−Removed: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
+Added: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
−Removed: Our common stock is publicly traded on the Nasdaq Capital Market under the symbol “CPST”.
+Added: Our common stock is publicly traded on the Nasdaq Capital Market under the symbol “CGRN”.
As of June 10, 2021, there were 245 stockholders of record of our common stock.
−Removed: This does not include the number of persons whose stock is held in nominee or “street name”
−Removed: accounts through brokers.
+Added: This does not include the number of persons whose stock is held in nominee or “street name” accounts through brokers.
We have never declared or paid any cash dividends on our capital stock.
5 unchanged sentences
Recent Sales of Unregistered Securities
−Removed: On February 10, 2020, in connection with a sponsorship agreement involving an equity-based payment to a non-employee recipient, we issued $600,000 in unregistered shares of common stock of the Company to the recipient.
−Removed: This transaction was exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act.
−Removed: The recipient of restricted shares of our common stock in this transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.
−Removed: On February 26, 2020, in connection with a consulting agreement involving an equity-based payment to a non-employee recipient, we issued 100,000 unregistered shares of common stock of the Company to the recipient.
+Added: On February 17, 2021, in connection with a sponsorship agreement involving an equity-based payment to a non-employee recipient, we issued 105,933 in unregistered shares of common stock of the Company worth $937,500 to the recipient.
This transaction was exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act.
1 unchanged sentence
Issuer Purchases of Equity Securities
−Removed: There were no repurchases of shares of common stock made during the fiscal year ended March 31, 2020.
−Removed: Selected Financial Data.
−Removed: We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item.
−Removed: Management’s Discussion and Analysis of Financial Condition and Results of Operations.
−Removed: The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward‑looking statements that involve risks and uncertainties.
−Removed: Our actual results may differ materially from the results discussed in the forward‑looking statements.
−Removed: Factors that might cause a difference include, but are not limited to, those discussed under Item 1A (Risk Factors) in this Form 10-K.
−Removed: The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appears elsewhere in this Form 10-K.
−Removed: We are the market leader in microturbines based on the number of microturbines sold.
−Removed: Generally, power purchased from the electric utility grid is less costly than power produced by distributed generation technologies.
−Removed: Utilities may also charge fees to interconnect to their power grids.
−Removed: 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: 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: Because our microturbines can provide a reliable source of power and can operate on multiple fuel sources, management believes they offer a level of flexibility not currently offered by other technologies such as reciprocating engines.
−Removed: Our goals for Fiscal 2020 were to improve cash flow, working capital, and our balance sheet;
−Removed: grow revenue through accelerating global product sales;
−Removed: diversify into additional market verticals and geographies;
−Removed: and increase aftermarket sales absorption.
−Removed: During Fiscal 2020 our net loss was $22.0 million and our basic and diluted loss per share was $2.70 compared to $16.7 million and $2.49, respectively, in the same period of the previous year.
−Removed: The increase in the net loss during Fiscal 2020 was primarily because of lower revenue, higher operating costs and interest expense.
−Removed: The decrease in revenue was primarily due to weakness in the natural resources market due to declining oil prices, as well as COVID-19 shutdowns and movement restrictions that resulted in delays in certain customers’
−Removed: project timelines and product shipments in all of our global markets.
−Removed: Product revenue was lower primarily due to weakening in the United States natural resources market.
−Removed: Additionally, we build to a fixed number of production slots for our microturbines each quarter and during Fiscal 2020, we allocated five C1000 Signature Series systems production slots to our long-term rental program, resulting in lower product revenue.
−Removed: The increase in operating expense was primarily attributable to higher marketing costs and bad debt expense recorded during Fiscal 2020.
−Removed: On February 4, 2019, we entered into a $30.0 million three-year term note with Goldman Sachs to replace the existing $15.0 million revolving credit facility with Bridge Bank, which resulted in higher interest expense during Fiscal 2020 compared to Fiscal 2019.
−Removed: Fiscal 2020 was characterized by growth of our aftermarket service business because of additional revenue from our FPP long-term service contracts and rental income from our factory rental program compared to Fiscal 2019.
−Removed: Additionally, the U.S.
−Removed: dollar has strengthened against other currencies and continues to be an issue in select markets as the strong dollar makes our products more expensive in those markets, as we sell in U.S.
