−Removed: Capstone Turbine Corporation (“Capstone”, “We”
−Removed: or the “Company”) develops, manufactures, markets and services microturbine technology solutions for use in stationary distributed power generation and distribution networks applications, including energy efficient cogeneration combined heat and power (“CHP”), integrated combined heat and power (“ICHP”), and combined cooling, heat and power (“CCHP”), as well as renewable energy, natural resources, and critical power supply applications.
+Added: Capstone Green Energy Corporation (“Capstone”, “We” or the “Company”) is a provider of customized microgrid solutions and on-site energy technology systems focused on helping customers around the globe meet their environmental, energy savings, and resiliency goals.
+Added: In April 2021, we added additional products to our portfolio and shifted our focus to four key business lines.
+Added: Our Energy Conversion Products business line is driven by the Company’s industry-leading, highly efficient, low-emission, resilient microturbine energy systems offering scalable solutions in addition to a broad range of customer-tailored solutions, including hybrid energy systems and larger frame industrial turbines.
+Added: Through our Energy as a Service business line, we offer rental solutions utilizing our microturbine energy systems and battery storage systems, comprehensive factory protection plan service contracts that guarantee life-cycle costs, as well as aftermarket spare parts.
+Added: Our two emerging business lines are Energy Storage Products and Hydrogen Energy Solutions.
+Added: Our Energy Storage Products business line designs and installs microgrid storage systems creating customized solutions using a combination of battery technologies and monitoring software.
+Added: Through our Hydrogen Energy Solutions business line, we offer customers a variety of hydrogen products, including the Company’s microturbine energy systems.
+Added: Because these are new offerings, Energy Storage Products and Hydrogen Energy Solutions revenue has been immaterial to date.
+Added: We develop, manufacture, market and service microturbine technology solutions for use in stationary distributed power generation and distribution networks applications, including energy efficient cogeneration combined heat and power (“CHP”), integrated combined heat and power (“ICHP”), and combined cooling, heat and power (“CCHP”), as well as renewable energy, natural resources, and critical power supply applications.
Microturbines allow customers to produce power on-site in parallel with the electric grid or stand-alone when no utility grid is available.
−Removed: Several technologies are used to provide “on-site power generation”
−Removed: (also called “distributed generation”) such as reciprocating engines, solar photovoltaic power (“PV”), wind turbines and fuel cells.
−Removed: Our microturbines can be interconnected to other distributed energy resources to form “microgrids”
−Removed: (also called “distribution networks”) located within a specific geographic area and provide power to a group of buildings.
−Removed: For customers who do not have access to the electric utility grid, microturbines provide clean, on site power with fewer scheduled maintenance intervals and greater fuel flexibility than competing technologies.
+Added: Several technologies are used to provide “on-site power generation” (also called “distributed generation”) such as reciprocating engine (also known as internal combustion engines), solar photovoltaic power (“PV”), wind turbines and fuel cells.
+Added: 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.
+Added: For customers that do not have access to the electric utility grid, microturbines provide clean, on site power with fewer scheduled maintenance intervals and greater fuel flexibility than competing technologies.
For customers with access to the electric grid, microturbines provide an additional source of continuous on-site power generation, thereby providing additional reliability and potential cost savings compared to the local utility.
With our stand-alone feature, customers can produce their own energy in the event of a utility power outage and can use microturbines as their primary source of power for extended periods of time unlike traditional diesel standby generator sets.
−Removed: Because our microturbines also produce clean, usable heat energy, they provide economic advantages to customers who can benefit from the use of hot water, chilled water, air conditioning and steam.
−Removed: In addition, our microturbines have been used as battery charging generators for hybrid electric vehicles and to provide power to a vessel’s electrical loads in marine applications.
+Added: Because our microturbines also produce clean, usable heat energy, they provide economic advantages to customers that can benefit from the use of hot water, chilled water, air conditioning and steam.
+Added: In addition, our microturbines have been used as battery charging generators for hybrid electric vehicles and to provide power to a vessel’s electrical loads in marine applications.
Our microturbines are sold, installed and serviced primarily through our global distribution network.
−Removed: Together with our distributors, we offer new and remanufactured parts as well as a comprehensive Factory Protection Plan (“FPP”) through long-term service agreements ranging from 5 to 20 years.
−Removed: As part of our long-term growth strategy, in January 2020, Capstone divided its sales and marketing team into two separate organizations.
−Removed: One stand-alone organization will remain focused on developing and managing the existing worldwide distribution channel and will lead all marketing and advertising activities as we continue building the Company into a strong and recognizable worldwide brand.
−Removed: The second stand-alone organization is responsible for growing the Company's national account business and long-term rental fleet.
−Removed: Additionally, this team will be responsible for business development, licensing, and new product partnerships.
−Removed: We will also continue to expand with new fuels, such as hydrogen and further growing our renewable market segment participation.
−Removed: We believe this new sales strategy, when combined with a positive adjusted EBITDA, will better enable us to capture more market share with large, global customers, where we see greater potential at dozens of their facilities worldwide.
−Removed: Our existing distribution network remains our worldwide feet-on-the-ground and our local presence, while the internal salesforce will build strong, long-term relationships with larger, more diverse customers.
−Removed: We offer microturbines designed for commercial, industrial and onshore and offshore oil and gas applications with product offerings ranging from 30 kilowatts (“kW”) to one megawatt (“MW”) in electric power output, which can be deployed in arrays up to 10 MWs.
−Removed: Our microturbines combine patented air bearing technology, advanced combustion technology and sophisticated power electronics to form efficient and ultra-low emission electricity and cooling and heat production systems.
+Added: Together with our distributors, we offer new and remanufactured parts as well as a comprehensive factory protection plan through long-term service agreements ranging from 5 to 20 years.
+Added: We also offer our microturbines for rent through our long-term rental program.
+Added: In addition to our existing microturbine products, we offer 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.
+Added: The Company is currently exploring energy conversion options for the smaller end of the power spectrum.
+Added: We offer microturbines designed for commercial, industrial and onshore and offshore oil and gas applications with product offerings ranging from 30 kilowatts (“kW”) to one megawatt (“MW”) in electric power output, which can be deployed in arrays up to 10 MWs.
+Added: Our microturbines combine patented air bearing technology, advanced combustion technology, sophisticated power electronics, and advanced software controls to form efficient and ultra-low emission electricity and cooling and heat production systems.
Because of our air bearing technology, our microturbines do not require lube oil, grease, or traditional coolants.
This means they do not require routine maintenance to change and dispose of lube oil, grease, or other liquid lubricants, as do the most common reciprocating engines.
−Removed: We also manufacture and supply controllers that provide complete automated system control, including load following and custom logic to protect against expensive local utility demand charges.
−Removed: These controllers include the legacy Capstone Logic Controllers (CLC) and the new Capstone PowerSync family of controllers.
+Added: We also manufacture and supply controllers that provide complete automated system control, including electrical load following and custom logic to protect against expensive local utility demand charges.
+Added: These controllers include the legacy Capstone Logic Controllers (CLC) and the new Capstone PowerSync family of system controllers.
+Added: Beginning Fiscal 2022 we intend to begin manufacturing 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.
Our microturbines can be fueled by various sources, including natural gas, propane, butane, various sour gases, renewable fuels such as renewable natural gas, landfill gas, biogas or digester gas, kerosene, diesel and biodiesel.
−Removed: microturbines are available with integrated unit mounted heat exchangers, making them easy to engineer and install in applications where hot water, chilled water, air conditioning and steam is desired.
−Removed: We sell microturbine units, components, controllers and accessories, as well as offer long-term microturbine rentals.
−Removed: We also remanufacture microturbine engines and provide new and remanufactured aftermarket spares parts, accessories, services, and comprehensive long-term service contracts from 5 to 20 years.
−Removed: Our microturbines are sold primarily through distributors and Original Equipment Manufacturers (“OEMs”).
+Added: Our microturbines are available with integrated unit mounted heat exchangers, making them easy to engineer and install in applications where hot water, chilled water, air conditioning and steam is desired.
+Added: Alternative fuels, in particular hydrogen, are increasingly important and the Company recently demonstrated that it could reliably run on a 10% hydrogen / 90% natural gas mix and is currently testing a 70% hydrogen / 30% natural gas mix through its R&D partnership with Argonne National Laboratory.
+Added: These are promising milestones on the development roadmap to 100% hydrogen solutions.
+Added: We estimate that over the last three years, we have helped save companies approximately $700 million on energy costs and over one million tons of carbon.
+Added: Our microturbines are sold primarily through distributors and Original Equipment Manufacturers (“OEMs”).
Distributors purchase our products for sale to end users and also provide service, application engineering and installation support.
−Removed: Distributors also provide a variety of additional services, including engineering, application, and air permit support services in which the microturbines will be used, installation support of the products at the end users’
−Removed: sites, commissioning the installed applications and providing post commissioning service, including a comprehensive FPP.
+Added: Distributors also provide a variety of additional services, including engineering, application, and air permit support services in which the microturbines will be used, installation support of the products at the end users’ sites, commissioning the installed applications and providing post commissioning service, including a comprehensive FPP.
Our distributors perform as independent value-added resellers.
OEMs integrate our products into their own product solutions.
−Removed: This Annual Report on Form 10-K (this “Form 10-K”) refers to our fiscal years ending March 31 as its “Fiscal”
+Added: This Annual Report on Form 10-K (this “Form 10-K”) refers to our fiscal years ending March 31 as “Fiscal” years.
Company Response to COVID-19
−Removed: In March 2020, the Company began to monitor the global effects of “COVID-19,”
−Removed: an infectious disease caused by Severe Acute Respiratory Syndrome Coronavirus 2 (SARS CoV-2) that was first detected in November 2019 in the city of Wuhan, China.
−Removed: The subsequent spread of COVID-19 to the U.S.
−Removed: and many other parts of the world led the World Health Organization to characterize COVID-19 as a pandemic on March 11, 2020.
+Added: In March 2020, the Company began to monitor the global effects of COVID-19, the worldwide spread of which led the World Health Organization (“WHO”) to characterize it as a pandemic on March 11, 2020.
Thereafter, most U.S.
−Removed: states imposed “stay-at-home”
−Removed: orders on their populations to stem the spread of COVID-19.
+Added: states imposed “stay-at-home” orders on their populations to stem the spread of COVID-19.
Of specific interest to the Company, stay-at-home orders were imposed in the state of California on March 20, 2020.
