storage systems creating customized solutions using a combination of battery technologies and monitoring software. Through the Company’s Hydrogen Energy Solutions business line, it offers customers a variety of hydrogen products, including the Company’s microturbine energy systems. Because these are new offerings, Energy Storage Products and Hydrogen Energy Solutions revenue has been immaterial to date. The Company was organized in 1988 and has been commercially producing its microturbine generators since 1998.
2. Basis of Presentation and Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “GAAP”) for interim financial information and the instructions to Form 10-Q and Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The condensed consolidated balance sheet at March 31, 2022 was derived from audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the Fiscal year ended March 31, 2022. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim condensed consolidated financial statements include all adjustments (including normal recurring adjustments) necessary for a fair presentation of the financial condition, results of operations and cash flows for such periods. Results of operations for any interim period are not necessarily indicative of results for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the Fiscal Year 2022 filed with the SEC on July 13, 2022. This Quarterly Report on Form 10-Q (this “Form 10-Q”) refers to the Company’s fiscal years ending March 31 as its “Fiscal” years.
Significant Accounting Policies There have been no changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K for Fiscal Year 2022 filed with the SEC on July 13, 2022, that have had a material impact on the Company's condensed consolidated financial statements and related notes.
Evaluation of Ability to Maintain Current Level of Operations In connection with the preparation of these condensed consolidated financial statements for the three months ended June 30, 2022, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to meet its obligations as they became due over the next twelve months from the date of issuance of the Company’s first quarter of Fiscal 2023 interim condensed consolidated financial statements. Management assessed that there were such conditions and events, including a history of recurring operating losses, negative cash flows from operating activities, the continued negative impact of the volatility of the global oil and gas markets, a strong U.S. dollar in certain markets making our products more expensive in such markets, the COVID-19 pandemic, the Russian invasion of Ukraine, and ongoing global geopolitical tensions. The Company incurred a net loss of $
7
the three months ended June 30, 2021. As of June 30, 2022, the Company had cash and cash equivalents of $
Management evaluated these conditions in relation to the Company’s ability to meet its obligations as they become due. The Company’s ability to continue current operations and to execute on management’s plan is dependent on the Company’s ability to generate cash flows from operations. Management believes that the Company will continue to make progress on its path to profitability through a cost reduction plan implemented in March 2022, expanding the EaaS revenue streams, as well as price increases on its Factory Protection Plan and certain product offerings. In March 2022, the Company implemented an expense reduction plan and announced its efforts to reduce operating costs and modify its operating model to better match its expanding EaaS business. In order to implement the expense reduction plan, the Company undertook a holistic review of its operations, taking the growing EaaS business into account. Beginning on February 28, 2022, the Company furloughed
In February 2022, the Company announced that it reached its goal of having
To help offset inflation and the rising cost of components, as well as improve our profitability, the Company implemented price increases on our Factory Protection Plan contracts effective April 1, 2022, and implemented price increases on certain of the Company’s product offerings including the C65 and C1000 products, effective May 1, 2022.
The Company may seek to raise funds by selling additional securities (through the at-the-market offering program or otherwise) to the public or to selected investors or by obtaining additional debt financing. Pursuant to the AR NPA Second Amendment (as defined below), the Company is required to use its commercially reasonable best efforts to raise at least $
Based on the current operating plan, management anticipates that, given current working capital levels and current financial projections, including the cost reduction plan, expanding EaaS business, and price increases, the Company will be able to meet its financial obligations as they become due over the next twelve months from the date of issuance of the Company’s first quarter of Fiscal 2023 interim condensed consolidated financial statements.
8
Paycheck Protection Program and COVID-19
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief and Economic Security (the “CARES Act”), which, among other things, outlines the provisions of the Paycheck Protection Program (the “PPP”). The Company determined that it met the criteria to be eligible to obtain a loan under the PPP because, among other reasons, in light of the COVID-19 outbreak and the uncertainty of economic conditions related thereto, the loan was necessary to support the Company’s ongoing operations. Under the PPP, the Company could obtain a U.S. Small Business Administration loan in an amount equal to the average of the Company’s monthly payroll costs (as defined under the PPP) for calendar 2019 multiplied by 2.5 (approximately 10 weeks of payroll costs). Section 1106 of the CARES Act contains provisions for the forgiveness of all or a portion of a PPP loan, subject to the satisfaction of certain requirements. The amount eligible for forgiveness is, subject to certain limitations, the sum of the Company’s payroll costs, rent and utilities paid by the Company during the eight-week period beginning on the funding date of the PPP loan.
On
Despite the introduction of COVID-19 vaccines and improvements in the global economy as a whole during Fiscal 2022, the pandemic remains volatile and continues to evolve, including the emergence of variants of the virus, such as the Omicron variant. The Company will continue to assess its operations, considering the guidance of local governments and global health organizations.
Basis for Consolidation These condensed consolidated financial statements include the accounts of the Company, Capstone Turbine International, Inc., its wholly owned subsidiary that was formed in June 2004 and Capstone Turbine Financial Services, LLC, its wholly owned subsidiary that was formed in October 2015, after elimination of inter-company transactions.
3. Recently Issued Accounting Pronouncements
Not yet adopted
In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in this ASU reduce the number of accounting models for convertible debt instruments and convertible preferred stock in order to simplify the accounting for convertible instruments. In addition, it amends the guidance for the scope exception surrounding derivatives for contracts in an entity’s own equity. In each case, the related guidance surrounding EPS has also been amended. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company is currently
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU provide guidance for estimating credit losses on certain types of financial instruments, including trade receivables, by introducing an approach based on expected losses. The expected loss approach will require entities to incorporate considerations of historical information, current information and reasonable forecasts. With certain exceptions, transition to the new guidance will be through a cumulative effect adjustment to opening accumulated deficit as of the beginning of the first reporting period in which the guidance is adopted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”), which defers the adoption of ASU 2016-13 for Smaller Reporting Companies (“SRCs”) as defined by the SEC for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently
9
Management considers the applicability and impact of all Accounting Standards Updates (“ASUs”). The ASUs not listed were assessed and determined by management to be either not applicable or are expected to have minimal impact on the Company’s consolidated financial position and/or results of operations.
4. Customer Concentrations and Accounts Receivable
Cal Microturbine and E-Finity Distributed Generation, LLC (“E-Finity”),
Additionally, E-Finity and Cal Microturbine accounted for
5. Inventories
Inventories are valued at the lower of cost (determined on a first in first out (“FIFO”) basis) or net realizable value and consisted of the following (in thousands):
June 30, | March 31, | ||||||
| 2022 |
| 2022 |
| |||
Raw materials | $ | | $ | | |||
Work in process | — |
| — | ||||
Finished goods | — | | |||||
Total | | | |||||
Less: inventory reserve | ( | ( | |||||
Less: non-current portion | ( | ( | |||||
Total inventory, net-current portion | $ | | $ | | |||
The non-current portion of inventories represent the portion of inventories in excess of amounts expected to be sold or used in the next twelve months and primarily comprise of repair parts for older generation products still in operation but not technologically compatible with current configurations. The weighted average age of the non-current portion of inventories on hand as of June 30, 2022 is
Non-current Inventory | ||||
| Balance Expected | |||
Expected Period of Use |
| to be Used |
| |
13 to 24 months | $ | | ||
25 to 36 months |
| | ||
Total | $ | |
6. Property, Plant, Equipment and Rental Assets
Property, plant, equipment and rental assets consisted of the following (in thousands):
June 30, | March 31, | ||||||
| 2022 |
| 2022 |
| |||
Machinery, equipment, automobiles and furniture | $ | | $ | |
| ||
Leasehold improvements |
| |
| |
| ||
Molds and tooling | | | |||||
Rental assets |
| |
| |
| ||
| |
| | ||||
Less: accumulated depreciation |
| ( |
| ( | |||
Total property, plant, equipment and rental assets, net | $ | | $ | | |||
10
During the three months ended June 30, 2022, the Company deployed an additional
The Company regularly assesses the useful lives of property and equipment and retires assets no longer in service. Depreciation expense for property, plant, equipment and rental assets was $
7. Stock-Based Compensation
The following table summarizes, by condensed consolidated statements of operations line item, stock-based compensation expense (in thousands):
Three Months Ended | |||||||
June 30, | |||||||
| 2022 |
| 2021 |
| |||
Cost of goods sold | $ | |
| $ | | ||
Research and development |
| |
| | |||
Selling, general and administrative |
| |
| | |||
Stock-based compensation expense | $ | | $ | | |||
Stock Plans
2000 Equity Incentive Plan and 2017 Equity Incentive Plan
In June 2017, the Company’s Board adopted the Capstone Green Energy Corporation 2017 Equity Incentive Plan (the “2017 Plan”), which was approved by the stockholders at the Company’s 2017 annual meeting of stockholders on August 31, 2017 (the “2017 Annual Meeting”). The 2017 Plan initially provided for awards of up to
As of June 30, 2022, there were
Restricted Stock Units and Performance Restricted Stock Units
The Company issued restricted stock units under the Company’s 2000 Equity Incentive Plan, as well as issued (and may in the future issue) restricted stock units under the 2017 Plan to employees, non-employee directors and consultants. The restricted stock units are valued based on the closing price of the Company’s Common Stock on the date of issuance, and compensation cost is recorded on a straight-line basis over the vesting period. The restricted stock units issued to employees vest over a period of , or
11
date. The following table summarizes restricted stock unit and performance restricted stock unit (“PRSU”) activity during the three months ended June 30, 2022:
Weighted | ||||||
Average Grant | ||||||
Date Fair | ||||||
Restricted Stock Units and Performance Restricted Stock Units | Shares | Value |
| |||
Non-vested restricted stock units outstanding at March 31, 2022 |
| |
| $ | | |
Granted |
| | | |||
Vested and issued |
| ( | | |||
Forfeited |
| ( | | |||
Non-vested restricted stock units outstanding at June 30, 2022 |
| | | |||
Restricted stock units expected to vest beyond June 30, 2022 |
| | $ | | ||
The following table provides additional information on restricted stock units and performance restricted stock units:
Three Months Ended June 30, | |||||||
|
| 2022 |
| 2021 | |||
Restricted stock compensation expense (in thousands) |
| $ | |
| $ | | |
Aggregate fair value of restricted stock units vested and issued (in thousands) |
| $ | |
| $ | | |
Weighted average grant date fair value of restricted stock units granted during the period |
| $ | |
| $ | | |
As of June 30, 2022, there was approximately $
The Company’s PRSU activity is included in the above restricted stock units tables. The PRSU program has a
During the first quarter of Fiscal 2023, the Company granted
The weighted average per share grant date fair value of PRSUs granted during the first quarter of Fiscal 2023 was $
12
Stockholder Rights Plan
On May 6, 2019, the Board declared a dividend of one right (a “New Right”) for each of the Company’s issued and outstanding shares of Common Stock. The dividend was paid to the stockholders of record at the close of business on May 16, 2019 (the “Record Date”). Each New Right entitles the registered holder, subject to the terms of the NOL Rights Agreement (as defined below), to purchase from the Company one -thousandth of a share of the Company’s Series B Junior Participating Preferred Stock (the “Preferred Stock”) at a price of $
The NOL Rights Agreement replaced the Company’s Rights Agreement, dated May 6, 2016, by and between the Company and Broadridge Financial Solutions, Inc., as successor-in-interest to Computershare Inc., as rights agent (the “Original Rights Agreement”). The Original Rights Agreement, and the rights thereunder to purchase fractional shares of Preferred Stock, expired at 5:00 p.m., New York City time, on May 6, 2019 and the NOL Rights Agreement was entered into immediately thereafter.