−Removed: Our products continue to gain interest in all six of the major vertical markets (energy efficiency, renewable energy, natural resources, critical power supply, microgrid and transportation).
−Removed: In the energy efficiency market, we continue to expand our market presence in hotels, office buildings, hospitals, retail and industrial applications globally.
−Removed: The renewable energy market is fueled by landfill gas, biodiesel, and biogas from sources such as food processing, agricultural waste and livestock manure.
−Removed: Our product sales in the oil and gas and other natural resources market is driven by our microturbines’
−Removed: reliability, emissions profile and ease of installation.
−Removed: Given the volatility of the oil and gas market, our business strategy is to target projects within the energy efficiency and renewable energy markets.
−Removed: We also continued to see interest in critical power supply applications as customers want solutions that can handle both primary and backup power.
−Removed: Transportation is a developing market segment for us and currently transportation products were only for customer demonstrations.
−Removed: We continue to focus on improving our products based on customer input, building brand awareness and new channels to market by developing a diversified network of strategic distribution partners.
−Removed: Our focus is on products and solutions that provide near term opportunities to drive repeatable business rather than discrete projects for niche markets.
−Removed: In addition, management closely monitors operating expenses and strives to improve manufacturing efficiencies while simultaneously lowering direct material costs and increasing average selling prices.
−Removed: The key drivers to our success are revenue growth, higher average selling prices, lower direct material costs, positive new order flow and reduced cash usage.
−Removed: An overview of our direction, targets and key initiatives follows:
−Removed: Focus on Vertical Markets Within the distributed generation markets that we serve, we focus on vertical markets that we identify as having the greatest near-term potential.
−Removed: In our primary products and applications (energy efficiency, renewable energy, natural resources, critical power supply, microgrid and transportation products), we identify specific targeted vertical market segments.
−Removed: Within each of these segments, we identify what we believe to be the critical factors to success and base our plans on those factors.
−Removed: Given the volatility of the oil and gas market, we have refocused our business strategy to target projects within the energy efficiency and renewable energy markets.
−Removed: The following table summarizes our product shipments by vertical markets:
−Removed: Energy efficiency
−Removed: Natural resources
−Removed: Renewable energy
−Removed: Critical Power Supply
−Removed: Energy Efficiency—CHP/CCHP
−Removed: Energy efficiency refers to the proper utilization of both electrical and thermal energies in the power production process.
−Removed: In such applications, our microturbines are able to maximize the availability of usable energy to provide a significant economic advantage to customers while reducing their onsite emissions.
−Removed: CHP and CCHP can improve site economics by capturing the waste heat created from a single combustion process to increase the efficiency of the total system, from approximately 30 percent to 80 percent or more.
−Removed: 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: Natural Resources—Crude Oil, Natural Gas, Shale Gas & Mining
−Removed: Our microturbines are installed in the natural resource market for use in both onshore and offshore applications, including oil and gas exploration, production, and at compression and transmission sites as a highly efficient and reliable source of power.
−Removed: In some cases, these oil and gas or mining operations have no electric utility grid and rely solely on power generated onsite.
−Removed: There are numerous locations, on a global scale, where the drilling, production, compression and transportation of natural resources and other extraction and production processes create fuel byproducts, which are traditionally burned or released into the atmosphere.
−Removed: Our microturbines can turn these fuel byproducts - flare gas, or associated gas, into a useable fuel to provide prime power to these sites.
−Removed: Renewable Energy
−Removed: There is a growing transition to renewable energy sources and technologies on a global scale.
−Removed: Our microturbines run efficiently on renewable fuels such as methane and other biogases from landfills, wastewater treatment facilities and renewable natural gas.
−Removed: 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.
−Removed: 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: Critical Power Supply
−Removed: Because of the potentially catastrophic consequences of system failure, momentary or otherwise, certain high demand power users, including high technology, health care and information systems facilities require higher levels of reliability in their power generation service.
−Removed: To meet these customer requirements, traditional solutions utilize UPS to protect critical loads from power disturbances along with back-up diesel generators for extended outages.
−Removed: 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: Microgrid is a group of interconnected loads and distributed energy resources that acts as a single controllable energy entity with respect to the grid.
−Removed: Distributed energy resources typically include other dual-mode microturbines, reciprocating engines, solar photovoltaic (PV), wind turbine, fuel cells and battery storage.
−Removed: 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.
−Removed: 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: We have seen continued development in the microgrid market segment.