−Removed: On March 23, 2020 the Company enacted a Business Continuity Plan in response to COVID-19.
−Removed: Beginning March 30, 2020, the Company furloughed approximately 52 employees, leaving behind only staff deemed essential for day-to-day administrative operations for a minimum period of 45 days.
−Removed: The Company’s Leadership Team volunteered to take a 25% temporary salary cut as well as the fiscal 2020 Executive Bonus in equity in lieu of cash if earned.
−Removed: In addition, approximately 25 other top company managers volunteered to take a similar 15% reduction in salary.
−Removed: Several employees returned to work June 1st, most with the 15% voluntary salary cuts, with others scheduled to return in a staggered manner through to the end of September.
−Removed: Additionally, in March 2020, the directors voted to take a temporary 25% reduction in base cash retainer in support of the Company’s Business Continuity Plan.
−Removed: As a result of the continued global economic slowdown due to COVID-19 and the associated decline in global crude oil prices, the Company eliminated 26 employees on June 1, 2020.
−Removed: During the period of March 30, 2020 to June 1, 2020, the Company had a limited production capability of new microturbine products, but had pre-built approximately 5.9 MW of microturbine finished goods during March 2020, for shipment during this period of suspended production.
−Removed: The Company continues to maintain a crew of essential operations employees to manufacture service engines, remanufacture spare parts and provide service spares in support of FPPs and global distributor spare parts orders.
−Removed: The Company’s vendor supply chain has been impacted by the pandemic, however it continues to be operational as of today.
−Removed: However, the Company is looking to minimize incoming inventory receipts to less than $6.0 million between April 1, 2020, and June 30, 2020, in order to minimize cash burn, increase liquidity, and increase inventory turns with a goal of generating positive working capital during the first and second quarter of Fiscal 2021.
−Removed: 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”).
−Removed: 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.
+Added: On March 23, 2020 we enacted a Business Continuity Plan in response to COVID-19.
+Added: Beginning March 30, 2020, we furloughed 52 employees, leaving behind only staff deemed essential for day-to-day administrative operations for a minimum period of 45 days.
+Added: Our Leadership Team volunteered to take a 25% temporary salary cut.
+Added: In addition, 25 other top Company managers volunteered to take a similar 15% reduction in salary.
+Added: Several employees returned to work June 1, 2020, most with the 15% voluntary salary cuts, with others scheduled to return in a staggered manner through to the end of September.
+Added: Additionally, in March 2020, the Board voted to take a temporary 25% reduction in base cash retainer in support of our Business Continuity Plan.
+Added: As a result of the continued global economic slowdown due to COVID-19 and the associated decline in global crude oil prices, we eliminated 26 positions on June 1, 2020.
+Added: During the period of March 30, 2020 to June 1, 2020, we had a limited production capability of new microturbine products but had pre-built approximately 5.9 MW of microturbine finished goods during March 2020 for shipment during this period of suspended production.
+Added: On September 28, 2020 salaries were returned to 100% and remaining furloughed employees returned to work.
+Added: Our vendor supply chain has been impacted by the pandemic;
+Added: however, we have been able to maintain sufficient supply flow to continue operations as of the date hereof.
+Added: 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”).
+Added: 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
+Added: Company’s ongoing operations.
Under the PPP, the Company could obtain a U.S.
−Removed: 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).
+Added: 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.
−Removed: The amount eligible for
−Removed: 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.
+Added: 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 April 24, 2020, the Company closed on a PPP loan in the amount of $2,610,200, which was transferred by the Company into an account dedicated to allowable uses of the PPP loan proceeds.
On May 13, 2020, the Company repaid $660,200 of the loan in accordance with the Fourth Amendment to the Note Purchase Agreement between the Company and Goldman Sachs Specialty Lending Group, L.P.
−Removed: The COVID-19 outbreak and the uncertainty of economic conditions relating thereto may negatively impact the Company’s results of operations, cash flows and financial position;
−Removed: however, the overall financial impact cannot be reasonably estimated at this time.
−Removed: Based on the operational and financial plans that management has developed, the Company expects to be able to meet its financial obligations as they become due over the next twelve months.
−Removed: Our 30 kW (“C30”) microturbine can produce enough electricity to power a small convenience store or cathodic protection for an oil or natural gas pipeline.
−Removed: The 65 kW (“C65”) microturbine can produce enough heat to provide hot water to a 100 room hotel while also providing about one third of its electrical requirements.
−Removed: Our 200 kW (“C200”) microturbine is well suited for larger hotels, office, commercial, and industrial buildings and wastewater treatment plants, among others.
−Removed: By packaging the C200 microturbine power modules into single enclosures which are available in multiple sizes and are built in similar dimensions to a standard shipping container or International Organization for Standardization (“ISO”) sizes, we have created an upgradable family of microturbine offerings from 400 kW up to 1000 kW or 1 MW in a compact footprint engineered to function as a single source of power.
−Removed: Our 400 kW, 600 kW, 800 kW and 1000 kW (“C1000S Series”) microturbines are well suited for utility substations, larger commercial and industrial facilities and remote oil and gas applications.
−Removed: The 600 kW and 800 kW systems can be shipped in a five-bay configuration which allows the end-use customer to add one to two more 200 kW microturbines in the future to increase their total onsite power production from 600 kW to 1000 kW without any change to the existing site footprint, as their business power demands expand over time.
−Removed: We began commercial sales of our C30 products in 1998, targeting the emerging distributed generation industry that was being driven by fundamental changes in power requirements.
−Removed: In September 2000, we shipped the first commercial unit of our 60 kW microturbine (“C60”), which was replaced by the C65 model during the quarter ended March 31, 2006.
−Removed: We began shipping the C60 ICHP solution in 2003.
−Removed: Our C60 microturbine was the first combustion power generation product to be certified by the California Air Resources Board (“CARB”) as meeting its stringent distributed generation emissions standards that went into effect in 2003.
−Removed: The first commercial C200 microturbine was shipped on August 28, 2008.
−Removed: Our C1000 Series product was developed based on our C200 microturbine engine.
−Removed: The C1000 Series product can be configured into 1,000 kW, 800 kW, 600 kW and 400 kW solutions in multiple sizes and are built in similar dimensions to a standard shipping container or ISO sizes, and depending on the configuration, provides the opportunity for future expandability.
−Removed: The first commercial shipment of our C1000 Series product was on December 29, 2008.
−Removed: During Fiscal 2016, we unveiled our C1000 Signature (“C1000S”) microturbine as part of our new C1000S microturbine energy systems which also includes an 800 kW (“C800S”), a 600 kW (“C600S”), and a 400 kW (“C400S”) microturbine.
−Removed: The C1000S microturbine incorporates over 70 components, system and design upgrades intended to improve the overall product quality and enhance the microturbine ownership experience in all applications but specifically for CHP and CCHP applications.
−Removed: We began shipping the C200 and C1000 Signature Series ICHP solution in the fourth quarter of fiscal 2017.
+Added: In February 2021, the Company applied for forgiveness in full of the original balance of the PPP loan and is awaiting review and approval.
+Added: No assurance can be provided that forgiveness of any portion of the PPP loan will be obtained.
+Added: Our 30 kW (“C30”) microturbine can produce enough electricity to power a small convenience store or cathodic protection for an oil or natural gas pipeline.
+Added: Our 65 kW (“C65”) microturbine can produce enough heat to provide hot water to a 100 room hotel while also providing about one third of its electrical requirements.
+Added: Our 200 kW (“C200”) microturbine is well suited for larger hotels, office, commercial, and industrial buildings and wastewater treatment plants, among others.
+Added: By packaging the C200 microturbine power modules into single enclosures which are available in multiple sizes and are built in similar dimensions to a standard shipping container or International Organization for Standardization sizes, we have created an upgradable family of microturbine offerings from 400 kW up to 1000 kW or 1 MW in a compact footprint engineered to function as a single source of power.
+Added: Our 400 kW, 600 kW, 800 kW and 1000 kW (“C1000S Series”) microturbines are well suited for utility substations, larger commercial and industrial facilities and remote oil and gas applications.
+Added: Our 600 kW and 800 kW systems can be shipped in a five-bay configuration which allows the end-use customer to add one to two more 200 kW microturbines in the future to increase their total onsite power production from 600 kW to 1000 kW without any change to the existing site footprint, as the customer’s business power demands expand over time.
Our microturbines are compact, lightweight and environmentally friendly generators of electricity and heat compared to competing technologies.
They operate on the same principle as a jet engine using a variety of commercially available fuels.
−Removed: For example, our microturbines can operate on low British Thermal Unit (“BTU”) gas, which is gas with lower energy content, and can also operate on gas with a high amount of sulfur, known in the industry as sour gas.
+Added: For example, our microturbines can operate on low British Thermal Unit (“BTU”) gas, which is gas with lower energy content, and can also operate on gas with a high amount of sulfur, known in the industry as sour gas.
Examples of these fuel sources include methane from facilities such as wastewater treatment plants, landfills and anaerobic digesters.
−Removed: Our microturbines’
−Removed: multi-fuel capability provides competitive advantages with respect to some of
−Removed: our selected vertical markets.
+Added: Our microturbines’ multi-fuel capability provides competitive advantages with respect to some of our selected vertical markets.
The combustor system remains the same for all fuels except for the fuel injectors, which currently vary between liquid and multiple gaseous fuels.
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● Our advanced combustion technology allows our microturbines to achieve low emissions.
−Removed: Our natural gas fueled C65, C200S and C1000S series microturbines were certified by the CARB as meeting its stringent 2007 emissions requirements—the same emissions standard used to certify fuel cells and the same emissions levels as a central power plant.
+Added: Our natural gas fueled C65, C200S and C1000S series microturbines were certified by the California Air Resources Board (“CARB”) as meeting its stringent 2007 emissions requirements—the same emissions standard used to certify fuel cells and the same emissions levels that a central power plant must satisfy.
Our C65 and C200 Landfill and Digester Gas systems were certified by the CARB as meeting its 2008 waste gas emissions requirements for landfill and digester gas applications.
These low emission levels not only provide an environmentally friendly product, but also eliminate permitting requirements in several municipalities for continuously operated onsite power generation.
−Removed: The patented air bearing system allows the microturbine’s single moving assembly to produce power without the need for typical petroleum-based lubrication.
+Added: ● Our patented air bearing system allows the microturbine’s single moving assembly to produce power without the need for typical petroleum-based lubrication.