The purpose of the NOL Rights Agreement is to diminish the risk that the Company’s ability to use its net operating losses and certain other tax assets (collectively, “Tax Benefits”) to reduce potential future federal income tax obligations would become subject to limitations by reason of the Company’s experiencing an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Tax Code”). A company generally experiences such an ownership change if the percentage of its stock owned by its “5-percent shareholders,” as defined in Section 382 of the Tax Code, increases by more than 50 percentage points over a rolling three-year period. The NOL Rights Agreement is designed to reduce the likelihood that the Company will experience an ownership change under Section 382 of the Tax Code by (i) discouraging any person or group from becoming a
The New Rights will not be exercisable until the earlier to occur of (i) the close of business on the tenth business day after a public announcement or filing that a person has, or group of affiliated or associated persons have, become an “Acquiring Person,” which is defined as a person or group of affiliated or associated persons who, at any time after the date of the NOL Rights Agreement, have acquired, or obtained the right to acquire, beneficial ownership of
With respect to certificates representing shares of Common Stock outstanding as of the Record Date, until the Distribution Date, the New Rights will be evidenced by such certificates for shares of Common Stock registered in the names of the holders thereof, and not by separate Rights Certificates, as described further below. With respect to book entry shares of Common Stock outstanding as of the Record Date, until the Distribution Date, the New Rights will be evidenced by the balances indicated in the book entry account system of the transfer agent for the Common Stock. Until the earlier of the Distribution Date and the Expiration Date, as described below, the transfer of any shares of Common Stock outstanding on the Record Date will also constitute the transfer of the New Rights associated with such shares of Common Stock. As soon as practicable after the Distribution Date, separate certificates evidencing the New Rights (“Right Certificates”) will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date, and such Right Certificates alone will evidence the New Rights.
The New Rights, which are not exercisable until the Distribution Date, will expire prior to the earliest of (i) May 6, 2022 or such later day as may be established by the Board prior to the expiration of the New Rights, provided that the extension is submitted to the Company’s stockholders for ratification at the next annual meeting of stockholders of the Company succeeding such extension; (ii) the time at which the New Rights are redeemed pursuant to the NOL Rights Agreement; (iii) the time at which the New Rights are exchanged pursuant to the NOL Rights Agreement; (iv) the time at which the New Rights are terminated upon the occurrence of certain transactions; (v) the close of business on the first day after the Company’s 2019 annual meeting of stockholders, if approval by the stockholders of the Company of the NOL
13
Rights Agreement has not been obtained on or prior to the close of business on the first day after the Company’s 2019 annual meeting of stockholders; (vi) the close of business on the effective date of the repeal of Section 382 of the Tax Code, if the Board determines that the NOL Rights Agreement is no longer necessary or desirable for the preservation of Tax Benefits; and (vii) the close of business on the first day of a taxable year of the Company to which the Board determines that no Tax Benefits are available to be carried forward, (the earliest of (i), (ii), (iii), (iv), (v), (vi) and (vii) is referred to as the “Expiration Date”).
Each share of Preferred Stock will be entitled, when, as and if declared, to a preferential per share quarterly dividend payment equal to the greater of (i) $
On April 7, 2022, the Board approved an extension of the NOL Rights Agreement from May 6, 2022 to May 6, 2025, subject to obtaining stockholder approval of such extension. The Company intends to seek that approval at the 2022 annual meeting of stockholders on September 12, 2022.
8. Offerings of Common Stock and Warrants
Common Stock Offering
On June 17, 2021, the Company entered into an amended and restated underwriting agreement (the “Underwriting Agreement”) with H.C. Wainwright Co., LLC (the “Underwriter”) whereby the Company agreed to sell to the Underwriter, and the Underwriter agreed to purchase, in a firm commitment underwritten public offering
The Offering of the Shares was registered pursuant to a shelf registration statement (No. 333-254290) on Form S-3 filed by the Company with the Securities and Exchange Commission on March 22, 2021, and declared effective on April 14, 2021 (the “Registration Statement”), and made pursuant to a prospectus supplement, dated June 17, 2021, and accompanying prospectus that form a part of the Registration Statement relating to the Offering.
The Offering closed on June 22, 2021, and the Company received net proceeds of $
Warrants
Goldman Warrant
On February 4, 2019, the Company sold to Goldman Sachs Co. LLC (the “Holder”), a Purchase for Common Shares (the “Warrant”) pursuant to which the Holder may purchase shares of the Company’s Common Stock in an aggregate amount of up to
On December 9, 2019, the Company entered into an Amendment No. 1 to the Purchase Warrant for Common Shares (the “Amendment No. 1”) with Special Situations Investing Group II, LLC (as successor in interest to Goldman
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Sachs Co. LLC) (the “Warrant Holder”) that amends the Warrant. The Amendment No. 1 amended the Warrant to increase the number of Warrant Shares issuable under the Warrant (on a post-reverse split basis) and to decrease the exercise price from $
On June 16, 2020, the Company entered into an Amendment No. 2 to the Purchase Warrant for Common Shares (“Amendment No. 2”) with the Warrant Holder to increase the number of Warrant Shares (as defined therein) issuable under the Warrant and to decrease the exercise price from $
Amendment No. 2 also amends the Warrant such that the Per Share Anti-Dilution Price (as defined therein) is equal to the Per Share Warrant Exercise Price as provided in the Amendment No. 2 to the Warrant. As a result of the decrease in exercise price, the Company recorded the change in valuation of $
Goldman “2020 Warrant”
On October 1, 2020, the Company entered into an Amendment No. 3 to the Purchase Warrant for Common Shares (the “Amendment No. 3”) with Special Situations Investing Group II, LLC (as successor in interest to Goldman Sachs Co. LLC) (the “Warrant Holder”) that amends that certain Purchase Warrant for Common Shares originally issued by the Company to Goldman Sachs Co. LLC, dated February 4, 2019, as amended (the “Original Warrant”). Amendment No. 3 amends the Original Warrant to amend Section 2.1, Section 2.2(c) and Section 18.1 of the Warrant to, among other things, make certain changes necessitated by the issuance of a second Warrant (the “2020 Warrant”) to the Warrant Holder pursuant to the Company’s entry into the Amended Restated (“AR”) Note Purchase Agreement (See Note 10 – Term Note Payable).
On October 1, 2020, and pursuant to the Company’s entry into the AR Note Purchase Agreement, the Company sold to the Warrant Holder the 2020 to purchase up to
Risk-free interest rate |
| |
Contractual term |
| |
Expected volatility |
|
September 2019 Pre-Funded and Series D Warrants
On September 4, 2019, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional and accredited investors pursuant to which the Company agreed to issue and sell in a registered direct offering (the “Registered Direct Offering”) an aggregate of
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In a concurrent private placement, the Company issued to the purchasers warrants to purchase
Stock to Vendors
From time to time, the Company may enter into agreements with vendors for sponsorship, marketing or investor relation services whereby it may agree to compensate the vendor in cash and unregistered shares of Common Stock of the Company. The value of the unregistered shares of Common Stock is recorded as prepaid marketing cost and included in prepaid expenses and other current assets and stockholder’s equity in the Condensed Consolidated Balance Sheets and is amortized in proportion to the terms of their respective agreements.
On February 17, 2021 and April 1, 2021, the Company issued
9. Fair Value Measurements
The FASB has established a framework for measuring fair value using generally accepted accounting principles. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described as follows:
Level 1. Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2. Inputs to the valuation methodology include:
| ● | Quoted prices for similar assets or liabilities in active markets |
| ● | Quoted prices for identical or similar assets or liabilities in inactive markets |
| ● | Inputs other than quoted prices that are observable for the asset or liability |
| ● | Inputs that are derived principally from or corroborated by observable market data by correlation or other means |
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used must maximize the use of observable inputs and minimize the use of unobservable inputs.