−Removed: Transportation
−Removed: Our technology is also used in HEV applications.
−Removed: Our customers have applied our products in HEV applications such as transit buses and Class 7 and 8 work trucks.
−Removed: In these applications, the microturbine acts as an onboard battery charger to recharge the battery system as needed.
−Removed: The benefits of microturbine-powered HEV hybrids include extended range, fuel economy gains, quieter operation, reduced emissions and higher reliability when compared with traditional internal combustion engines.
−Removed: Additionally, our technology is used in marine applications.
−Removed: Our customers have applied our products in the commercial vessel and luxury yacht market segments.
−Removed: The application for our marine products is for use as a ship auxiliary engine.
−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, thereby reducing overall fuel consumption and emissions.
−Removed: Another feasible application is similar to our HEV application where the vessel is driven by an electric propulsion system and the microturbine serves as an on board range extender.
−Removed: Transportation is a developing market segment for us.
−Removed: In Fiscal 2020, transportation products were only for customer demonstrations.
−Removed: Net product orders were approximately $33.8 million and $46.2 million for Fiscal 2020 and Fiscal 2019, respectively.
−Removed: Ending backlog was approximately $37.7 million at March 31, 2020 compared to $71.3 million at March 31, 2019.
−Removed: Book-to-bill ratio was 1.4:1 and 1.1:1 for Fiscal 2020 and 2019, respectively.
−Removed: Book-to-bill ratio is the ratio of new orders we received to units shipped and billed during a period.
−Removed: During the second quarter of Fiscal 2020, we removed from product backlog orders related to Green Energy Sustainable Solutions, Inc.
−Removed: (“GESS”) of approximately $10.6 million.
−Removed: This removal was the result of Capstone’s findings following further review of GESS’s ability to meet its obligations under their national account agreement.
−Removed: During the first quarter of Fiscal 2019, we removed from product backlog orders related to Regatta Solutions, our former California distributor (“Regatta”) for approximately $3.8 million.
−Removed: This removal was the result of the reassignment of the California sales territory to Cal Microturbine, our new exclusive distribution partner in California.
−Removed: On October 13, 2017, we entered into the Assignment Agreement and the Note with 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: 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 October 13, 2017, we and the Guarantor, entered into 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: On June 5, 2018, we entered into the Amended Assignment Agreement and 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 was contingent upon TI’s payment to us of the remaining approximately $1.5 million in five payments by September 20, 2019.
−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: 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 20, 2019.
−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: As a result of the above amendments we removed product orders related to BPC from backlog of approximately $20.4 million and $20.7 million, for Fiscal 2020 and Fiscal 2019, respectively.
−Removed: These removals were the result of our continuous review of BPC related backlog with TI which resulted in us no longer honoring the product pricing, and the cancellation of our distributor agreement with TI.
−Removed: There are no remaining backlog related to BPC as of March 31, 2020.
−Removed: A portion of our backlog is concentrated in the international oil and gas market which may impact the overall timing of shipments or the conversion of backlog to revenue.
−Removed: The timing of the backlog is based on the requirement date indicated by our customers.
−Removed: However, based on historical experience, management expects that a significant portion of our backlog may not be shipped within the next 18 months.
−Removed: Additionally, the timing of shipments is subject to change based on several variables (including customer deposits, payments, availability of credit and customer delivery schedule changes), most of which are not in our control and can affect the timing of our revenue.
−Removed: As a result, management believes the book-to-bill ratio demonstrates the current demand for our products in the given period.
−Removed: Sales and Distribution Channels We seek out distributors that have business experience and capabilities to support our growth plans in our targeted markets.
−Removed: A significant portion of our revenue is derived from sales to distributors who resell our products to end users.
−Removed: We have a total of 88 distributors, OEMs and national accounts.
−Removed: In the United States and Canada, we currently have 23 distributors, OEMs and national accounts.
−Removed: Outside of the United States and Canada, we currently have 65 distributors, OEMs and national accounts.
−Removed: We continue to refine our distribution channels to address our specific targeted markets.
−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 provide funding for increased strategic marketing activities.
−Removed: See Note 2—Summary of Significant Accounting Policies for additional discussion of revenue recognition for this program.
−Removed: Service We provide service primarily through our global distribution network.
−Removed: Together with our global distribution network we offer a comprehensive FPP for a fixed fee to perform regularly scheduled and unscheduled maintenance as needed.