Air bearings use a high pressure field of air rather than petroleum lubricants.
This improves reliability and reduces maintenance such as oil changes.
−Removed: The digital power electronics manage critical functions and monitor operations of the microturbine;
−Removed: our electronic controls manage the microturbine’s speed, temperature and fuel flow and communication with external networks and building management systems.
+Added: ● Our digital power electronics manage critical functions and monitor operations of the microturbine.
+Added: Our electronic controls manage the microturbine’s speed, temperature and fuel flow and communication with external networks and building management systems.
The digital power electronics coordinate with the grid when the units are operated in a grid connect mode and with the onboard battery when equipped for standalone mode.
−Removed: The digital power electronics also include the functionality of seamless transfer capabilities, ensuring the end-users’
−Removed: critical loads do not experience any interruption to their operation in the event of a utility power outage.
+Added: The digital power electronics also include the functionality of seamless transfer capabilities, ensuring the end-users’ critical loads do not experience any interruption to their operation in the event of a utility power outage.
All control functions are performed digitally.
Performance is optimized, resulting in low emissions, high reliability and high efficiency over a variable power range.
−Removed: Our proprietary Capstone Remote Monitoring Software (“CRMS”) allows end users to operate and manage the microturbine remotely.
+Added: ● Our proprietary Capstone Remote Monitoring Software allows end users to operate and manage the microturbine remotely.
This remote capability can provide end users with power generation flexibility and cost savings.
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The controls start the turbogenerator and manage its load, coordinate the functioning of the microturbine with the grid, manage the speed, fuel flow and exhaust temperature of the microturbine, convert the variable frequency, up to a maximum of 1,600 Hertz and variable voltage power produced by the generator into a usable output of either 50 or 60 Hertz AC for stationary applications or DC for hybrid electric vehicle applications, and provide digital communications to externally maintain and control the equipment.
−Removed: The electrical output of our units can be paralleled in multiple unit configurations through our Advanced Power Server product and a digital communications cable to serve larger installations requiring electrical loads up to ten megawatts.
−Removed: Our products can operate connected to the electric utility grid as a current source, on a standalone basis as a voltage source, multipacked to support larger loads as a “virtual single”
−Removed: unit and in dual mode, where the microturbine operates connected to the electric utility grid or operates independently.
+Added: The electrical output of our units can be paralleled in multiple unit configurations through our Advanced Power Server product and a digital communications cable to serve larger installations requiring electrical loads of up to ten megawatts.
+Added: Our products can operate connected to the electric utility grid as a current source, on a standalone basis as a voltage source, multipacked to support larger loads as a “virtual single” unit and in dual mode, where the microturbine operates connected to the electric utility grid or operates independently.
We were the first microturbine manufacturer to achieve UL Class I, Division 2 certification and ATEX certification for operation in hazardous area oil and gas applications.
These specially packaged systems are applied in oil and gas production areas with potentially explosive environments.
−Removed: Our C65, as well as our C200 and C1000 Signature Series grid connect and stand-alone microturbines are listed by Underwriters Laboratories (“UL”) as meeting the UL 2200 stationary engine generator standards and the UL 1741 utility interconnection requirements.
−Removed: Our C30 and C60 microturbines are certified by the California Energy Commission and were the first products to comply with the requirements of its “Rule 21”
−Removed: grid interconnection standard.
+Added: Our C65, as well as our C200 and C1000 Signature Series grid connect and stand-alone microturbines are listed by Underwriters Laboratories (“UL”) as meeting the UL 2200 stationary engine generator standards and the UL 1741 utility interconnection requirements.
+Added: Our C30 and C60 microturbines are certified by the California Energy Commission and were the first products to comply with the requirements of its “Rule 21” grid interconnection standard.
This standard streamlines the process for connecting distributed generation systems to the grid in California.
−Removed: The benefits of achieving this standard include avoiding both costly external equipment procurement requirements and extensive site by site and utility by utility
−Removed: Our protective relay functionality has also been recognized by the State of New York, which allows our microturbines to be connected to New York’s electric utility grid.
+Added: The benefits of achieving this standard include avoiding both costly external equipment procurement requirements and extensive site by site and utility by utility analysis.
+Added: Our protective relay functionality has also been recognized by the State of New York, which allows our microturbines to be connected to New York’s electric utility grid.
We offer various accessories for our products including rotary gas compressors with digital controls, integrated heat recovery modules for CHP applications, dual mode controllers that allow automatic transition between grid connect and stand-alone modes, batteries with digital controls for stand-alone or dual mode operations, power servers for large multipack installations, protocol converters for Internet access, packaging options and miscellaneous parts such as frames, exhaust ducting, backflow dampers and installation hardware.
+Added: In addition to our existing microturbine products, we offer 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.
+Added: The Company is currently exploring energy conversion options for the smaller end of the power spectrum.
+Added: During Fiscal 2022, we intend to begin manufacturing modular hybrid energy stations and lithium-ion BESS to be sold either individually or combined as part of a custom microturbine-battery storage solution.
Stationary power generation applications can vary greatly depending on load size and demand location.
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Within these vertical markets, we focus on applications that we believe have the greatest near-term potential for the customer based on various different factors such as energy load demand, available fuels, economic payback and for some, government incentives.
+Added: The critical power supply, microgrid and transportation verticals do not currently generate significant revenues for us, however, we have experienced continued development in these verticals and remain focused on the development of applications in these verticals.
We also target smaller sub segments that fall within these vertical markets that may not otherwise be considered for on-site generation.
−Removed: Energy Efficiency—CHP/CCHP
+Added: Energy Efficiency—CHP/CCHP
Energy efficiency refers to the proper utilization of both electrical and thermal energies in the power production process.
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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.
−Removed: When compared to onsite boilers, microturbines generally produce fewer commonly found air pollutants (“criteria pollutants”), such as nitrogen oxides (“NOx”), carbon monoxide (“CO”) and volatile organic compounds (“VOCs”).
+Added: When compared to onsite boilers, microturbines generally produce fewer commonly found air pollutants (“criteria pollutants”), such as nitrogen oxides (“NOx”), carbon monoxide (“CO”) and volatile organic compounds (“VOCs”).
In fact, our CHP or CCHP system can displace local boiler emissions altogether.
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Organizations of all sizes have used the heat generated by our microturbines at the many different types of commercial and industrial applications they serve, including hotels and resorts, hospitals, and medical centers, as well as office buildings and large retail facilities.
+Added: During Fiscal 2021, we continued to expand and develop our new hydrogen products.
+Added: We released our first commercially available hydrogen-based Combined Heat and Power (CHP) product, which can reliably run on a 10% hydrogen-90% natural gas mix, and we are targeting a commercial release of a product that will run on a 30% hydrogen-70% natural gas mix product by March 31, 2022.
+Added: We are continuing our research and development partnership with Argonne National Laboratory and are already testing a 70% hydrogen-30% natural gas configuration.
+Added: Argonne National Laboratory is a national science and technology research laboratory operated by the University of Chicago Argonne, LLC for the United States Department of Energy.
+Added: In addition, in May 2021, we announced a demonstration project with Blue Economy CRC, a cooperative research center in partnership that was established to bring together sustainable seafood production and renewable energy to further develop Australia’s aquaculture industry.
+Added: This demonstration microturbine system is intended to run on 100% hydrogen.
Renewable Energy
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They also run efficiently on other small biogas applications like food processing plants, livestock farms and agricultural green waste operations.
−Removed: Microturbines can burn these renewable fuels with minimal emissions, thereby, and in some cases, avoiding the imposition of penalties incurred for pollution while simultaneously producing electricity from this “free”
−Removed: renewable fuel source for use at the site or in the surrounding areas.
+Added: Microturbines can burn these renewable fuels with minimal emissions, thereby, and 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.
−Removed: We introduced our C65 and C200 stand-alone digester products to the renewable energy market segment in 2007 and 2013, respectively.
+Added: We offer C65 and C200 stand-alone digester products to the renewable energy market segment.
With these products, we are able to target many different types of renewable energy applications, including biogas producing facilities in third world countries and in remote locations that offer a valuable fuel source for the generation of electricity.
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Minor controls changes have been implemented to increase stability at low power levels.
−Removed: The ability to convert this low BTU fuel to electricity along with the high reliability and low maintenance features of this product make it well suited for this market.
−Removed: Natural Resources—Crude Oil, Natural Gas, Shale Gas & Mining
+Added: The ability to convert this low BTU fuel to electricity along with the high reliability and low maintenance features of this product make it well suited for this market segment.
+Added: 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 exploration, production, compression, and transmission sites as a highly efficient and reliable source of prime power.
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Our microturbines can turn these fuel byproducts, flare gas or associated gas, into a useable fuel to provide power to these remote oil and gas sites.
−Removed: Major oil and gas companies are developing large shale reserves, or plays, in the United States.
−Removed: We have been shipping microturbines into the U.S.
−Removed: shale gas market since 2010.
−Removed: The addressable market for our microturbines in this industry is significant.
+Added: The addressable market for our microturbines in the United States shale reserves industry is significant.
The shale gas market for microturbines may grow as demand for natural gas continues to rise and the U.S.
−Removed: as the Environmental Protection Agency (“EPA”), the Department of the Interior and other federal and state agencies work to reduce the emission of hazardous air pollutants associated with natural gas development, including limitations on the flaring of excess gases.
−Removed: Our product sales in the natural resources market is driven by our microturbines’
−Removed: reliability, emissions profile and ease of installation.
−Removed: However, our growth in the oil and gas sector within our natural resources market is primarily driven by oil prices.
−Removed: The company believes it will experience growth in this market when oil prices are sustained at or above $50.00 per barrel.
+Added: as the Environmental Protection Agency (“EPA”), the Department of the Interior and other federal and state agencies work to reduce the emission of hazardous air pollutants associated with natural gas development, including limitations on the flaring of excess gases.
+Added: Our product sales in the natural resources market are driven by our microturbines’ reliability, emissions profile and ease of installation.
+Added: However, any growth in the oil and gas sector within our natural resources market is primarily driven by oil prices.
The C30, C65 and C200 microturbines can be configured to meet Class 1 Zone 2 hazardous location requirements for the natural resources market.
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The majority of microturbine based distributed generation installations have powered through hurricanes with little or no downtime.
−Removed: 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.
+Added: 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.
−Removed: We have seen continued development in the critical market segment as it relates to heath care facilities.