Basis for Valuation
The carrying values reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate their fair values because of the immediate or short-term maturities of these
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financial instruments. The term note payable has been recorded net of a discount based on the fair value of the associated warrant and capitalized debt issuance costs and as of June 30, 2022 includes the Three-Year Term Note as discussed in Note 10 – Term Note Payable. The carrying values and estimated fair values of these obligations are as follows (in thousands):
As of | As of | ||||||||||||
June 30, 2022 | March 31, 2022 | ||||||||||||
Carrying | Estimated | Carrying | Estimated |
| |||||||||
| Value |
| Fair Value |
| Value |
| Fair Value |
| |||||
Term note payable | $ | |
| $ | | $ | |
| $ | | |||
PPP loan | — | — | — | — | |||||||||
Total |
| $ | |
| $ | |
| $ | |
| $ | | |
10. Term Note Payable
On
On
The AR Note Purchase Agreement contains customary covenants, including, among others, covenants that restrict the Company’s ability to incur debt, grant liens, make certain investments and acquisitions, pay dividends, repurchase equity interests, repay certain debt, amend certain contracts, enter into affiliate transactions and asset sales or make certain equity issuances (including equity issuances that would cause an ownership change within the meaning of Section 382 of the Internal Revenue Code), and covenants that require the Company to, among other things, provide annual, quarterly and monthly financial statements, together with related compliance certificates, maintain its property in good condition, maintain insurance and comply with applicable laws. The financial covenants of the AR Note Purchase Agreement require the Company not to exceed specified levels of Adjusted EBITDA losses relative to its financial model, beginning with the fiscal quarter ending September 30, 2021. Additionally, the Company shall not permit the Company’s minimum consolidated liquidity, which consists of its cash and cash equivalents, to be less than $
On May 13, 2021, the Company and the collateral agent, entered into a First Amendment, dated as of May 13, 2021 (the “Amendment”), to the AR Note Purchase Agreement. The Amendment amends certain provisions of the AR Note Purchase Agreement, including to (a) require the Company to expand its Rental Fleet (as defined in the AR Note Purchase Agreement) by (i) at least
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covenants of the AR Note Purchase Agreement require the Company not to exceed specified levels of Adjusted EBITDA losses relative to its financial model, beginning with the fiscal quarter ending September 30, 2021. As of March 31, 2022, the Company was not in compliance with the Adjusted EBITDA covenant contained in the AR Note Purchase Agreement and did not cure such non-compliance by prepaying the Notes. As a result, the Company was in breach of the Adjusted EBITDA covenant as of May 27, 2022. On July 13, 2022 the Company entered into the AR NPA Second Amendment with the Purchaser and the Collateral Agent, pursuant to which (i) the Purchaser and the Collateral Agent waived our breach of the Adjusted EBITDA covenant and (ii) the AR Note Purchase Agreement has been amended to, among other things, add certain new covenants, including requirements that the Company use its commercially reasonable best efforts to raise at least $
The Notes have been recorded net of a discount based on the debt issuance costs totaling $
Interest expense related to the Notes payable during the three months ended June 30, 2022 and 2021 was $
SBA Paycheck Protection Program Loan
On April 15, 2020, the Company submitted an application to its banking partner Western Alliance Bank, an Arizona corporation (“Western Alliance”) under the Small Business Administration (the “SBA”) Paycheck Protection Program (“PPP”) enabled by the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”). Western Alliance entered into a note on April 24, 2020 with the Company and agreed to make available to the Company a loan in the amount of $
On May 13, 2020, the Company repaid $
In February 2021, the Company applied for forgiveness of the PPP Loan, and the loan was forgiven in full on June 30, 2021 (See “Gain on extinguishment of debt” below).
Gain on extinguishment of debt In June 2021, the Company received notification from Western Alliance that the SBA approved forgiveness of the PPP loan in its entirety. The Company accounted for forgiveness on the PPP Loan in accordance with ASC 470 and recognized a gain on debt extinguishment of $
11. Accrued Warranty Reserve
The Company provides for the estimated costs of warranties at the time revenue is recognized. The specific terms and conditions of those warranties vary depending upon the microturbine product sold and the geography of sale. The Company’s product warranties generally start from the delivery date and continue for up to
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Balance, beginning of the period | $ | | ||
Standard warranty provision |
| | ||
Deductions for warranty claims |
| ( | ||
Balance, end of the period | $ | |
During the fourth quarter of Fiscal 2021, the Company recorded a specific $
12. Revenue Recognition
The Company derives its revenues primarily from system sales, service contracts and professional services. Revenues are recognized when control of the systems and services is transferred to the Company’s customers in an amount that reflects the consideration it expects to be entitled to in exchange for those services.
The Company determines revenue recognition through the following steps:
| ● | Identification of the contract, or contracts, with a customer |
| ● | Identification of the performance obligations in the contract |
| ● | Determination of the transaction price |
| ● | Allocation of the transaction price to the performance obligations in the contract |
| ● | Recognition of revenue when, or as, the Company satisfies a performance obligation |
The Company recognizes revenue when performance obligations identified under the terms of contracts with its customers are satisfied, which generally occurs, for systems, upon the transfer of control in accordance with the contractual terms and conditions of the sale. The majority of the Company’s revenue associated with systems is recognized at a point in time when the system is shipped to the customer. Revenue from service contracts and post-shipment performance obligations is recognized when or as those obligations are satisfied. The Company primarily offers assurance-type standard warranties that do not represent separate performance obligations and will separately offer and price extended warranties that are separate performance obligations for which the associated revenue is recognized over-time based on the extended warranty period. The Company records amounts billed to customers for reimbursement of shipping and handling costs within revenue. Shipping and handling costs associated with outbound freight after control over a system has transferred to a customer are accounted for as fulfillment costs and are included in cost of goods sold. Sales taxes and other usage-based taxes are excluded from revenue.
Comprehensive Factory Protection Plan (“FPP”) service contracts require payment at the beginning of the contract period. Advance payments are not considered a significant financing component as they are typically received less than one year before the related performance obligations are satisfied. These payments are treated as a contract liability and are classified in deferred revenue in the Condensed Consolidated Balance Sheets. Once control transfers to the customer and the Company meets the revenue recognition criteria, the deferred revenue is recognized in the Condensed Consolidated Statement of Operations. The deferred revenue relating to the annual maintenance service contracts is recognized in the Condensed Consolidated Statement of Operations on a straight-line basis over the expected term of the contract.
Significant Judgments - Contracts with Multiple Performance Obligations
The Company enters into contracts with its customers that often include promises to transfer multiple products, parts, accessories, FPP and services. A performance obligation is a promise in a contract with a customer to transfer products or services that are distinct. Determining whether products and services are distinct performance obligations that should be accounted for separately or combined as one unit of accounting may require significant judgment.
Products, parts and accessories are distinct as such services are often sold separately. In determining whether FPP and service contracts are distinct, the Company considers the following factors for each FPP and services agreement: availability of the services from other vendors, the nature of the services, the timing of when the services contract was signed in comparison to the product delivery date and the contractual dependence of the product on the customer’s
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satisfaction with the professional services work. To date, the Company has concluded that all of the FPP and services contracts included in contracts with multiple performance obligations are distinct.
The Company allocates the transaction price to each performance obligation on a relative standalone selling price (“SSP”) basis. The SSP is the price at which the Company would sell a promised product or service separately to a customer. Judgment is required to determine the SSP for each distinct performance obligation.
The Company determines SSP by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include the Company’s discounting practices, the size and volume of the Company’s transactions, the customer demographic, the geographic area where systems and services are sold, price lists, its go-to-market strategy, historical sales and contract prices. The determination of SSP is made through consultation with and approval by the Company’s management, taking into consideration the go-to-market strategy. As the Company’s go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes to SSP.
In certain cases, the Company is able to establish SSP based on observable prices of products or services sold separately in comparable circumstances to similar customers. The Company uses a single amount to estimate SSP when it has observable prices.
If SSP is not directly observable, for example when pricing is highly variable, the Company uses a range of SSP. The Company determines the SSP range using information that may include market conditions or other observable inputs. The Company typically has more than one SSP for individual products and services due to the stratification of those products and services by customer size and geography.
The following table presents disaggregated revenue by business group (in thousands):
Three Months Ended June 30, | ||||||
| 2022 |
| 2021 | |||
Microturbine Products | $ | | $ | | ||
Accessories | | | ||||
Total Product and Accessories | | | ||||
Parts and Service |
| |
| | ||
Total Revenue | $ | | $ | | ||
The following table presents disaggregated revenue by geography based on the primary operating location of the Company’s customers (in thousands):
Three Months Ended June 30, | ||||||
| 2022 |
| 2021 | |||
United States | $ | | $ | | ||
Mexico |
| |
| | ||
All other North America |
| |
| | ||
Total North America |
| |
| | ||
Russia |
| |
| | ||
All other Europe | | | ||||
Total Europe | | | ||||
Asia |
| |
| | ||
Australia |
| |
| | ||
All other |
| |
| | ||
Total Revenue | $ | | $ | | ||
Contract Balances
The Company’s contract liabilities consist of advance payments for systems as well as deferred revenue on service obligations and extended warranties. The current portion of deferred revenue is included in current liabilities under deferred revenue and the non-current portion of deferred revenue is included in deferred revenue non-current liabilities in the Condensed Consolidated Balance Sheets.