−Removed: We provide factory and on-site training to certify all personnel that are allowed to perform service on our microturbines.
−Removed: FPPs are generally paid quarterly in advance.
−Removed: Our FPP backlog at the end of Fiscal 2020 and Fiscal 2019 was approximately $82.4 million and $78.9 million, respectively, which represents the value of the contractual agreement for FPP services that has not been earned and extends through Fiscal 2035.
−Removed: Additionally, we offer new and remanufactured parts through our global distribution network.
−Removed: Service revenue in Fiscal 2020 was approximately 30% of total revenue.
−Removed: Product Robustness and Life Cycle Maintenance Costs We continue to invest in enhancements that relate to high performance and high reliability.
−Removed: An important element of our continued innovation and product strategy is to focus on the engineering of our product hardware and electronics to make them work together more effectively and deliver improved microturbine performance, reliability and low maintenance cost to our customers.
−Removed: New Product Development Our new product development is targeted specifically to meet the needs of our selected vertical markets.
−Removed: We expect that our existing product platforms, the C30, C65, C200 and C1000 Series microturbines, will be our foundational product lines for the foreseeable future.
−Removed: Our research and development project portfolio is centered on enhancing the features of these base products.
−Removed: During Fiscal 2020, we introduced and expanded our PowerSync family of controllers, easily customizable for our microturbine systems.
−Removed: Additionally, we delivered our first production self-cleanable severe environment air filtration system for our Signature Series line of microturbine products.
−Removed: We continued on a project to modernize electronics to today’s standards, providing common functionality and enabling long term support.
−Removed: To support our global fleet during Fiscal 2020, we achieved Australian AS4777 certification for our C200 product line, and UK G99 Grid Interconnect type approval for our C65 and C200 product lines.
−Removed: In addition, Germany released VDE 4110 for Medium Voltage Grid Interconnection, to augment the BDEW certification.
−Removed: We achieved “Prototype Confirmation”
−Removed: for this new specification that enables continued operability in Germany.
−Removed: In partnership with one of our long-term EMEA distributors, we 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.
−Removed: We are also developing a more efficient microturbine CHP system with the support of the DOE, which awarded us a grant of $5.0 million in support of this development program, of which $4.2 million was allocated to us and was used through September 30, 2015.
−Removed: We successfully completed the first phase of the development program on September 30, 2015 and achieved 270 kW with a prototype C250 microturbine in our development test lab.
−Removed: Management intends to continue with the next phase of development and commercialization after we achieve profitability.
−Removed: The next phase will be to continue development of the C250 product architecture as well as the associated power electronics and software controls required for successful commercialization.
−Removed: Cost and Core Competencies We believe that the core competencies of our products are air‑bearing technology, advanced combustion technology and sophisticated power electronics to form efficient and ultra‑low emission electricity and cooling and heat production systems.
−Removed: Our core intellectual property is contained within our air‑bearing technology.
−Removed: We continue to review avenues for cost reduction by sourcing to the best value supply chain option.
−Removed: In order to utilize manufacturing facilities and technology more effectively, we are focused on continuous improvements in manufacturing processes.
−Removed: Additionally, considerable effort is being directed to manufacturing cost reduction through process improvement, product design, advanced manufacturing technology, supply management and logistics.
−Removed: Management expects to be able to leverage our costs as product volumes increase.
−Removed: Our manufacturing designs include the use of conventional technology, which has been proven in high volume automotive and turbocharger production for many years.
−Removed: Many components used in the manufacture of our products are readily fabricated from commonly available raw materials or off the shelf items available from multiple supply sources;
−Removed: 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.
−Removed: However, single source suppliers with long lead times may be more challenging to transition to another supplier.
−Removed: We have an ongoing program to develop alternative back up suppliers for sole source parts wherever possible, however this has been challenging with low production volumes and increased pricing.
−Removed: We regularly reassess the adequacy and abilities of our suppliers to meet our future needs.
−Removed: During the first quarter of 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 the fourth quarter of 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: the first quarter of Fiscal 2019, we issued a prepayment of approximately $2.2 million to this single source supplier.
−Removed: As of March 31, 2020, there were gradual improvement trends in the capacity issues at the supplier.
−Removed: A new supplier has been fully qualified and has taken over as the primary source of this commodity for Capstone.