−Removed: We have developed the world’s only microturbine-powered UPS solutions that offer clean, IT grade power and can completely displace the need for traditional UPS and back-up diesel generators.
+Added: We have developed the world’s only microturbine-powered UPS solutions that offer clean, IT grade power and can completely displace the need for traditional UPS and back-up diesel generators.
We offer two UL listed microturbine powered UPS solutions:
−Removed: our UPSource microturbine powered solution, which provides a source for prime or emergency power;
−Removed: as well as our Hybrid UPS microturbine-powered solution, which provides power when dispatched in high
−Removed: efficiency, standard UPS and emergency power.
−Removed: Both critical power supply products offer eight nines of availability in an n+1 configuration when the product has at least one independent back-up source.
−Removed: This measurement of availability is used in the data center industry to refer to 99.999999% of reliability.
−Removed: These integrated solutions are well suited for new facility construction or expansion and can be installed with absorption chillers or other heat recovery systems to obtain high efficiency levels while reducing operating costs, compared with traditional solutions and is a developing market segment for us.
+Added: our Hybrid UPS microturbine-powered solution, which provides power when dispatched in high efficiency, standard UPS and emergency power.
+Added: These integrated solutions are well suited for new facility construction or expansion and can be installed with absorption chillers or other heat recovery systems to obtain high efficiency levels while reducing operating costs, compared with traditional solutions.
Dual-mode units operating in a prime power configuration can support a 150 percent overload for up to 10 seconds during transient conditions.
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Microgrids can be connected to larger electricity grids;
−Removed: 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.
+Added: 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.
−Removed: Additionally, we have our own programmable logic control system and sensors, which interface with other building automation systems and these control systems are one of the key aspects of monitoring a microgrid.
−Removed: The use of microgrid to serve local loads helps to reduce energy losses in transmission and distribution, further increasing the efficiency of the microgrid.
−Removed: We have been a part of numerous successful microgrid installations worldwide ranging from a wind turbine manufacturer, ski resort, university, industrial farm, utility software company, brewery and an electrical distribution utility.
−Removed: Capstone microturbines functionality is to ensure energy availability for advanced microgrids before and during disasters, such as hurricanes.
+Added: Additionally, we have our own programmable logic control system and sensors, which interface with other building automation systems and are a key aspect of monitoring a microgrid.
+Added: The use of microgrids to serve local loads helps to reduce energy losses in transmission and distribution, further increasing the efficiency of the microgrid.
+Added: We have been a part of numerous successful microgrid installations worldwide ranging from a wind turbine manufacturer, ski resort, university, industrial farm, utility software company, brewery and electrical distribution utility.
+Added: Our microturbines’ functionality is to ensure energy availability for advanced microgrids before and during disasters, such as hurricanes.
They may also help reduce electrical expenditures in the years following a disaster when electric utility rates may be increased to pay for the expenses for grid infrastructure repairs and improvements associated with these disasters.
−Removed: We have seen continued development in the microgrid market segment.
Transportation
−Removed: Our technology also can be used in hybrid electric vehicle (“HEV”) applications.
+Added: Our technology can also be used in hybrid electric vehicle (“HEV”) applications.
Our customers have applied our products in HEV applications such as transit buses and Class 7 and 8 work trucks.
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Internal combustion diesel engine manufacturers have been challenged for the last several years to develop technology improvements, prior to aftertreatment that reduce emissions to levels specified by the EPA and CARB 2007 and 2010 standards.
−Removed: Many manufacturers are incorporating aftertreatment that increases upfront equipment costs, vehicle weight and life cycle costs, which and may reduce overall engine efficiency.
+Added: Many manufacturers are incorporating aftertreatment that increases upfront equipment costs, vehicle weight and life cycle costs, and may reduce overall engine efficiency.
Additionally, our technology is also used in marine applications.
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The application for our marine products is for use as a ship auxiliary generator set.
−Removed: In this application, the microturbines provide power to the vessel’s electrical loads and, in some cases, the vessel is able to utilize the exhaust energy to increase the overall efficiency of the application, reducing overall fuel consumption and emissions.
+Added: In this application, the microturbines provide power to the vessel’s electrical loads and, in some cases, the vessel is able to utilize the exhaust energy to increase the overall efficiency of the application, reducing overall fuel consumption and emissions.
Another feasible application is similar to our HEV application where the vessel is driven by an electric propulsion system and the microturbine serves as an on board battery charger and range extender.
Our marine customers use both liquid fueled and natural gas microturbine products.
−Removed: Liquefied natural gas (“LNG”) is in its early stages as a marine fuel, and the number of vessels powered by LNG is forecasted to double every two years over the next decade.
−Removed: Vessel owners can receive the same benefits as users of stationary products:
−Removed: low emissions with no exhaust aftertreatment, long maintenance intervals, high reliability, low noise and no vibration.
−Removed: Transportation is a developing market segment for us.
−Removed: In Fiscal 2020, transportation products were only for customer demonstrations.
+Added: Vessel owners can receive the same benefits as
+Added: users of stationary products:
+Added: low emissions with no exhaust after treatment, long maintenance intervals, high reliability, low noise and no vibration.
+Added: In Fiscal 2020 and Fiscal 2021, transportation products were only for customer demonstrations.
Sales and Marketing
We primarily sell and market our microturbine product, parts and service through our global network of authorized distributors and a new direct sales team, which was formed in January 2020 to focus on OEMs and national accounts.
−Removed: As part of our long-term growth strategy, in January 2020, Capstone divided its sales and marketing team into two separate organizations.
−Removed: One stand-alone organization will remain focused on developing and managing the existing worldwide distribution channel and will lead all marketing and advertising activities as we continue building the Company into a strong and recognizable worldwide brand.
−Removed: The second stand-alone organization is responsible for growing the Company's national account business and long-term rental fleet.
−Removed: Additionally, this team will be responsible for business development, licensing, and new product partnerships.
−Removed: We will also focus on new fuels, such as hydrogen and further growing our renewable market segment participation.
−Removed: We believe this new sales strategy, when combined with a positive adjusted EBITDA, will better enable us to capture more market share with large, global customers, where we see greater potential at dozens of their facilities worldwide.
+Added: In January 2020, we divided our sales and marketing team into two separate organizations.
+Added: One organization remains focused on developing and managing our existing worldwide distribution channel and leading all marketing and advertising activities as we continue building our Company into a strong and recognizable worldwide brand.
+Added: The second organization is responsible for growing our Company's national account business and long-term rental fleet.
+Added: Under the terms of the A&R Note Purchase Agreement with Goldman Sachs, we are required to grow our rental fleet to 21.1 MW, from our current fleet size of 10.6 MW, by March 31, 2022.
+Added: Additionally, this team is responsible for business development, licensing, new product partnerships, and new fuels, such as hydrogen, and further growing our renewable market segment participation.
+Added: We believe this sales strategy better enables us to capture market share with large, global customers, where we see greater potential at dozens of their facilities worldwide.
Our existing distribution network remains our worldwide feet-on-the-ground and our local presence, while the internal salesforce will build strong, long-term relationships with larger, more diverse customers.
Our worldwide distribution network was developed from the ground up and has become a valuable asset, because we can reach end use customers globally.
−Removed: Each of our distributors is a strategically placed independent partner marketing, selling, and providing applications engineering support for our products on our behalf.
+Added: Each of our distributors is a strategically placed independent partner that markets, sells, and provides applications engineering support for our products on our behalf.
In addition, distributors provide remote monitoring services, warranty support, local spare parts support, and customer training and long-term service support.
−Removed: Through our global distribution network, we offer a comprehensive FPP for a fixed fee to perform regularly scheduled and unscheduled maintenance as needed.
+Added: Through our global distribution network, we offer a comprehensive factory protection plan (“FPP”) for a fixed fee to perform regularly scheduled and unscheduled maintenance as needed.
We provide factory and onsite training to certify all personnel that perform sales, applications, commissioning, and long-term service on our microturbines.
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We typically do not have customer acceptance provisions in our agreements.
−Removed: Effective January 1, 2018, we launched our Distributor Support System (“DSS program”) to provide 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.
−Removed: This new program is funded by our distributors and was developed to provide improved worldwide distributor training, sales efficiency, website development, company branding and funding for increased strategic business-to-business marketing activities.
−Removed: During Fiscal 2016, we launched Capstone Energy Finance, a joint venture that provides financing options for the purchase of our microturbines.
−Removed: Capstone Energy Finance provides end users with the ability to purchase electricity generated by our microturbine at their facility with no upfront capital investment and expand access to clean and reliable onsite energy.
−Removed: A power purchase agreement from Capstone Energy Finance enables organizations to reduce operating expenses by allowing them to buy electricity at a rate that is lower than what they currently pay today.
−Removed: Customers can purchase all or a portion of their energy from Capstone Energy Finance and eliminate exposure to volatile utility rates by locking in a fixed rate for a period of ten to twenty years.
−Removed: Capstone Energy Finance monitors and maintains the system for the entire term of the agreement, and customers pay only for the energy they use.
−Removed: We believe financing solutions offered by Capstone Energy Finance can help new and existing end-users evaluate their purchasing options and provide a solution to immediately improve their bottom line without requiring capital investment in new equipment.
−Removed: The adoption rate of the Capstone Energy Finance solution has been slower than we expected because our customers continue to utilize other financing options or elect to pay directly for our microturbines.
+Added: 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 verticals.
+Added: This program is funded by our distributors and was developed to provide improved worldwide distributor training, online documentation library, paperless service software, sales efficiency, website development, company branding and funding for increased strategic business-to-business marketing activities.
+Added: Our Geographic Markets
United States and Canada
−Removed: We have distribution agreements with a number of companies throughout North America for the resale of our products.
+Added: We have distribution agreements with several companies throughout North America for the resale of our products.
Many of these distributors serve multiple markets in their select geographic regions.
−Removed: The primary markets served in this region have been energy efficiency, renewable energy, natural resources, critical power, microgrid and transportation products.
+Added: The primary markets served in this region have been energy efficiency, renewable energy, and natural resources products.
The energy efficiency and natural resources vertical markets are expected to grow as a result of an increased domestic production of hydrocarbons, the low downstream price of natural gas, as well as public and regulatory acceptance of distributed generation.
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Our strategy is to leverage our distribution network in Mexico across various market verticals.