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As of June 30, 2022, the balance of deferred revenue was approximately $
FPP Balance, beginning of the period | $ | | ||
FPP Billings |
| | ||
FPP Revenue recognized |
| ( | ||
Balance attributed to FPP contracts |
| | ||
DSS Program | | |||
Deposits |
| | ||
Deferred revenue balance, end of the period | $ | |
Deferred revenue attributed to FPP contracts represents the unearned portion of the Company’s contracts. FPP contracts are generally paid quarterly in advance with revenue recognized on a straight line basis over the contract period. As of June 30, 2022, approximately $
The DSS program provides additional support for distributor business development activities, customer lead generation, brand awareness and tailored marketing services for each of the Company’s major geography and market vertical. This program is funded by the Company’s distributors and was developed to provide improved worldwide distributor training, sales efficiency, website development, company branding and provide funding for increased strategic marketing activities. DSS program revenue is generally paid quarterly with revenue recognized on a straight-line basis over a calendar year period.
Deposits are primarily non-refundable cash payments from distributors for future orders.
Unsatisfied Performance Obligations
The Company has elected the practical expedient to disclose only the value of unsatisfied performance obligations for contracts with an original expected length greater than
As of June 30, 2022, the FPP backlog was approximately $
Practical Expedients
The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period would have been
13. Other Assets
The Company was a party to a Development and License Agreement with Carrier Corporation (“Carrier”) regarding the payment of royalties on the sale of each of the Company’s
On September 19, 2018, the Company paid in full the negotiated royalty settlement of $
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the captions “Prepaid expenses and other current assets” and “Other assets” in the accompanying condensed consolidated balance sheets and will be amortized in the accompanying condensed consolidated statements of operations over a
June 30, | March 31, | ||||||
| 2022 |
| 2022 |
| |||
Other current assets | $ | | $ | | |||
Other assets | |
| | ||||
Royalty-related assets | $ | | $ | | |||
14. Commitments and Contingencies
Purchase Commitments
As of June 30, 2022, the Company had firm commitments to purchase inventories of approximately $
Lease Commitments
See Note 15 – Leases.
Other Commitments
The Company has agreements with certain of its distributors requiring that, if the Company renders parts obsolete in inventories the distributors own and hold in support of their obligations to serve fielded microturbines, then the Company is required to replace the affected stock at no cost to the distributors. While the Company has never incurred costs or obligations for these types of replacements, it is possible that future changes in the Company’s product technology could result and yield costs to the Company if significant amounts of inventory are held at distributors. As of June 30, 2022, no significant inventories of this nature were held at distributors.
Legal Matters
Capstone Turbine Corporation v. Turbine International, LLC.
On February 3, 2020, Capstone Turbine Corporation filed suit against its former distributor, Turbine International, LLC (“Turbine Intl.”), in the Superior Court of California for the County of Los Angeles under the following caption: Capstone Turbine Corporation v. Turbine International, LLC; Case No. 20STCV04372 (“Capstone-Turbine Intl. Litigation”). The Company has alleged claims against Turbine Intl. for breach of contract and for injunctive relief relating to the parties’ prior distributor relationship, which terminated at the end of March of 2018, and Turbine Intl.’s failure to satisfy its payment obligations under certain financial agreements, namely an accounts receivable agreement and promissory note in favor of Capstone. As remedies for these claims, the Company is seeking compensatory, consequential, along with injunctive relief and attorney’s fees, interest, and costs.
On March 18, 2020, Turbine Intl. filed its answer and cross-claims in the Capstone-Turbine Intl. Litigation. In its cross-claims, Turbine Intl. asserted claims against Capstone, and individually against Mr. James Crouse, Capstone’s Chief Revenue Officer, for breach of contract under the distributor agreement, accounts receivable agreement and promissory note, fraud, breach of the covenant of good faith and fair dealing, unjust enrichment and constructive trust, negligent misrepresentation, violation of the California unfair practices act, violation of racketeer influenced corrupt organizations act, and conspiracy to commit fraud. As remedies for these alleged claims, Turbine Intl. are seeking compensatory,
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consequential, and punitive damages along with attorney’s fees, interest, and costs. Capstone answered the cross-claims on May 7, 2020.
On June 29, 2020, Capstone filed a motion to file a First Amended Complaint that would add, among other things, a claim for enforcement of a guaranty signed by an entity related to Turbine Intl., Hispania Petroleum, S.A., and personal claims against the principals of Turbine Intl. and Hispania. That motion was granted on August 19, 2020, and the First Amended Complaint (“FAC”) is now on file. All of the new defendants have been served and have filed answers. A trial date in the matter has been set for December 12, 2022. Discovery is ongoing. The Company has not recorded any liability as of June 30, 2022 as the matter is too early to estimate.
15. Leases
The Company leases offices and manufacturing facilities under various non-cancelable operating leases expiring at various times through Fiscal 2037. All of the leases require the Company to pay maintenance, insurance and property taxes. The lease agreements for primary office and manufacturing facilities provide for rent escalation over the lease term and
During the first quarter of Fiscal 2023, the Company has entered into several rental agreements, to rent used microturbine equipment from customers where that equipment was not currently in use. The Company is then renting this equipment to end users as part of its Energy as a Service business. These agreements totaling approximately
The components of lease expense were as follows (in thousands):
Three Months Ended June 30, | ||||||
| 2022 |
| 2021 | |||
Operating lease cost | $ | |
| $ | | |
Supplemental balance sheet information related to the leases was as follows (dollars in thousands):
June 30, 2022 | March 31, 2022 | ||||
$ | | $ | | ||
Total operating lease right-of-use assets | $ | | $ | | |
$ | | $ | | ||
| |
| | ||
Total operating lease liabilities | $ | | $ | | |
Weighted average remaining lease life |
|
| |||
Weighted average discount rate | |||||
The Company records its right-of-use assets within other assets (non-current) and its operating lease liabilities within current and long-term portion of notes payable and lease obligations.
Supplemental cash flow information related to the leases was as follows (in thousands):
Three Months Ended June 30, | |||||
2022 | 2021 | ||||
Cash paid for amounts included in the measurement of lease liabilities |
| ||||
Operating cash flows from operating leases | $ | | $ | | |
Right-of-use assets obtained in exchange for lease obligations | |||||
Operating leases | $ | | $ | — | |
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Maturities of operating lease liabilities as of June 30, 2022 were as follows (in thousands):
Operating | |||
Year Ending March 31, |
| Leases | |
2023 (remainder of fiscal year) | $ | | |
2024 | | ||
2025 |
| | |
2026 |
| | |
2027 |
| | |
Thereafter | | ||
Total lease payments | $ | | |
Less: imputed interest | ( | ||
Present value of operating lease liabilities | $ | | |
16. Net Loss Per Common Share
Basic loss per common share is computed using the weighted-average number of Common Shares outstanding for the period. Diluted loss per share is also computed without consideration to potentially dilutive instruments because the Company incurred losses which would make such instruments anti-dilutive. Outstanding stock options and restricted stock units at June 30, 2022 and 2021 totaled
17. Subsequent Events
The Company has evaluated subsequent events through the filing date of this Form 10-Q with the SEC, to ensure that this filing includes all appropriate footnote disclosure of events both recognized in the financial statements as of June 30, 2022, and events which occurred subsequently but were not recognized in the financial statements. Except as described below, there were no other subsequent events which required recognition, adjustment to or disclosure in the financial statements.
On July 13, 2022 the Company entered into the Second Amendment to the AR Note Purchase Agreement with the Purchaser and the Collateral Agent, pursuant to which (i) the Purchaser and the Collateral Agent waived our breach of the Adjusted EBITDA covenant and (ii) the AR Note Purchase Agreement has been amended to, among other things, add certain new covenants, including requirements that we use our commercially reasonable best efforts to raise at least $
On August 10, 2022 the Company entered into the Third Amendment to the AR Note Purchase Agreement with the Purchaser and the Collateral Agent, pursuant to which the Purchaser and the Collateral Agent extended to August 31, 2022 the date by which the Company is obligated to enter into an engagement agreement with an investment banking professional services firm in connection with a repayment of all of the Obligations under the Notes.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 in our Annual Report on Form 10-K for Fiscal 2021. All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are approximate.
Special Note Regarding Forward-Looking Statements
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.
Our actual results may differ materially from those expressed in, or implied by, the forward-looking statements included in this Form 10-Q as a result of various factors, including, among others:
| ● | the ongoing effects of the COVID-19 pandemic on our business, financial condition, results of operations and cash flows, and the fact that many of the other factors discussed below may be amplified by the COVID-19 pandemic and the restrictions that have been instituted as a result of the pandemic; |
| ● | the availability of credit and compliance with the agreements governing our indebtedness; |
| ● | risks related to our history of net losses and ability to raise additional capital and fund future operating requirements; |
| ● | the development of the market for and customer uses of our microturbines, including our Energy as a Service solutions; |
| ● | our ability to develop new products and enhance existing products; |
| ● | our ability to produce products on a timely basis in a high quality manner; |
| ● | availability of sources for and costs of component parts; |
| ● | competition in the markets in which we operate; |
| ● | operational interruption by fire, earthquake and other events beyond our control; |
| ● | federal, state and local regulations of our markets and products; |
| ● | usage of our federal and state net operating loss carryforwards; |
| ● | the financial performance of the oil and natural gas industry and other general business, industry and economic conditions applicable to us; |
| ● | changes to international trade regulation, quotas, duties or tariffs, and sanctions caused by the changing U.S. and geopolitical environment, including the ongoing conflict between Russia and the Ukraine; |
| ● | security and cybersecurity risks related to our electronic processing of sensitive and confidential business and product data; |
| ● | the impact of the recent departure of several key management and other employees; |
| ● | the additional covenants imposed by our most recent amendment to the AR Note Purchase Agreement with Goldman Sachs; |
| ● | our ability to adequately protect our intellectual property rights; |
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| ● | the impact of pending or threatened litigation; and |
| ● | other risks and uncertainties discussed in “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for Fiscal 2022. |
Furthermore, new risks may emerge from time to time and it is not possible for us to predict all risks, nor can we assess the impact of all factors on the business or the extent to which any factor, or combination of factors, may cause actual results, performance or achievement to differ materially from those contained in any forward-looking statements. Forward-looking statements speak only as of the date of this Form 10-Q. Except as expressly required under federal securities laws and the rules and regulations of the Securities and Exchange Commission (the SEC), we do not have any obligation, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this Form 10-Q, whether as a result of new information or future events or otherwise. Readers should not place undue reliance on the forward-looking statements included in this Form 10-Q or that may be made elsewhere from time to time by us, or on our behalf. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
Overview
We are the market leader in microturbines based on the number of microturbines sold. 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 microturbine has 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. In addition to our existing microturbine products, since September 2020, we have offered additional energy conversion products in the form of Baker Hughes 5 MW, 12 MW, and 16 MW industrial gas turbines, where we will purchase and resell their product (although there was no revenue from sales of additional energy conversion products in the form of Baker Hughes industrial gas turbines for the three months ended June 30, 2022 or 2021). We are currently exploring energy conversion options for the smaller end of the power spectrum. We intend to begin to manufacture modular hybrid energy stations and lithium-ion battery energy storage systems (“BESS”) to be sold either individually or combined as part of a custom microturbine-battery storage solution. We consider our microturbines, Baker Hughes turbines, and hybrid energy stations to be a part of our Energy conversion products business line. We also added a new Energy Storage Products business line in Fiscal 2022 and there has not yet been any revenue from this business line.