−Removed: We believe that effective execution in each of these key areas will be necessary to leverage Capstone’s promising technology and early market leadership into achieving positive cash flow with growing market presence and improving financial performance.
−Removed: During the third quarter of Fiscal 2018, we consolidated our operations and offices into our Van Nuys location and we believe that our production capacity is approximately 2,000 units per year, depending on product mix.
−Removed: 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.
−Removed: Reverse Stock Split At the annual meeting of stockholders of the Company held on August 29, 2019, the Company’s stockholders approved an amendment to our Second Amended and Restated Certificate of Incorporation (the “Amendment”) to effect a reverse stock split of our common stock at a ratio in the range of one-for-five (1:5) to one-for-ten (1:10).
−Removed: Pursuant to such authority granted by the stockholders, the Company’s board of directors approved a one-for-ten (1:10) reverse stock split (the “Reverse Stock Split”) of the common stock and the filing of the Amendment.
−Removed: The certificate was filed with the Secretary of State of Delaware, effective on October 21, 2019 and the Reverse Stock Split became effective as of that date as filed with the SEC under the Securities and Exchange Act.
−Removed: Accordingly, all references to numbers of common shares, including the number of common shares on an as-if-converted basis, per-share data and share prices and exercise prices in the accompanying condensed consolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis.
−Removed: Critical Accounting Policies
−Removed: Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
−Removed: The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent liabilities.
−Removed: On an on‑going basis, we evaluate our estimates, including but not limited to those related to long‑lived assets, including finite‑lived intangible assets and fixed assets, bad debts, inventories, warranty obligations, stock‑based compensation, income taxes and contingencies.
−Removed: We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
−Removed: Actual results may differ from these estimates under different assumptions or conditions.
−Removed: We believe that the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
−Removed: We evaluate the carrying value of long‑lived assets, including intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.
−Removed: Factors that are considered important that could trigger an impairment review include a current‑period operating or cash flow loss combined with a history of operating or cash flow losses and a projection or forecast that demonstrates continuing losses or insufficient income associated with the use of a long‑lived asset or asset group.
−Removed: Other factors include a significant change in the manner of the use of the asset or a significant negative industry or economic trend.
−Removed: This evaluation is performed based on undiscounted estimated future cash flows compared with the carrying value of the related assets.
−Removed: If the undiscounted estimated future cash flows are less than the carrying value, an impairment loss is recognized and the loss is measured by the difference between the carrying value and the estimated fair value of the asset group.
−Removed: The estimated fair value of the assets is determined using the best information available.
−Removed: On a quarterly basis, we assess whether events or changes in circumstances have occurred that potentially indicate the carrying value of long‑lived assets may not be recoverable.
−Removed: Intangible assets include a
−Removed: manufacturing license, technology, backlog and customer relationships.
−Removed: We reevaluate the useful life determinations for these intangible assets each reporting period to determine whether events and circumstances warrant a revision in their remaining useful lives.
−Removed: We performed an analysis as of March 31, 2020 and determined that there was no impairment.
−Removed: See Note 5—Intangible Assets in the “Notes to Consolidated Financial Statements.”
−Removed: Our inventories are valued at the lower of cost (determined on a first in first out (“FIFO”) basis) or net realizable value.
−Removed: We routinely evaluate the composition of our inventories and identify slow‑moving, excess, obsolete or otherwise impaired inventories.
−Removed: Inventories identified as impaired are evaluated to determine if write‑downs are required.
−Removed: Included in this assessment is a review for obsolescence as a result of engineering changes in our product.
−Removed: Future product enhancement and development may render certain inventories obsolete, resulting in additional write‑downs of inventories.
−Removed: In addition, inventories are classified as current or long‑term based on our sales forecast and also, in part, based on our projected usage for warranty claims and service.
−Removed: A change in forecast could impact the classification of inventories.
−Removed: We provide for the estimated cost of warranties at the time revenue from sales is recognized.
−Removed: We also accrue the estimated costs to address reliability repairs on products no longer under warranty when, in our judgment, and in accordance with a specific plan developed by us, it is prudent to provide such repairs.
−Removed: We estimate warranty expenses based upon historical and projected product failure rates, estimated costs of parts, labor and shipping to repair or replace a unit and the number of units covered under the warranty period.
−Removed: While we engage in extensive quality programs and processes, our warranty obligation is affected by failure rates and service costs in correcting failures.
−Removed: As we have more units commissioned and longer periods of actual performance, additional data becomes available to assess future warranty costs.