−Removed: South America constitutes a diverse group of markets that vary greatly in potential capture for us based on a number of factors, including availability of oil and gas production and transmission, energy pricing and political and investment climate.
−Removed: While we have distributors in nearly all South American countries, our management is focused on what we consider to be the top geographical markets, such as Colombia, Brazil, Bolivia, and Chile.
+Added: South America constitutes a diverse group of markets that vary greatly in potential capture for us based on several factors, including availability of oil and gas production and transmission, energy pricing and political and investment climate.
+Added: While we have distributors in nearly all South American countries, management is focused on what we consider to be the top national markets, which include Colombia, Brazil, Bolivia, and Chile.
Asia and Australia
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This includes flare gas to power projects which are a particularly attractive market opportunity given the volume of gas being flared, and the need for stable power in the region.
−Removed: Our management has targeted distributors and customers involved in the capture and use of flare gas in the oil and gas market.
+Added: Management has targeted distributors and customers involved in the capture and use of flare gas in the oil and gas market.
However, the geopolitical environment in this region is still volatile, which can have an impact on our sales.
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To address the European market, including Russia, we are strengthening our relationships with existing and new distributors and have increased local sales and service support.
−Removed: We have an office in Europe for the purpose of working with our local distributors on a daily basis to identify and understand growth opportunities.
−Removed: We have a recently upgraded Integrated Remanufacturing Facility (IRF) in the United Kingdom to make new and remanufactured parts readily available to our distributors.
+Added: We have an office in the United Kingdom for the purpose of working with our local distributors on a daily basis to identify and understand growth opportunities.
+Added: Upon the successful resolution of Brexit, we have recently upgraded our Integrated Remanufacturing Facility (IRF) in the United Kingdom to make new and remanufactured parts readily available to our distributors.
Europe has a history of extensive use of distributed generation technologies.
−Removed: We continue to diversify the company’s overall presence in Russia and the surrounding Commonwealth of Independent States (CIS) as we explore new growth opportunities in these areas with multiple new distributors.
+Added: We continue to diversify the Company’s overall presence in Russia and the surrounding Commonwealth of Independent States (CIS) as we explore new growth opportunities in these areas with multiple new distributors.
The rebuilding of our business in Russia and the surrounding CIS area continues to evolve including the addition of our new Russia oil and gas distributor Arman Energo.
−Removed: Further, the continuation or escalation of the current geopolitical instability in Russia and Ukraine could continue to negatively impact our operations, sales, and future growth prospects in that region.
−Removed: For more information, see “Risk Factors”
−Removed: beginning on Page 18 of this Form 10‑K.
−Removed: Sales to E‑Finity Distributed Generation, LLC (“E‑Finity”), one of our domestic distributors, accounted for 12% and 13% of our revenue for the fiscal years ended March 31, 2020 and 2019, respectively.
−Removed: Sales to Cal Microturbine (“CAL”), one of our domestic distributors, accounted for 12% of our revenue for the year ended March 31, 2019.
−Removed: Additionally, E-Finity accounted for 14% of net accounts receivable as of March 31, 2020.
−Removed: Reliable Secure Power Systems, (“RSP”), one of our domestic distributors, and E-Finity, accounted for 14% and 10%, respectively, of net accounts receivable as of March 31, 2019.
−Removed: On October 13, 2017, we entered into an Accounts Receivable Assignment Agreement (the “Assignment Agreement”) and Promissory Note (the “Note”) with Russian distributor Turbine International, LLC (“TI”).
−Removed: Pursuant to the terms of the Assignment Agreement, we agreed to assign to TI the right, title and interest to receivables owed to us from BPC Engineering, our former Russian distributor (“BPC”), upon TI’s payment to us of $2.5 million in three payments by February 1, 2018.
−Removed: We received payments from TI of approximately $1.0 million under the Assignment Agreement during Fiscal 2018 which was recorded as bad debt recovery.
−Removed: The receivables owed to us from BPC had a balance of $4.8 million as of March 31, 2019, and this balance was fully reserved.
−Removed: On October 13, 2017, we and Hispania Petroleum, S.A.
−Removed: (the “Guarantor”), entered into a Guaranty Agreement (the “Guaranty Agreement”) whereby the Guarantor guarantees TI’s obligations under the Agreement and Note.
−Removed: However, due to our limited business relationship with TI and the missed payments on the Assignment Agreement, we deferred recognition of the Assignment Agreement and Note until collectability is reasonably assured.
−Removed: In connection with the terms of the Note, we granted TI the sole distribution rights for our products and services in the Russian oil and gas sector.
−Removed: As a result of this appointment, TI agreed to pay us $3.8 million over a three-year period in 35 equal monthly installments starting in August 2018.
−Removed: On June 5, 2018, we entered into an amendment to the Assignment Agreement (the “Amended Assignment Agreement”) and the Note (the “Amended Note”) with TI.
−Removed: Pursuant to the terms of the Amended Assignment Agreement, the right, title and interest to receivables owed to us from BPC will be contingent upon TI’s payment to us of the remaining approximately $1.5 million in five payments by September 20, 2019.
−Removed: Under the terms of the Amended Note, TI agreed to pay us $3.8 million over a three-year period in 13 equal quarterly installments starting on December
−Removed: The payments of $0.4 million, $0.3 million, and $0.3 million, due March 20, 2019, June 20, 2019, and September 20, 2019, respectively, under the Amended Assignment Agreement, have not been received at the time of this filing.
−Removed: In September 2019, we sent TI a notice to cure default with a deadline of October 31, 2019.
−Removed: TI failed to cure the noticed default and we have since terminated TI’s distributor agreement.
−Removed: As a result, the BPC accounts receivable and related accounts receivable reserve of $4.8 million were written off.
−Removed: We recorded a net bad debt expense of approximately $0.4 million during Fiscal 2020 primarily due to the uncertainty of collections from certain distributors during the COVID-19 pandemic.
−Removed: We recorded a net bad debt recovery of approximately $0.3 million during Fiscal 2019.
−Removed: As of September 30, 2019, we collected cumulatively approximately $1.8 million from BPC on their previously reserved accounts receivable.
−Removed: Additionally, we collected cumulatively approximately $1.5 million from TI, under the terms of the Assignment Agreement and the Amended Assignment Agreement.
−Removed: The BPC accounts receivable and related accounts receivable reserve of $4.8 million were written off as of March 31, 2020.
+Added: Further, the continuation or escalation of geopolitical instability in Russia and Ukraine could continue to negatively impact our operations, sales, and future growth prospects in that region.
+Added: Sales to Cal Microturbine (“CAL”) and E-Finity Distributed Generation, LLC (“E-Finity”), our domestic distributors, accounted for 15% and 12%, respectively, of our revenue for Fiscal 2021.
+Added: Sales to E-Finity accounted for 12% of our revenue for Fiscal 2020.
+Added: Additionally, E-Finity accounted for 13% and 14% of net accounts receivable as of March 31, 2021 and March 31, 2020, respectively.
+Added: We recorded net bad debt recovery of approximately $0.2 million during Fiscal 2021.
+Added: We recorded net bad debt expense of approximately $0.4 million during Fiscal 2020 primarily due to the uncertainty of collections from certain distributors at the initial onset of the COVID-19 pandemic.
The market for our products is highly competitive.
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Many potential customers rely on the utility grid for their electrical power.
−Removed: Many of our distributed generation competitors are large, well‑established companies that derive competitive advantages from production economies of scale, worldwide presence, brand recognition and greater resources which they can devote to product development or promotion.
+Added: Many of our distributed generation competitors are large, well-established companies that derive competitive advantages from production economies of scale, worldwide presence, brand recognition and greater financial resources that they can devote to product development or promotion.
Often power purchased from the electric utility grid can be less costly than power produced by distributed generation technologies.
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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.
−Removed: Because our microturbines can provide a reliable source of power and can operate on multiple fuel sources, our management believes we offer a level of flexibility not currently offered by other technologies such as reciprocating engines.
+Added: Because our microturbines can provide a reliable source of power and can operate on multiple fuel sources, management believes we offer a level of flexibility not currently offered by other technologies such as reciprocating engines.
Our reciprocating engine competitors have products and markets that are well developed and technologies that have been proven for some time.
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(which now includes American DG Energy Inc.), among others.
−Removed: Our microturbines may also compete with other distributed generation technologies, including solar-powered systems, wind-powered systems, fuel cells and fly wheel.
+Added: Our products may also compete with other distributed generation technologies, including solar-powered systems, wind-powered systems, fuel cells and fly wheel.
Solar and wind powered systems produce no emissions and benefit from above market contracts provided by state mandates.
−Removed: The main drawbacks to solar and wind powered systems is that they may not be dispatchable because of their dependence on weather conditions, the utility grid or high capital costs that can often make these systems uneconomical without government subsidies depending upon geographic locale and application of the technology.
+Added: The main drawbacks to solar and wind powered systems are that they may not be dispatchable because of their dependence on weather conditions, the utility grid or high capital costs that can often make these systems uneconomical without government subsidies depending upon geographic locale and application of the technology.
Although the market is still developing, a number of fuel cell providers are also focused on markets similar to ours, including Active Power Inc.
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Fuel cells have slightly lower levels of NOx, CO, VOCs and other criteria pollutant emissions than our microturbines.
−Removed: With equivalent government incentives, microturbines would provide a better economic value to end users in most applications.
−Removed: We also compete with other companies who have microturbine products, including FlexEnergy and Turbec S.p.A.
−Removed: Overall, we compete with end users’
−Removed: other options for electrical power and heat generation on the basis of our microturbine’s ability to:
+Added: However, with equivalent government incentives, microturbines would provide a better economic value to end users in most applications.
+Added: We also compete with other companies that offer microturbine products, including FlexEnergy and Turbec S.p.A.
+Added: Overall, we compete with end users’ other options for electrical power and heat generation on the basis of our product’s ability to:
● provide power when a utility grid is not available or goes out of service;
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Our markets can be positively or negatively impacted by the effects of governmental and regulatory matters.
−Removed: We have systems installed in 73 countries around the world, each of which has their own policy and regulatory framework, which are subject to change.
+Added: We have systems installed in 73 countries around the world, each of which has its own policies and regulatory framework, which are subject to change.
We are affected not only by energy policy, laws, regulations and incentives of governments in the markets in which we sell, but also by rules, regulations and costs imposed by utilities.
Utility companies or governmental entities may place barriers on the installation or interconnection of our product with the electric grid.