Our goals for Fiscal 2023 are to:
| ● | expand our EaaS business by growing the long-term rental fleet, |
| ● | focus on growing top line revenue through our new Direct Solutions Sales team and growing the DSS subscription program, |
| ● | broaden our diverse energy products and service offerings, |
| ● | increase aftermarket margins and escalate parts availability, and |
| ● | focus on managing working capital and inventory turns. |
For the first quarter of Fiscal 2023 our net loss was $2.1 million and our basic and diluted net loss per share was $0.13, compared to $2.2 million and $0.16, respectively, for the same period of the previous fiscal year. The $0.1 million decrease in the net loss during the first quarter of Fiscal 2023 compared to the same period the previous year was primarily attributable to increased revenue from microturbine products, higher gross margins from rental revenue, and lower overhead and operating expenses, offset by the gain on extinguishment of debt resulting from the forgiveness of the PPP Loan during the first quarter of Fiscal 2022.
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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, 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.
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 EaaS business.
An overview of our direction, targets and key initiatives are as follows:
| 1. | Our Energy Conversion Products business line is driven by our industry-leading, highly efficient, low-emission, resilient microturbine energy systems offering scalable solutions in addition to a broad range of customer-tailored solutions. We target specific market verticals for these products. |
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, and microgrid 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.
The following table summarizes our percentage or product revenues by vertical markets for which we had product revenues for the periods presented:
Three Months Ended June 30, | |||||
| 2022 |
| 2021 |
| |
Energy efficiency |
| 39% | 45% | ||
Natural resources | 35% | 27% | |||
Renewable energy | 26% | 28% | |||
Energy Efficiency—CHP/CCHP
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 onsite 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 percent to 80 percent 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.
Natural Resources—Crude Oil, Natural Gas, Shale Gas Mining
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 onsite. 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 - flare gas, or associated gas, into a useable fuel to provide prime power to these sites.
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Renewable Energy
There is a growing transition to renewable energy sources and technologies on a global scale. Our microturbines run efficiently on renewable fuels such as methane and other biogases from landfills, wastewater treatment facilities and renewable natural gas. They also run efficiently on other small biogas applications like food processing plants, livestock farms and agricultural green waste operations. Microturbines can burn these renewable fuels with minimal emissions, thereby, in some cases, avoiding the imposition of penalties incurred for pollution while simultaneously producing electricity from this “free” renewable fuel source for use at the site or in the surrounding areas. Our microturbines have demonstrated effectiveness in these smaller applications and may outperform conventional combustion engines in some situations, including when the gas contains a high amount of sulfur, as the sulfur can contaminate combustion engines lube oil leading to equipment breakdowns and higher lifecycle costs.
Microgrid
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. There was no revenue in the Microgrid market vertical for the three months ended June 30, 2022 and 2021.
Critical Power Supply
Because of the potentially catastrophic consequences of system failure, momentary or otherwise, certain high demand power users, including high technology, health care and information systems facilities require higher levels of reliability in their power generation service. To meet these customer requirements, traditional solutions utilize Uninterruptible Power Supplies (“UPS”) to protect critical loads from power disturbances along with back-up diesel generators for extended outages. We offer an alternative solution that can both meet customer reliability requirements and reduce operating costs. We have seen continued development in the critical market segment as it relates to heath care facilities. There was no revenue in the Critical Power Supply market vertical for the three months ended June 30, 2022 and 2021.
Backlog
Net product orders were approximately $8.5 million and $6.7 million for the three months ended June 30, 2022 and 2021, respectively. Ending backlog was approximately $24.8 million at June 30, 2022 compared to $25.3 million at March 31, 2022. The gross book-to-bill ratio was 1.4:1 and 1.0:1 for the three months ended June 30, 2022 and 2021, respectively. Book-to-bill ratio is the ratio of new orders we received to units shipped and billed during a period.
A portion of our backlog is concentrated in the oil and gas market which may impact the overall timing of shipments or the conversion of backlog to revenue. The timing of the backlog is based on the requirement date indicated by our customers. However, based on historical experience, management expects that a significant portion of our backlog may not be shipped within the next 18 months. Additionally, the timing of shipments is subject to change based on several variables (including customer deposits, payments, availability of credit and customer delivery schedule changes), most of which are not in our control and can affect the timing of our revenue. As a result, management believes the book-to-bill ratio demonstrates the current demand for our products in the given period.
| 2. | Sales and Distribution Channels We seek out distributors that have business experience and capabilities to support our growth plans in our targeted markets. A significant portion of our revenue is derived from sales to distributors that resell our products to end users. We have a total of 66 distributors, OEMs and national accounts. In the United States and Canada, we currently have 10 distributors, OEMs and national accounts. Outside of the |
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| United States and Canada, we currently have 56 distributors, OEMs and national accounts. We continue to refine our distribution channels to address our specific targeted markets. |
Our Distributor Support System (“DSS program”) provides additional support for distributor business development activities, customer lead generation, brand awareness and tailored marketing services for each of our major geography and market vertical. This program is funded by our distributors and was developed to provide improved worldwide distributor training, sales efficiency, website development, company branding and provide funding for increased strategic marketing activities. See Note 12 – Revenue Recognition for additional discussion of revenue recognition for this program.
| 3. | Service As part of our Energy as a Service business line, we provide service primarily through our global distribution network. Together with our global distribution network we offer a comprehensive factory protection plan for a fixed fee to perform regularly scheduled and unscheduled maintenance as needed. We provide factory and on-site training to certify all personnel that are allowed to perform service on our microturbines. Factory protection plans are generally paid quarterly in advance. |
Our FPP backlog as of June 30, 2022 was approximately $79.7 million, which represents the value of the contractual agreement for FPP services that had not been earned and extends through Fiscal 2043. Our FPP backlog as of March 31, 2022 was approximately $79.1 million, which represents the value of the contractual agreement for FPP services that then had not been earned and extends through Fiscal 2042. Additionally, we offer new and remanufactured parts through our global distribution network. Service revenue in the first quarter of Fiscal 2023 was approximately 38% of total revenue.
| 4. | Product Robustness and Life Cycle Maintenance Costs We continue to invest in enhancements that relate to high performance and high reliability. An important element of our continued innovation and product strategy is to focus on the engineering of our product hardware and electronics to make them work together more effectively and deliver improved microturbine performance, reliability and low maintenance cost to our customers. |
| 5. | New Product Development Our new product development is targeted specifically to meet the needs of our selected vertical markets. We expect that our existing product platforms, the C65, C200 and C1000 Series microturbines, will be our foundational product lines for the foreseeable future. Our research and development project portfolio is centered on enhancing the features of these base products. |
During Fiscal 2022, we continued to expand and 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.
| 6. | Cost and Core Competencies We believe that the core competencies of our products are air-bearing technology, advanced combustion technology and sophisticated power electronics to form efficient and ultra-low emission electricity and cooling and heat production systems. Our core intellectual property is contained within our air-bearing technology. We continue to review avenues for cost reduction by sourcing to the best value supply chain option. In order to utilize manufacturing facilities and technology more effectively, we are focused on continuous improvements in manufacturing processes. Additionally, considerable effort is being directed to manufacturing cost reduction through process improvement, product design, advanced manufacturing technology, supply management and logistics. Management expects to be able to leverage our costs as product volumes increase. |
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 time. 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, single source suppliers with long lead times may be more challenging to transition to another supplier. We regularly reassess the adequacy and abilities of our suppliers to meet our future needs.
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We believe that effective execution in each of these key areas will be necessary to leverage Capstone’s promising technology and early market leadership into achieving positive cash flow with growing market presence and improving financial performance.
We currently occupy warehouse and office space in Van Nuys, California with a production capacity of approximately 2,000 units per year, depending on product mix.
Critical Accounting Policies and Estimates
The preparation of our condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Management believes the most complex and sensitive judgments, because of their significance to the condensed consolidated financial statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Actual results could differ from management’s estimates. Management believes the critical accounting policies listed below affect our more significant accounting judgments and estimates used in the preparation of the condensed consolidated financial statements. These policies are described in greater detail in our Annual Report on Form 10-K for Fiscal 2022 and continue to include the following areas:
| ● | Revenue recognition; |
| ● | Inventory write-downs and classification of inventories; |
| ● | Estimates of warranty obligations; |
| ● | Accounts receivable allowances; |
| ● | Deferred tax assets and valuation allowance; |
| ● | Impairment of long-lived assets, including intangible assets with finite lives; and |
| ● | Stock-based compensation expense. |
Results of Operations
Three Months Ended June 30, 2022 and 2021
The following table summarizes our revenue by geographic markets (amounts in millions):
Three Months Ended June 30, | |||||||
2022 | 2021 | ||||||
United States and Canada | $ | 12.3 | $ | 7.4 | |||
Europe and Russia | 4.0 | 4.0 | |||||
Latin America | 1.0 | 2.4 | |||||
Asia and Australia | 1.2 | 1.8 | |||||
Middle East and Africa | 0.2 | 0.5 | |||||
Total | $ | 18.7 | $ | 16.1 | |||
Revenue for the three months ended June 30, 2022 increased $2.6 million to $18.7 million from $16.1 million for the three months ended June 30, 2021. The $2.6 million increase was primarily driven by a $4.9 million increase in the United States and Canada, offset by decreases of $1.4 million in the Latin America, $0.6 million in the Asia and Australia and $0.3 million in the Middle East and Africa. The increase in the United States and Canada was primarily attributable to an increase in our EaaS long-term rental services and product shipments into the natural resources vertical markets compared to the same period last year. The decrease in Latin America, Asia and Australia, and Middle East and Africa was primarily due to decreases in product shipments into the energy efficiency and renewable energy vertical markets compared to the same period last year.
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The following table summarizes our revenue (revenue amounts in millions):
Three Months Ended June 30, | ||||||||||||||
2022 | 2021 | |||||||||||||
| Revenue |
| Megawatts |
| Units |
| Revenue |
| Megawatts |
| Units | |||
Microturbine Product | $ | 9.0 |
| 8.7 |
| 52 | $ | 8.3 |
| 7.4 |
| 48 | ||
Accessories |
| 0.2 |
|
| 0.1 |
| ||||||||
Total Product and Accessories |
| 9.2 |
|
| 8.4 |
| ||||||||
Parts, Service and Rentals | 9.5 | 7.7 | ||||||||||||
Total | $ | 18.7 |
| $ | 16.1 |
| ||||||||
For the three months ended June 30, 2022, revenue from microturbine products and accessories increased $0.8 million, or 10%, to $9.2 million from $8.4 million for the three months ended June 30, 2021. The $0.8 million increase was primarily driven by an increase in megawatts and units shipped during the three months ended June 30, 2022 compared to the same period last year. Megawatts shipped were 8.7 megawatts and 7.4 megawatts during the three months ended June 30, 2022 and 2021, respectively. Average revenue per megawatt shipped was approximately $1.0 million and $1.1 million during the three months ended June 30, 2022 and 2021, 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.
Parts, service and rentals revenue (which are part of our Energy as a Service business line and includes revenue from our parts shipments, FPP contracts, rentals, Distributor Support Subscription fees, and other service revenue) increased $1.8 million, or 23%, to $9.5 million for three months ended June 30, 2022 from $7.7 million for the three months ended June 30, 2021. The $1.8 million increase was primarily driven by an increase in rental revenue as a result of our EaaS business plan during the three months ended June 30, 2022 compared to the same period last year.
Sales to Cal Microturbine and E-Finity accounted for 24% and 11% of our revenue for the three months ended June 30, 2022, respectively. Sales to Horizon Power Systems and E-Finity accounted for 11% and 10% of our revenue for the three months ended June 30, 2021, respectively.
Gross Margin 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 margin was $4.7 million, or 25% of revenue, for the three months ended June 30, 2022 compared to a gross margin of $2.6 million, or 17% of revenue, for the three months ended June 30, 2021. The increase of $2.1 million was primarily a result of $2.3 million higher direct material costs margin, partially offset by an increase in our production and service center labor and overhead expense of $0.1 million and higher warranty expense of $0.1 million.
Direct material costs margin, calculated as total revenue less our direct material costs, increased $2.3 million during the first quarter of Fiscal 2023 compared to the first quarter of Fiscal 2022 primarily because of higher service margin from rental revenue.
Warranty expense is a combination of a standard warranty provision recorded at the time revenue is recognized and changes, if any, in estimates for reliability repair programs. Reliability repair programs are based upon estimates that are recorded in the period that new information becomes available, including design changes, cost of repair and product enhancements, which can include both in-warranty and out-of-warranty systems. The increase in warranty expense of $0.1 million reflects warranty accommodations and timing of warranty claims in the current period. During the three months ended June 30, 2021, we shipped approximately $2.0 million of parts to replace high risk failure parts in some of our fielded units due to a previously identified supplier defect and recorded it against the $4.9 million reserve established during the three months ended March 31, 2021.
Production and service center labor and overhead expense increased by $0.1 million primarily because of increases of approximately $0.7 million in facilities costs, offset by decreases of $0.3 million in labor costs and $0.3 million in allocated costs for shared-services facilities expense, primarily as a result of lower costs from actions taken in our cost reduction plan in the three months ended June 30, 2022.
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The following table summarizes our gross margin (in millions except percentages):
Three Months Ended June 30, | |||||||
| 2022 |
| 2021 | ||||
Gross Margin | |||||||
Product and accessories | $ | 0.3 | $ | (0.6) | |||
As a percentage of product and accessories revenue |
| 3 | % |
| (7) | % | |
|
| ||||||
Parts, service and rentals | $ | 4.4 | $ | 3.2 | |||
As a percentage of parts, service and rentals revenue |
| 47 | % |
| 42 | % | |
|
| ||||||
Total Gross Margin | $ | 4.7 |
| $ | 2.6 | ||
As a percentage of total revenue | 25 | % | 17 | % | |||
The increase in product and accessories gross margin was primarily the result of lower overhead costs in the three months ended June 30, 2022 due to cost savings from our cost reduction plan.
Product and accessories gross margin as a percentage of product and accessories revenue increased to 3% during the three months ended June 30, 2022, from (7)% during the three months ended June 30, 2021, primarily driven by product price increases and lower overhead costs in the three months ended June 30, 2022. Parts, service and rentals gross margin as a percentage of parts and service revenue increased to 47% during the three months ended June 30, 2022, compared to 42% during the three months ended June 30, 2021 primarily as a result of lower overhead costs and higher margin rental revenue in the three months ended June 30, 2022.
Research and Development (“RD”) Expenses decreased $0.4 million, or 44%, to $0.5 million from $0.9 million as a result of lower costs from actions taken in our cost reduction plan in the three months ended June 30, 2022.
Selling, General, and Administrative (“SGA”) Expenses decreased $0.4 million, or 8%, to $4.9 million from $5.3 million primarily as a result of lower costs from actions taken in our cost reduction plan in the three months ended June 30, 2022.
Interest Expense for the three months ended June 30, 2022 and 2021 was $1.4 million and $1.2 million, respectively. See Liquidity and Capital Resources below for additional discussion on our interest expense.
Gain on Extinguishment of Debt of approximately $1.9 million during the three months ended June 30, 2021 was the result of the forgiveness of the PPP Loan. See Note 10 – Term Note Payable.
Other Income for the three months ended June 30, 2021 includes the payment to the Company of $0.6 million of PPP Loan proceeds previously repaid in accordance with the Fourth Amendment to the Note Purchase Agreement between the Company and Goldman Sachs Specialty Lending Group, L.P. See Note 10 – Term Note Payable.
Liquidity and Capital Resources
Cash Flows
Our cash requirements depend on many factors, including the execution of our business strategy and plan. We have invested our cash in institutional funds that invest in high quality short-term money market instruments to provide liquidity for operations and for capital preservation. Our cash and cash equivalents balances decreased $5.6 million during the three months ended June 30, 2022, primarily due to higher accounts payable payments to vendors and an increase in inventory to support our revenue growth, partially offset by improved collections of accounts receivable. Cash used in investing activities was primarily to continue the expansion of the rental fleet, which was partially offset by cash used in financing activities related to the repayment of our debt.
Operating Activities During the three months ended June 30, 2022, we used $3.4 million in cash in our operating activities, which consisted of a net loss for the period of $2.1 million, cash used for working capital of $2.8 million, partially offset by non-cash adjustments (primarily depreciation and amortization, inventory provision, warranty provision and stock based compensation) of $1.5 million. During the three months ended June 30, 2021, we used $10.1 million in cash in our operating activities, which consisted of a net loss for the period of $2.2 million, cash used for working capital
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of $7.1 million and non-cash adjustments (primarily gain on extinguishment of debt, depreciation and amortization, inventory provision, warranty provision and stock based compensation) of $0.8 million.
The following is a summary of the significant sources (uses) of cash from operating activities (amounts in thousands):
Three Months Ended June 30, |
| ||||||
| 2022 |
| 2021 |
| |||
Net loss |
| $ | (2,059) |
| $ | (2,182) | |
Non-cash operating activities(1) |
| 1,531 |
| (837) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable |
| 653 |
| (3,278) | |||
Inventories |
| (746) |
| (3,341) | |||
Accounts payable and accrued expenses |
| (3,112) |
| 2,324 | |||
Prepaid expenses, other current assets and other assets | (253) | (107) | |||||
Other changes in operating assets and liabilities |
| 544 |
| (2,720) | |||
Net cash provided by (used) in operating activities | $ | (3,442) | $ | (10,141) | |||
| (1) | Represents change in gain on extinguishment of debt, warranty provision, depreciation and amortization, stock-based compensation expense, inventory provision and accounts receivable allowances. |
The change in non-cash operating activities during the three months ended June 30, 2022, compared to the same period the previous year was primarily driven by the gain on extinguishment of debt resulting from the forgiveness of the PPP Loan during the first quarter of Fiscal 2022. The change in accounts receivable was primarily the result of improved collections during the three months ended June 30, 2022 compared to the same period in the previous fiscal year. The change in inventory was primarily the result of less inventory purchases during the three months ended June 30, 2022, compared to the three months ended June 30, 2021. The change in accounts payable and accrued expenses was primarily due to higher accounts payable payments to vendors during the three months ended June 30, 2022 compared to the same period the previous fiscal year. The change in other operating assets and liabilities during the three months ended June 30, 2022 compared to the same period in the previous fiscal year, was primarily the result of increase in our deferred revenue.