−Removed: Further, utility companies may charge additional fees to customers who install on‑site power generation;
+Added: Further, utility companies may charge additional fees to customers that install on-site power generation;
thereby reducing the electricity they take from the utility, or for having the capacity to use power from the grid for back-up or standby purposes.
These types of restrictions, fees or charges could hamper the ability to install or effectively use our product, or increase the cost to our potential customers for using our systems.
−Removed: This could make our systems less economical, thereby adversely affecting our revenue and profitability.
+Added: This could make our systems less economical for our customers, thereby adversely affecting our sales and ultimately our revenue and profitability.
In addition, utility rate reductions can make our products less competitive which would have a material adverse effect on our operations.
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Department of Energy continues to fund the development of cost-effective, high efficiency CHP that is responsive to site demands and grid requirements.
−Removed: Flexible CHP could provide additional generating capacity when grid demand increases or renewable resources are not available as well as other grid services, like frequency regulation, to keep the grid stable.
+Added: Flexible CHP could provide additional generating capacity when grid demand increases or renewable resources are not available.
As more intermittent renewable resources are added to the electric grid, grid operators need access to additional dispatchable generation capacity to ensure an adequate and stable power supply.
−Removed: Capstone’s PowerSync controller could provide this automated response capability to allow for participation in grid services markets, where permitted.
−Removed: In the United States, a 10% Federal Investment Tax Credit (“ITC”) for CHP and microturbines is available through the end of 2021.
−Removed: In addition, bonus depreciation rules allow businesses to immediately deduct 100% of eligible
−Removed: property placed in service after September 27, 2017 and before January 1, 2023.
−Removed: The deduction limit will phase down from 100% to 0% by 2027.
−Removed: As a result, we may see a positive impact on our sales in the United States due to the availability of this 10% tax credit and bonus depreciation.
+Added: Capstone’s PowerSync controller could provide this automated response capability to allow for participation in grid services markets, where permitted.
+Added: Our addition of battery energy storage products to our portfolio of solutions opens our customers’ access to some of the higher incentives available to these technologies as well as allowing us to provide an integrated microturbine solution.
+Added: In the United States, a 10% Federal Investment Tax Credit (“ITC”) for CHP and microturbines was extended and is now available through the end of 2023.
+Added: In addition, bonus depreciation rules allow businesses to immediately deduct 100% of eligible property placed in service after September 27, 2017 and before January 1, 2023.
+Added: The deduction percentage will phase down from 100% to 0% by 2027.
+Added: As a result, we may see a positive impact on our sales in the United States
+Added: due to the availability of these tax incentives.
However, other CHP and gas-powered distributed energy technology-providers will also benefit from the return of these tax incentives, and, fuel cell technologies will receive a 26% ITC level with a phase down to 22% by 2023 and expiration in 2024.
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However, electricity demand spikes may also lead to higher electricity prices thereby improving project economics for on-site distributed power generation.
−Removed: In global markets, European governments continue to support efficient CHP and are beginning to take action on reducing local air pollution through regulations like the EU’s Medium Combustion Plant and EcoDesign Directives.
−Removed: Our low emission systems’
−Removed: ability to meet these programs’
−Removed: requirements may have a positive impact on our sales as implementation progresses.
+Added: In global markets, European governments continue to support efficient CHP and are beginning to act on reducing local air pollution through regulations like the EU’s Medium Combustion Plant and EcoDesign Directives.
+Added: Our low emission systems’ ability to meet these programs’ requirements may have a positive impact on our sales as implementation progresses.
+Added: However, the EU’s push for decarbonization may also leave natural gas-fueled, highly efficient systems in limbo despite their near-term carbon reduction potential and long term viability with the uptake of renewable and decarbonized gas alternatives.
In the oil and gas market, many producers have committed to reduce methane emissions from their operations.
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Sourcing and Manufacturing
−Removed: We are focused on continuously improving our supply chain effectiveness, strengthening our manufacturing processes and increasing operational efficiencies within our organization.
+Added: We are focused on improving our supply chain effectiveness, strengthening our manufacturing processes, and increasing operational efficiencies within our organization.
Our manufacturing designs include the use of conventional technology, which has been proven in high volume automotive and turbocharger production for many years.
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however, certain items are custom made to meet our specifications that require longer lead time.
−Removed: 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.
+Added: 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.
However, single source suppliers with long lead times may be more challenging to transition to another supplier.
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We continue to evaluate and implement new systems designed to provide improved quality, reliability, service, greater efficiency, and lower supply chain costs.
−Removed: During Fiscal 2020, we focused significant efforts on establishing additional long-term partnerships with several key vendors while consolidating and vertically integrating within our supply chain.
−Removed: We have located and qualified several new suppliers where previous single points of failure have occurred in past years.
−Removed: We have established and qualified dual source vendors for several critical long-lead time components which should mitigate the risks of supply chain interruptions in the future.
−Removed: Throughout the year, we have focused on several cost-reduction initiatives designed to reduce overall aftermarket and product costs to improve our operating cash position.
−Removed: Later in Fiscal 2020, we became aware of the COVID-19 pandemic and fully assessed our supply chain, determining that the sourcing controls and measures we put in place were adequate in helping prevent an interruption.
−Removed: While the COVID-19 situation remains fluid, we continue to put measures in place in the form of safety stocks and dual sourcing to prevent potential interruptions to the supply chain.
−Removed: During Fiscal 2019, we identified a defect in one of the component parts for microturbine systems from one of our single source suppliers.
−Removed: As a result of this defect we have identified several new suppliers with greater engineering expertise and robust quality management systems.
−Removed: The transition is complex, lengthy and may result in an interruption in our manufacturing process.
−Removed: An interruption in our manufacturing process for this component part would adversely impact our results of operations.
−Removed: The efforts to qualify and dual source these components was completed in the fourth quarter of Fiscal 2019.
−Removed: During Fiscal 2018, we received notification from one of our single source suppliers that they were at maximum capacity and would require prepayment and a significant increase in the price of multiple components in order to fulfill our supply requirements for Fiscal 2019.
−Removed: Due to their capacity issues, it is uncertain if we will experience an interruption in parts from this supplier or be able to fully offset or recover any resulting component price increases.
−Removed: During Fiscal 2019, we issued a prepayment of approximately $2.2 million to this single source supplier.
−Removed: A new supplier has been fully qualified and has taken over as the primary source of this commodity for Capstone.
+Added: During Fiscal 2021, we remained focused on mitigating supply chain issues, such as the costs of commodities and delayed lead times, related to the ongoing global COVID-19 pandemic.
+Added: Localization of the vast majority our immediate supply chain within a 300-mile radius of our factory located in Van Nuys, California mitigates much of the global stressors associated with a typical geographically dispersed supply chain, as many of our suppliers were sharing similar experiences of the pandemic in the same magnitude we were experiencing in parallel.
+Added: Our prior years’ strategy of locating dual-sources and establishing long-term purchasing agreements helped to mitigate interruptions in our supply chain.
+Added: Global freight delays, tariffs and costs remain a concern from a logistics perspective, however with a highly-localized supply chain, much of these effects are limited.
+Added: To address delays, we increased planning fence lead-times within our ERP system to drive material purchases earlier, and we attempt to source products locally as much as possible.
+Added: As with Fiscal 2020, the COVID-19 situation still remains fluid, and we are keeping in place proactive measures in the form of safety stocks and dual sourcing to prevent potential interruptions to our supply chain.
We have substantially increased our focus on process controls and validations, supplier controls, distribution controls and providing our operations teams with the training and tools necessary to drive continuous improvement in product quality.
−Removed: In addition, we remain focused on examining our operations and general business activities to identify cost improvement opportunities in order to enhance our operational effectiveness and use lean manufacturing processes.
+Added: In addition, we remain focused on examining our operations and general business activities to identify cost improvement opportunities to enhance our operational effectiveness and use lean manufacturing processes.
Our ability to leverage these capabilities may be affected by the current variability in our demand volumes and forecasting.
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Our strategy is to identify primary and secondary sources for critical components, both domestic and international, for when available to minimize production line down time due to unavailability of such parts, which could affect our ability to meet manufacturing schedules on build or a linear basis.
−Removed: In April 2019, we executed multiple new Long Term Agreements (“LTA”) including a new 10-year LTA with a new supplier.
−Removed: The LTA from the new supplier will initially reduce annual direct material costs an estimated $2 million per year once the transition is completed.
−Removed: The strategy to reduce direct material costs is based on partnering with our supply base to drive collaborative cost improvements within its value chain which will enable the significant material cost reductions.
−Removed: Solar Turbines Incorporated (“Solar”), a wholly owned subsidiary of Caterpillar Inc., was our sole supplier of recuperator cores prior to 2001.
−Removed: In 2000, we exercised an option to license Solar’s technology, which allows us to manufacture these cores ourselves and we began manufacturing them in June 2001.
−Removed: We are required to pay a per unit royalty fee for the life of Capstone’s patents for cores manufactured and sold by us using the technology.
−Removed: Royalties of approximately $26,400 and $33,200 were earned by Solar for the fiscal year ended March 31, 2020 and 2019, respectively.
−Removed: In 2007, we entered into a Development and License Agreement (“Development Agreement”) with Carrier Corporation (“Carrier”) regarding the payment of royalties on the sale of each of our C200 microturbines.
−Removed: On July 25, 2018, we and Carrier entered into a Second Amendment whereby we agreed to pay Carrier approximately $3.0 million to conclude our current royalty obligation under the Development Agreement and release us from any future royalty payment obligations.
+Added: In April 2019, we executed multiple new Long Term Agreements (“LTA”), including a new 10-year LTA with a new supplier.
+Added: The LTA from the new
+Added: supplier will initially reduce annual direct material costs by an estimated $2 million per year once the transition is completed.
+Added: The strategy to reduce direct material costs is based on partnering with our supply base to drive collaborative cost improvements within its value chain, which will enable significant material cost reductions.
+Added: In 2007, we entered into a Development and License Agreement (“Development Agreement”) with Carrier Corporation (“Carrier”) regarding the payment of royalties on the sale of each of our C200 microturbines.
+Added: On July 25, 2018, we and Carrier entered a Second Amendment whereby we concluded our royalty obligation under the Development Agreement and were released from any future royalty payment obligations.
The Second Amendment also removed non-compete provisions from the Development Agreement, allowing us to design, market or sell our C200 System in conjunction with any energy system and compete with Carrier products in the CCHP market.