Investing Activities Net cash used in investing activities of $1.9 million and $1.2 million during the three months ended June 30, 2022 and 2021, respectively, was primarily related to the additions to our rental fleet of approximately $1.8 million and $1.2 million, respectively.
Financing Activities During the three months ended June 30, 2022, we used cash of approximately $0.3 million in financing activities compared to cash generated during the three months ended June 30, 2021 of approximately $11.0 million. The cash used in financing activities during the three months ended June 30, 2022, were primarily due to the repayment of notes payable and lease obligations. The cash generated from financing activities during the three months ended June 30, 2021, were primarily the result of net proceeds from the June 2021 Common Stock offering and proceeds from the at-the-market offering program described below.
At-the-market offerings
On June 7, 2018, we entered into a sales agreement with H.C. Wainwright Co., LLC (the “Sales Agreement”) with respect to an at-the-market offering program (the “ATM Program”) pursuant to which we may offer and sell, from time to time at our sole discretion, shares of our Common Stock, having an aggregate offering price of up to $25.0 million. We will set the parameters for sales of the shares, including the number to be sold, the time period during which sales are requested to be made, any limitation on the number that may be sold in one trading day and any minimum price below which sales may not be made. On July 15, 2020, we entered into an amendment to the Sales Agreement, which modified the Sales Agreement to, among other things, amend the termination provisions of the Agreement and amend the maximum amount of shares of our Common Stock that we may offer and sell through or to H.C. Wainwright Co., LLC from time to time under the ATM Program. On March 19, 2021, we entered into a second amendment to the Sales Agreement, which modified the Sales Agreement to, among other things, reflect our filing of a new Registration Statement on Form S-3 with the SEC on March 22, 2021 and set the maximum amount of shares of our Common Stock that we may offer and sell through or to H.C. Wainwright at $50 million from the date of the amendment to the Sales Agreement, subject to certain limitations set forth in the amendment. No shares of our Common Stock under the at-the-market offering program were issued during the three months ended June 30, 2022. As of June 30, 2022, approximately $49.3 million remained available
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for issuance with respect to this ATM Program. However, following the filing of our Annual Report on Form 10-K on July 13, 2022, we are now subject to General Instruction I.B.6 of Form S-3, which limits the amounts that we may sell under our registration statement on Form S-3.
Common Stock Offering
On June 17, 2021, we entered into an amended and restated underwriting agreement (the “Underwriting Agreement”) with H.C. Wainwright Co., LLC (the “Underwriter”) whereby we agreed to sell to the Underwriter, and the Underwriter agreed to purchase, in a firm commitment underwritten public offering 1,904,763 shares (the “Shares”) of our common stock, $0.001 par value per share (the “Offering”). The offering price to the public in the Offering was $5.25 per share of Common Stock, and the Underwriter agreed to purchase the Shares from the Company pursuant to the Underwriting Agreement at a price of $4.91 per share, representing an underwriting discount of 6.5%. Pursuant to the Underwriting Agreement, we also granted the Underwriter an option to purchase, for a period of 30 days from the date of the Underwriting Agreement, up to an additional 285,714 shares of Common Stock (the “Option Shares”). On June 21, 2021, the Underwriter exercised the option in full. The Offering closed on June 22, 2021, and we received net proceeds of $10.5 million after deducting $1.0 million underwriting discounts, commissions and offering expenses paid by the Company.
Warrants
Goldman Warrant
On February 4, 2019, we sold to Goldman Sachs Co. LLC (the “Holder”), a Purchase Warrant for shares of our Common Stock (the “Warrant”) pursuant to which the Holder may purchase shares of our Common Stock in an aggregate amount of up to 404,634 shares (the “Warrant Shares”). Our Common Stock and warrant transactions during Fiscal 2021 triggered certain anti-dilution provisions in the warrants outstanding. As of June 30, 2022, the Holder may purchase shares of our Common Stock in an aggregate amount of up to 463,067 shares at an exercise price of $2.61 per share.
Goldman “2020 Warrant”
On October 1, 2020, we entered into an Amendment No. 3 to the Purchase Warrant for shares of our Common Stock (the “Amendment No. 3”) with Special Situations Investing Group II, LLC (as successor in interest to Goldman Sachs Co. LLC) (the “Warrant Holder”) that amended that certain Purchase Warrant for shares of our Common Stock originally issued by the Company to Goldman Sachs Co. LLC, dated February 4, 2019, as amended (the “Original Warrant”). As of June 30, 2022, the holder may purchase shares of our Common Stock in an aggregate amount of up to 291,295 shares at an exercise price of $4.76 per share.
September 2019 Pre-Funded and Series D Warrants
On September 4, 2019, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional and accredited investors pursuant to which we agreed to issue and sell in a registered direct offering (the “Registered Direct Offering”) an aggregate of 580,000 shares of our Common Stock at a negotiated purchase price of $5.00 per share, and pre-funded warrants to purchase up to an aggregate of 440,000 shares of our Common Stock at a negotiated purchase price of $5.00 per Pre-Funded Warrant, for aggregate gross proceeds of approximately $5.1 million (580,000 shares of common stock plus 440,000 pre-funded warrants at a $5.00 per share purchase price), before deducting placement agent fees and other offering expenses.
In a concurrent private placement, we agreed to issue to the purchasers warrants to purchase 765,000 shares of Common Stock, which represent 75% of the number of shares of Common Stock and shares underlying the Pre-Funded Warrants purchased in the Registered Direct Offering, pursuant to the Securities Purchase Agreement. The Common Warrants are exercisable for shares of Common Stock at an initial exercise price of $6.12 per share for a period of five years, starting on April 2, 2020 and expiring on April 2, 2025. In January 2021, three warrant holders exercised their rights to the warrant agreement to exercise on a cashless basis 690,000 Series D warrants at an exercise price of $6.12 per share under the warrant agreement. In accordance with terms of the warrant agreement, after taking into account the shares withheld to satisfy the cashless exercise option, we issued 352,279 shares of Common Stock. As of June 30, 2022, there were 75,000 Series D warrants outstanding at an exercise price of $6.12 per share.
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There were no stock options exercised during the three months ended June 30, 2022 and 2021. Repurchases of shares of our Common Stock for employee taxes due on vesting of restricted stock units, net of employee stock purchases, resulted in approximately $36,000 and $29,000 of net cash used during the three months ended June 30, 2022 and 2021, respectively.
Three-year Term Note On February 4, 2019, we entered into a Note Purchase Agreement, by and among us, certain subsidiaries of us as guarantors, Goldman Sachs Specialty Lending Holdings, Inc., as collateral agent and any other Purchasers party thereto from time to time, in connection with the sale of senior secured notes of us in a private placement exempt from registration under the Securities Act of 1933, as amended. Under the Note Purchase Agreement, we sold to the Purchaser $30.0 million aggregate principal amount of senior secured notes (the “Notes”). The first interest payment on the Notes was on March 31, 2019. On October 1, 2020, pursuant to AR Note Purchase Agreement, we increased the amount of borrowing under the Notes by $20.0 million to $50.0 million, and all outstanding Notes bear interest at the Adjusted (London Interbank Offer) LIBO Rate (as defined in the AR Note Purchase Agreement) plus 8.75% per annum. The Notes do not amortize and the entire principal balance is due in a single payment on the maturity date. As of March 31, 2022, $51.0 million in borrowings were outstanding under the Notes, which includes the accrual for an exit fee to be paid at maturity or upon pre-payment. Pursuant to the First Amendment to the AR Note Purchase dated as of May 13, 2021, the minimum consolidated liquidity requirement increased from $9.0 million to $12.0 million for the period from the Amendment Date to March 31, 2022, and $9.0 million thereafter. The financial covenants of the AR Note Purchase Agreement require the Company not to exceed specified levels of Adjusted EBITDA losses relative to its financial model, beginning with the fiscal quarter ending September 30, 2021. As of March 31, 2022, we were not in compliance with the Adjusted EBITDA covenant contained in the AR Note Purchase Agreement and did not cure such non-compliance by prepaying the Notes. As a result, we were in breach of the Adjusted EBITDA covenant as of May 27, 2022. On July 13, 2022 we entered into the AR NPA Second Amendment with the Purchaser and the Collateral Agent, pursuant to which (i) the Purchaser and the Collateral Agent waived our breach of the Adjusted EBITDA covenant and (ii) the AR Note Purchase Agreement has been amended to, among other things, add certain new covenants, including requirements that we use our commercially reasonable best efforts to raise at least $10 million through a sale of our common stock by September 14, 2022 and refinance the Notes by October 1, 2022. As of June 30, 2022, we are in compliance with the other covenants contained in the AR Note Purchase Agreement, as amended by AR NPA Second Amendment.
Paycheck Protection Program Loan On April 15, 2020, we applied for an unsecured PPP Loan in the principal amount of $2,610,200 under the Small Business Administration Paycheck Protection Program enabled by the Coronavirus Aid, Relief and Economic Security Act of 2020. On April 24, 2020, we entered into a promissory note with Western Alliance Bank. The Company received the full amount of the PPP Loan on April 24, 2020. In accordance with the requirements of the CARES Act, we used the proceeds from the PPP Loan to support fixed costs such as payroll costs, rent and utilities. On May 13, 2020, we repaid $660,200 of the PPP Loan in accordance with the Fourth Amendment to the Note Purchase Agreement between the Company and Goldman Sachs Specialty Lending Group, L.P.
The advance under the PPP Loan bore interest at a rate per annum of 1%.
In February 2021, the Company applied for forgiveness in full of the original balance of the PPP loan and the loan was forgiven in full on June 30, 2021. The Company received a refund of $660,200 and recorded these amounts within other income on the Company’s Condensed Consolidated Statements of Operations. Management accounted for forgiveness on the PPP Loan in accordance with ASC 470 and recorded a gain on extinguishment of debt on its condensed consolidated financial statements and related footnote disclosures, provided forgiveness be approved by the SBA.
Working Capital and Other Operating Assets and Liabilities Cash used for working capital was $2.8 million during the three months ended June 30, 2022, a decrease of $4.3 million from the cash used for working capital of $7.1 million during the three months ended June 30, 2021. These decreases in cash used for working capital and other operating assets and liabilities were primarily due to improved collections of accounts receivable, lower inventory purchases and lower warranty claims. Additionally, the change in accounts payable and accrued expenses was primarily due to increased accounts payable payments to vendors.
Evaluation of Ability to Maintain Current Level of Operations In connection with the preparation of these condensed consolidated financial statements for the three months ended June 30, 2022, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about our ability to meet obligations as they became due over the next twelve months from the date of issuance of our first quarter of Fiscal 2023 interim condensed consolidated financial statements. Management assessed that there were such conditions and events, including a history of recurring operating losses, negative cash flows from operating activities, the continued negative
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impact by the volatility of the global oil and gas markets, a strong U.S. dollar in certain markets making our products more expensive in such markets, the COVID-19 pandemic, the Russian invasion of Ukraine, and ongoing global geopolitical tensions. We incurred a net loss of $2.1 million and used net cash in operating activities of $3.4 million for the three months ended June 30, 2022. Our net loss improved during the three months ended June 30, 2022 compared to the three months ended June 30, 2021, primarily attributable to increased revenue from microturbine products, higher gross margins from rental revenue, and lower overhead and operating expenses, offset by the gain on extinguishment of debt resulting from the forgiveness of the PPP Loan during the first quarter of Fiscal 2022. Cash used for working capital requirements during the quarter were primarily for increases in inventory to grow our long-term rental fleet, as well as increased accounts payable payments to vendors. As of June 30, 2022, we had cash and cash equivalents of $16.9 million and outstanding debt of $51.0 million at fair value (see Note 10 – Term Note Payable in the Notes to the Condensed Consolidated Financial Statements for further discussion of the outstanding debt), and inventory purchase commitments of approximately $48.8 million through Fiscal 2023. Certain inventory delivery dates and related payments are not firmly scheduled; therefore, amounts under these firm purchase commitments will be payable upon the receipt of the related inventories and consequently may extend beyond 2023.
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 capital requirements may vary materially from those now planned. The amount of capital that we will need in the future will require us to achieve significantly increased sales volume which is dependent on many factors, including:
| ● | the continuing impact of the COVID-19 pandemic on the global economy and specifically on oil and gas markets; |
| ● | the market acceptance of our products and services; |
| ● | our business, product and capital expenditure plans; |
| ● | capital improvements to new and existing facilities; |
| ● | our competitors’ response to our products and services; |
| ● | our relationships with customers, distributors, dealers and project resellers; and |
| ● | our customers’ ability to afford and/or finance our products. |
Our accounts receivable balance, net of allowances, was $24.2 million and $24.7 million as of June 30, 2022 and March 31, 2022, respectively. Days sales outstanding in accounts receivable (“DSO”) decreased by 27 days to 123 days as of June 30, 2022 compared to 150 days as of March 31, 2022, primarily due to an increase in accounts receivable collections as our Distributors saw improved cash flows as the COVID-19 pandemic subsides. In the Energy Efficiency market vertical we sell to end users that have been significantly, economically impacted by the pandemic, such as in the Hospitality and Health Care industries. Additionally, the COVID-19 Pandemic heavily impacted our natural resources market vertical, where we primarily sell to Oil Gas end users. While oil prices have rebounded above $100 per barrel, we have not seen a corresponding rebound in capital expenditures or spending activity.
No assurance can be given that future bad debt expense will not increase above current operating levels. Increased bad debt 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 may be severely restricted or made very expensive at a time when we need, or would like, to do so, which could have 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.
Based on our current operating plan, management anticipates that, given current working capital levels, current financial projections and funds received under debt agreements as further described in Note 10 of the financial statements, and funds received under offerings of Common Stock as further described in Note 8 of the financial statements, we will be able to meet our financial obligations as they become due over the twelve months from the date of issuance of our first quarter of Fiscal 2023 interim condensed consolidated financial statements.
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New Accounting Pronouncements
Refer to Note 3 – Recently Issued Accounting Pronouncements in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding new accounting standards.
Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Interim Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and our Interim Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective as of June 30, 2022. The term “disclosure controls and procedures” means controls and other procedures of ours that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within required time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent limitations of the Effectiveness of Internal Control
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Refer to Note 14 – Commitments and Contingencies — Legal Matters, in the Notes to Condensed Consolidated Financial Statements (Part I, Item 1 of this Form 10-Q) for information regarding legal proceedings in which we are involved. From time-to-time, we are involved in other pending and threatened litigation in the normal course of business in which claims for monetary damages are asserted. In the opinion of management, the ultimate liability, if any, arising from such pending or threatened litigation is not expected to have a material effect on our results of operations, liquidity, or financial position.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” section contained in the Company’s Annual Report on Form 10-K for the year ended March 31, 2022, together with the cautionary statement under the caption “Special Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q. These described risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
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Our success depends in significant part upon the continuing service of management and key employees, and several key management and other employees have recently left Capstone.
In March 2022, we implemented an expense reduction plan, which included furloughs, employment terminations, pay cuts and the elimination of various management positions. We also recently suffered departures of other key personnel, including in accounting/finance and information technology. This has placed additional strain on remaining personnel, and we do not expect to replace all of the departed employees, so the increased burdens on the remaining personnel are expected to continue for the foreseeable future. Accordingly, our recent losses of key employees could adversely impact our business, financial condition and results of operations.
SEC regulations limit the amount of funds we can raise during any 12-month period pursuant to our shelf registration statement on Form S-3.
SEC regulations limit the amount that companies with a public float of less than $75 million may raise during any 12-month period pursuant to a shelf registration statement on Form S-3. We are currently subject to General Instruction I.B.6 to Form S-3, or the Baby Shelf Rule. As of the filing of our Annual Report on Form 10-K on July 13, 2022, we are subject to the Baby Shelf Rule. Under the Baby Shelf Rule the amount of funds we can raise through primary public offerings of securities in any 12-month period using a registration statement on Form S-3 pursuant to the Baby Shelf Rule is limited to one-third of the aggregate market value of the shares of our common stock held by non-affiliates of the Company. Therefore, we will be limited in the amount of proceeds we are able to raise by selling shares of our common stock using our Form S-3 until such time as our public float exceeds $75 million. Prior to such time as our public float exceeds $75 million, if our public float decreases, the amount of securities we may sell under our Form S-3 shelf registration statement will also decrease. Even if sufficient funding is available, there can be no assurance that it will be available on terms acceptable to us or our stockholders. Furthermore, if we are required or choose to file a new registration statement on a form other than Form S-3, we may incur additional costs and be subject to delays due to review by the SEC staff.
Item 5. Other Information
Third Amendment to the AR Purchase Agreement
On August 10, 2022, we entered into the Third Amendment to the AR Note Purchase Agreement with the Purchaser and the Collateral Agent, pursuant to which the Purchaser and the Collateral Agent extended to August 31, 2022 the date by which we are obligated to enter into an engagement agreement with an investment banking professional services firm in connection with a repayment of all of the Obligations under the Notes.
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Item 6. Exhibits
Exhibit |
| Description |
3.1 | ||
3.2 | ||
4.1 | ||
4.2 | ||
4.3 | Capstone Green Energy Corporation 2017 Equity Incentive Plan, as amended through August 27, 2021 (a) | |
4.4 | ||
10.1 | ||
10.2 | ||
10.3 | ||
31.1 | ||
31.2 | ||
32 | ||
101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document | |
101.SCH | XBRL Schema Document | |
101.CAL | XBRL Calculation Linkbase Document | |
101.LAB | XBRL Label Linkbase Document | |
101.PRE | XBRL Presentation Linkbase Document | |
101.DEF | XBRL Definition Linkbase Document | |
104 | The cover page from Capstone Green Energy Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL and contained in Exhibit 101 |
(a) | Incorporated by reference to Capstone Green Energy Corporation’s Quarterly report on Form 10-Q, filed on November 10, 2021 (File No. 001-15957) |
(b) | Incorporated by reference to Capstone Green Energy Corporation’s Quarterly report on Form 10-Q, filed on August 11, 2021 (File No. 001-15957) |
(c) | Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on October 5, 2020 (File No. 001-15957) |
(d) | Incorporated by reference to Capstone Turbine Corporation’s Current Report on Form 8-K, filed on May 14, 2021 (File No. 001-15957) |
(e) | Incorporated by reference to Capstone Green Energy Corporation’s Annual report on Form 10-K, filed on July 13, 2022 (File No. 001-15957) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CAPSTONE GREEN ENERGY CORPORATION | ||
By: | /s/ SCOTT W. ROBINSON | |
Scott W. Robinson | ||
Interim Chief Financial Officer | ||
(Principal Financial Officer) | ||
Date: August 11, 2022 | ||
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