−Removed: On September 19, 2018, we paid in full the negotiated royalty settlement agreement of $3.0 million to Carrier, as such there is no further royalty obligation to Carrier.
−Removed: Carrier earned $0.4 million in royalties for C200 and C1000 Series system sales during the fiscal year ended March 31, 2019.
−Removed: We have an approximately 42,300 square foot manufacturing footprint in our Van Nuys location in Southern California, running on a single shift.
−Removed: We believe that our production capacity goal of approximately 2,000 units per year, depending on product mix is well above our current production rates and will be achievable by adding additional shifts.
−Removed: This may require an increase in working capital and some additional capital expenditures when necessary.
−Removed: Research and Development (“R&D”)
−Removed: Our engineering mission has been on supporting the expansion of our existing suite of products, focusing on alternative fuels and technologies, maintaining relevance in the global evolution of grid interconnection requirements, and the launch of the PowerSync Controller.
+Added: There is no further royalty obligation to Carrier.
+Added: We have an approximately 42,300 square foot manufacturing footprint in our Van Nuys location in Southern California with production capacity of approximately 2,000 units per year, depending on product mix.
+Added: We believe we will be able to support this production capacity level by adding additional shifts, which would increase working capital requirements, and making some additional capital expenditures when necessary.
+Added: Research and Development (“R&D”)
+Added: Our engineering mission flexed in Fiscal 2021 to supporting business operational goals and enhancing system availability to ensure continuity during the global pandemic.
+Added: While these successful efforts became our primary objectives, we continued to emphasize the expansion of our existing suite of products, focusing on alternative fuels and technologies, maintaining relevance in the global evolution of grid interconnection requirements, and the evolution of the PowerSync Controller.
We focus our engineering efforts on coordinating our product design and manufacturing processes to bring our products to market in a cost-effective and timely manner.
−Removed: For the fiscal years ended March 31, 2020 and 2019, R&D expenses were $3.6 million in each year, which amounts are equivalent to 5% and 4% of total revenue, respectively, for these fiscal years.
−Removed: Our product development activities during Fiscal 2019 continued with the launch of the new family of PowerSync controllers used for Capstone microturbines.
−Removed: In Fiscal 2020 we completed the development and qualification of a new self-cleanable severe environment air filtration system for our Signature Series line of microturbine products.
−Removed: Capstone has also embarked upon a project to modernize control electronics, providing common functionality, minimizing near term obsolescence concerns, and enabling long term support.
−Removed: Phoenix Contact and Capstone partnered in a joint effort to improve on-site controls and integration with end-use customer facilities.
−Removed: The main objectives of developing the new PowerSync controller line were to further increase system reliability, availability and make Capstone microturbines easier to use for both end-user customers as well as Capstone distribution partners.
−Removed: Fiscal 2019 marked the first substantial integration of the PowerSync at a number of customer sites.
−Removed: From these integration and commissioning activities, Capstone and Phoenix Contact took feedback to make further improvements to software and hardware.
−Removed: The goal of such improvements is to make the whole process easier and more straightforward.
−Removed: Our new self-cleanable severe environment air filtration system for our line of Signature Series microturbine products was launched during Fiscal 2019.
−Removed: During sand and dust storms common to most hot arid desert areas, particulate concentrations close to the ground can reach levels 20,000 times those in typical U.S.
−Removed: Such dust and dirt loads can cripple conventional air filtration systems, cause massive maintenance expenditures and allow excessive dust concentrations to be ingested by the turbine.
−Removed: Capstone’s new cleanable severe environment units employ industry standard high-efficiency filters.
−Removed: The systems feature self-cleanable pulse actuation to extend life and service interval, critical for remote sites.
−Removed: In Fiscal 2020 we delivered two C600 systems with the self-cleanable filtration to a new customer in the Middle East.
−Removed: Our C65, C200 and C1000 Series microturbines became UL 1741 Supplement A (SA) certified during Fiscal 2019.
−Removed: This testing standard was written in response to California Rule 21, and in response to the local increased presence of distributed generation and require interactive grid support functions.
−Removed: Capstone benefitted substantially from previous certification successes for the German and Italian markets to expedite conformance to UL 1741 SA.
−Removed: Certification standards are becoming increasingly commonplace globally, with localization of controls and requirements.
−Removed: In Fiscal 2020, Capstone achieved Australian AS4777 certification for our C200 product line, and UK G99 Grid Interconnect type approval for C65 and C200 product lines.
−Removed: In addition, Germany released VDE 4110 for Medium Voltage Grid Interconnection, to augment the BDEW certification.
−Removed: Capstone achieved “Prototype Confirmation”
−Removed: for this new specification that enables continued operability in Germany.
−Removed: In Fiscal 2019, Capstone was issued two patents related to fuel injection and emissions.
+Added: For Fiscal 2021 and 2020, R&D expenses were $2.4 million and $3.6 million, respectively, representing 4% and 5% of total revenue, respectively, for these fiscal years.
+Added: We own two patents related to fuel injection and emissions.
The first patent issued is for a multi-staged lean pre-vaporizing, pre-mixing fuel injector providing ultra-low emissions that meet EPA Tier 4 requirements for power generation.
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This patent is the foundation for continued development in achieving high reliability and performance with hydrogen content fuels.
−Removed: Our partnership with the DOE provided funding during Fiscal 2017 in the amount of $335,000 for one year to Argonne National Laboratory to conduct hydrogen and synthetic fuel or syngas testing on our C65 and C200 microturbines.
+Added: We partnered with the United States Department of Energy (“DOE”), which provided funding during Fiscal 2017 in the amount of $335,000 for one year to Argonne National Laboratory to conduct testing on a 70% hydrogen-30% natural gas configuration.
Hydrogen testing was on hold while the test facility implemented mechanisms for safe handling, detection, and delivery of the hydrogen gas.
The safety challenges have been resolved, and testing has begun.
−Removed: Despite a challenging federal budgetary environment, funding has been extended to the 2020 government fiscal year for completion of the testing.
−Removed: Capstone Turbine continues support of the University of California, Irvine (“UCI”) through their Advanced Power and Energy Program, to evaluate Microturbine operation using hydrogen and natural gas fuel blends.
−Removed: The testing to be performed in Fiscal 2021 is sponsored by the local gas authority as they evaluate the impacts of gas grid hydrogen injection.
−Removed: Capstone and UCI continue to be key partners in advancing academic research while enabling commercialization of technology.
−Removed: We partnered with FGC Plasma Solutions to test a new plasma-assisted fuel injection technology in our C65 microturbine.
−Removed: We worked together to develop a new combustion concept for improved turbine efficiency and emissions performance.
−Removed: The technology could enable more optimum operation of the engine as well as benefits from lower
−Removed: emissions, increased fuel flexibility and improved reliability.
−Removed: Testing was completed in early Fiscal 2020 and results were positive whereby the solution could be implemented into our microturbine without adverse effects.
−Removed: Capstone and Argonne National Laboratory are also partnering on a microturbine derivative utilizing Argonne’s high-efficiency, fast-charging, and fast discharging Thermal Energy Storage System.
−Removed: This effort is funded through the Department of Energy’s Technology Commercialization Fund.
−Removed: The thermal storage system is expected to improve the microturbine’s overall efficiency increasing value to the customer.
+Added: Funding has been extended to the 2021 government fiscal year for completion of the testing.
+Added: Capstone and Argonne National Laboratory are also partnering on a microturbine derivative utilizing Argonne’s high-efficiency, fast-charging, and fast discharging Thermal Energy Storage System.
+Added: This effort is funded through the Department of Energy’s Technology Commercialization Fund.
+Added: The thermal storage system is expected to improve the microturbine’s overall efficiency increasing value to the customer.
The Thermal Energy Storage System modeling and simulation was completed towards the end of Fiscal 2020.
−Removed: A review was conducted and the design of a prototype, small scale, system was decided.
−Removed: Fiscal 2021 will see the assembly of the small scale system and model validation performed at Argonne using their C65 test system.
+Added: During Fiscal 2021 design was completed on the assembly of the small scale system to be installed at Argonne using their C65 test system.
+Added: We expect, Fiscal 2022 will see the procurement and assembly of the hardware at Argonne, and testing to validate the models that were developed.
+Added: We continue support of University of California, Irvine (“UCI”) through their Advanced Power and Energy Program, which works to evaluate microturbine operation using hydrogen and natural gas fuel blends.
+Added: The testing completed in Fiscal 2021 is sponsored by the local gas authority as they evaluate the impacts of gas grid hydrogen injection.
+Added: We and UCI continue to be key partners in advancing academic research while furthering commercialization of hydrogen technology in Fiscal 2022.
+Added: Leveraging off this partnership, UCI has completed the first phase of analysis in associated gas combustion in catalog Capstone products.
+Added: Associated gas is represented by higher hydrocarbons, which are more challenging to maintain in gaseous state.
+Added: As more pressure is placed on flaring at oil and gas locations, the expansion of our fuel acceptability limits enables customers a reliable, resilient, and environmentally conscientious way of handling waste gases.
+Added: Work continues in Fiscal 2022 to model and validate the combustion characteristics of associated gas, and update associated product documentation.
+Added: Our product development activities during Fiscal 2021 continued with the evolution of the new family of PowerSync controllers used for Capstone microturbines.
+Added: We also further advanced a project to modernize control electronics, providing common functionality, minimizing near term obsolescence concerns, and enabling long term support.
+Added: Leveraging our academic relationships, Capstone completed an initial analysis on the effective limits of our patented combustion system relative to higher hydrocarbon fuels.
+Added: We partnered with Phoenix Contact in a joint effort to improve on-site controls and integration with end-use customer facilities.
+Added: The main objectives of developing the new PowerSync controller line were to further increase system reliability, availability and make our microturbines easier to use for both end-user customers as well as our distribution partners.
+Added: Capstone and Phoenix Contact have been using customer feedback to make further improvements to software and hardware.
+Added: Grid interconnection standards have continued to evolve, with more emphasis being placed on harmonization of requirements.
+Added: AS-4777 certification for the C65 was able to be completed in Fiscal 2021.
+Added: The remaining TUV Rheinland witness test efforts planned during Fiscal 2021 were postponed due to the COVID-19 pandemic.
+Added: Capstone used the remainder of the year for development work on the multiple updated certification requirements including German (BDEW, now VDE-4110) and Italian (CEI 0-16) medium voltage operation, German low voltage VDE-4105 operation, and California Rule 21 (soon to be incorporated into UL 1741 Supplement B).
+Added: This work will enable consolidation of the efforts during Fiscal 2022 witness tests.
+Added: Capstone and Argonne National Laboratory are also partnering on a microturbine derivative utilizing Argonne’s high-efficiency, fast-charging, and fast discharging Thermal Energy Storage System.
+Added: This effort is funded through the Department of Energy’s Technology Commercialization Fund.
+Added: The thermal storage system is expected to improve the microturbine’s overall efficiency increasing value to the customer.
+Added: The Thermal Energy Storage System modeling and simulation was completed towards the end of Fiscal 2020.
+Added: During Fiscal 2021 design was completed on the assembly of the small scale system to be installed at Argonne using their C65 test system.
+Added: Fiscal 2022 will see the procurement and assembly of the hardware at Argonne, and testing to validate the models that were developed.
In addition, we continue to work both cost reduction and performance enhancement activities to improve the value of our microturbine products for our customer base.
Cost reduction activities are focused on leveraging the capabilities of our supply base and internal design lean manufacturing improvements.
−Removed: Product enhancements are focused on reducing the already very low maintenance requirements for our products, while at the same time improving operational efficiency, thereby reducing our customers’
−Removed: total cost of ownership.
+Added: Product enhancements are focused on reducing the already very low maintenance requirements for our products, while at the same time improving operational efficiency, thereby reducing our customers’ total cost of ownership.
Because of our single moving assembly, manufacturers believe there is also the opportunity to produce a lower cost product in larger automotive volumes.
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Although we believe the hybrid electric bus and truck market has the potential to be a beneficial option for the bus and truck manufacturers, we temporarily suspended our development efforts with respect to C30 microturbines targeted at this market in response to our lower revenue.
−Removed: Management intends to continue with the next phase of development after we achieve profitability.
−Removed: We are working with the Kenworth Truck Company to demonstrate a Class 7 series hybrid delivery truck with funding support from the South Coast Air Quality Management District and the San Joaquin Valley Air Pollution Control District.
−Removed: The Kenworth Class 7 hybrid truck is retrofitted with a refrigerated box body, and a 65kW Capstone microturbine operating on CNG.
−Removed: Emissions and fuel economy testing was completed at UC Riverside in 2018, including comparison testing of a similarly equipped traditional diesel truck.
−Removed: Results for the three tested drive cycles indicate the hybrid truck can provide 50 to 68% reduction in tailpipe NOx emissions, 19 to 27% reduction in overall CO2 emissions, and 26 to 32% reduction in operating cost.
−Removed: The next step is to operate the truck on actual customer delivery routes in both air districts to quantify the performance, emissions, fuel economy, and other benefits of a microturbine based hybrid solution.
−Removed: We expect to collect and utilize information from the Kenworth Class 7 hybrid truck’s road testing and demonstration processes for future product developments and enhancements.
−Removed: A prototype or concept vehicle such as this may take several years to go into commercial production following completion of rigorous testing.
−Removed: Our liquid fuel microturbines have demonstrated emissions levels which meet the CARB 2010 standards for Heavy Duty Diesel Engines (“HDDE”).
+Added: Our liquid fuel microturbines have demonstrated emissions levels which meet the CARB 2010 standards for Heavy Duty Diesel Engines (“HDDE”).
The liquid fuel microturbine is able to meet these extremely low emissions requirements using its lean premix combustion technology with no exhaust aftertreatment.
Competitive reciprocating engine technologies require aftertreatment components that increase system cost, require frequent maintenance, and impact engine efficiency.
−Removed: Our compressed natural gas (“CNG”) fueled microturbines also meet extremely low emission standards, including the U.S.
−Removed: Environmental Protection Agency and CARB 2010 emissions requirements for On Road HDDE for Urban Bus.
+Added: Our compressed natural gas (“CNG”) fueled microturbines also meet extremely strict emission standards, including the U.S.
+Added: Environmental Protection Agency and CARB 2010 emissions requirements for On Road
+Added: HDDE for Urban Bus.
Test emissions from our natural gas microturbines measured dramatically less than the emissions levels set forth by the CARB standard including NOx at 75% and CO at 96% less than the required levels.
−Removed: Our marine products have been used to provide hybrid electric marine propulsion, “hotel power,”
−Removed: CHP, or CCHP.
−Removed: They may be ideal for small and mid-size commercial ships that travel inland waterways and emissions controlled areas (“ECAs”).
−Removed: Although we believe the marine sector has the potential to be a beneficial option for the vessel owners, we temporarily suspended our development efforts with respect to C30 microturbines targeted at this market in response to our lower revenue.
−Removed: We currently intend to continue with the next phase of development after we achieve profitability.
−Removed: In partnership with one of our long-term EMEA distributors, Capstone has developed a marine C65 for a private yacht manufacturer and in Fiscal 2020 we delivered the product and also received certification from Lloyd’s Register EMEA for Lloyd’s Register Rules and Regulations for the Classification of Special Service Craft 2018 - Part 6.
+Added: Our marine products have been used to provide hybrid electric marine propulsion, “hotel power,” CHP, or CCHP.
+Added: They may be ideal for small and mid-size commercial ships that travel inland waterways and emissions controlled areas (“ECAs”).
+Added: In partnership with one of our long-term EMEA distributors, Capstone developed a marine C65 for a private yacht manufacturer and in Fiscal 2020 we delivered the product and also received certification from Lloyd’s Register EMEA for Lloyd’s Register Rules and Regulations for the Classification of Special Service Craft 2018 - Part 6.
+Added: In Fiscal 2021, the private yacht power system was land tested, sea trialed, and launched, enabling the owner to eliminate onboard ship vibrations associated with reciprocating engines, while also having low emissions without after treatment.
+Added: Capstone received a follow-on certification from Lloyd’s for Classification of Special Service Craft 2018, Part 10, Chapter 2.
Our C65 Hybrid UPS product line has been evolving over the years.
−Removed: After having received the 2011 NOVA Award from the Construction Innovation Forum for the C65 Hybrid UPS Microturbine at Syracuse University’s data center—labeled one of the greenest data centers in the world, our C65 Hybrid UPS system has continued development and has installations at Sempra in Monterey Park, California and our own data center in Van Nuys, California as well as two Department of Homeland Security installations, among several others.
−Removed: The product utilizes our inverter electronics and controls technology to provide continuous power quality to meet the customer’s critical load.
+Added: After having received the 2011 NOVA Award from the Construction Innovation Forum for the C65 Hybrid UPS Microturbine at Syracuse University’s data center—labeled one of the greenest data centers in the world, we have continued development of our C65 Hybrid UPS system and have installations at Sempra in Monterey Park, California and our own data center in Van Nuys, California as well as two Department of Homeland Security installations, among several others.
+Added: The product utilizes our inverter electronics and controls technology to provide continuous power quality to meet the customer’s critical load.
The load inverter is connected through a central power bus to provide power from one of three available power sources, including the utility grid, battery storage system, or microturbine generator.
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Protecting our Intellectual Property Rights and Patents
−Removed: We rely on a combination of patent, trade secret, copyright, “know how”, and trademark laws and nondisclosure agreements to establish and protect our intellectual property rights in our products.
−Removed: In this regard, we have obtained 47 U.S.
−Removed: and 3 international patents (in certain cases covering the same technology in multiple jurisdictions).
−Removed: The patents we have obtained will expire between calendar years 2020 and 2037.
+Added: We rely on a combination of patent, trade secret, copyright, “know how”, and trademark laws and nondisclosure agreements to establish and protect our intellectual property rights in our products.
+Added: We have 37 U.S.
+Added: and 3 international active patents (in certain cases covering the same technology in multiple jurisdictions).
+Added: The patents we have obtained will expire between the second half of calendar years 2021 and 2037.
We actively evaluate our patent portfolio and pursue new patent applications as we develop new technological innovations, as needed.
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In addition, we implement security procedures at our plants and facilities and have confidentiality agreements with our suppliers, distributors, employees and certain visitors to our facilities.
−Removed: Organization and Employees
−Removed: We were organized in 1988 in the State of California.
−Removed: Our company was reincorporated as Capstone Turbine Corporation on June 22, 2000 in the State of Delaware.
−Removed: As of March 31, 2020, we had 100 full-time employees and 12 part time employees.
+Added: Human Capital
+Added: On February 16, 2021, our board of directors adopted an amended charter governing our Compensation and Human Capital Committee, after discussing the rapid movement to expand the role of the Compensation Committee beyond traditional compensation-related matters.
+Added: In accordance with its recently amended charter, our Compensation and Human Capital Committee is responsible for reviewing, monitoring and providing recommendations to our board of directors on our workplace policies and practices, including corporate culture and employee engagement, talent management and leadership development, employee diversity and inclusion, ensuring a respectful workplace free of discrimination and harassment.
+Added: We are committed to maintaining, and continuing to foster, our diverse and inclusive work environment.
+Added: We recruit the best people for the job regardless of gender, ethnicity or other protected traits and it is our policy to promote inclusive, nondiscriminatory hiring and employment practices and fully comply with all laws applicable to discrimination in the workplace.
+Added: Workforce statistics
+Added: As of March 31, 2021, we had 122 full-time employees and 1 part time employee.
No employees are covered by collective bargaining arrangements.
We consider relations with our employees to be good.
+Added: Corporate Information
+Added: We were organized in 1988 in the State of California.
+Added: Our Company was reincorporated as Capstone Turbine Corporation on June 22, 2000 in the State of Delaware.
+Added: On April 21, 2021, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of the Company for the sole purpose of changing the Company’s name to Capstone Green Energy Corporation effective as of 12:01 a.m.
+Added: Eastern Time on April 22, 2021 (the “Corporate Name Change”).
+Added: In addition, the Company amended and restated its Fourth Amended and Restated Bylaws, effective as of April 22, 2021, solely to reflect the Corporate Name Change.
Available Information
−Removed: This Form 10‑K, as well as our quarterly reports on Form 10‑Q, current reports on Form 8‑K and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are made available free of charge on our Internet website (http://www.capstoneturbine.com) as soon as reasonably practicable after such materials are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”).
+Added: This Form 10-K, as well as our quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are made available free of charge on our Internet website (http://www.capstoneturbine.com) as soon as reasonably practicable after such materials are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”).
+Added: These filings are also available on the SEC’s website at www.sec.gov.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.