−Removed: When we have sufficient evidence that product changes are altering the historical failure occurrence rates, the impact of such changes is then taken into account in estimating future warranty liabilities.
−Removed: Changes in estimates are recorded in the period that new information, such as design changes, cost of repair and product enhancements, becomes available.
−Removed: Should actual failure rates or service costs differ from our estimates, revisions to the warranty liability would be required and could be material to our financial condition, results of operations and cash flow.
−Removed: Our revenue consists of sales of products, parts, accessories and service, which includes FPPs, net of discounts.
−Removed: Our distributors purchase products, parts and FPPs for sale to end users and are also required to provide a variety of additional services, including application engineering, installation, commissioning and post‑commissioning service.
−Removed: Our standard terms of sales to distributors and direct end users include transfer of title, care, custody and control at the point of shipment, payment terms ranging from full payment in advance of shipment to payment in 90 days, no right of return or exchange, and no post‑shipment performance obligations by us except for warranties provided on the products and parts sold.
−Removed: We recognize revenue when all of the following criteria are met:
−Removed: persuasive evidence of an arrangement exists, delivery has occurred or service has been rendered, selling price is fixed or determinable and collectability is reasonably assured.
−Removed: Service revenue derived from time and materials contracts is recognized as the service is performed.
−Removed: FPP contracts are agreements to perform certain agreed‑upon service to maintain a product for a specified period of time.
−Removed: Service revenue derived from FPP contracts is recognized on a straight‑line basis over the contract period.
−Removed: We occasionally enter into agreements that contain multiple elements, such as equipment, installation, engineering and/or service.
−Removed: Effective January 1, 2018, we launched our DSS program to fund 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: Service revenue derived from our DSS program began in March 2018 and is recognized on a pro rata basis as the distributors purchase our products.
−Removed: Trade accounts receivable are recorded at the invoiced amount and typically non‑interest bearing.
−Removed: We maintain allowances for estimated losses resulting from the inability of our customers to make required payments and other accounts receivable allowances.
−Removed: We evaluate all accounts aged over 60 days past payment terms.
−Removed: If the financial condition of our customers deteriorates or if other conditions arise that
−Removed: result in an impairment of their ability or intention to make payments, additional allowances may be required.
−Removed: We have a history of unprofitable operations.
−Removed: These losses generated significant federal and state net operating loss (“NOL”) carryforwards.
−Removed: We record a valuation allowance against the net deferred income tax assets associated with these NOLs if it is “more likely than not”
−Removed: that we will not be able to utilize them to offset future income taxes.
−Removed: Because of the uncertainty surrounding the timing of realizing the benefits of our favorable tax attributes in future income tax returns, a valuation allowance has been provided against all of our net deferred income tax assets.
−Removed: We currently provide for income taxes only to the extent that we expect to pay cash taxes, primarily foreign and state taxes.
−Removed: It is possible, however, that we could be profitable in the future at levels which could cause management to determine that it is more likely than not that we will realize all or a portion of the NOL carryforwards.
−Removed: Upon reaching such a conclusion, we would record the amount of net deferred tax assets that are expected to be realized.
−Removed: Such adjustment would increase income in the period that the determination was made.
−Removed: We recognize stock‑based compensation expense associated with stock options in the statement of operations.
−Removed: Determining the amount of stock‑based compensation to be recorded requires us to develop estimates to be used in calculating the grant‑date fair value of stock options.
−Removed: We calculate the grant‑date fair values using the Black‑Scholes valuation model.
−Removed: The use of Black‑Scholes model requires us to make estimates of the following assumptions:
−Removed: Expected volatility —The estimated stock price volatility was derived based upon our actual historic stock prices over the expected option life, which represents our best estimate of expected volatility.
−Removed: Expected option life —The expected life, or term, of options granted was derived from historical exercise behavior and represents the period of time that stock option awards are expected to be outstanding.
−Removed: Risk‑free interest rate —We used the yield on zero‑coupon U.S.
−Removed: Treasury securities for a period that is commensurate with the expected life assumption as the risk‑free interest rate.
−Removed: The amount of stock‑based compensation cost is recorded on a straight-line basis over the vesting period.
−Removed: Results of Operations
−Removed: Year Ended March 31, 2020 Compared to Year Ended March 31, 2019
−Removed: The following table summarizes our revenue by geographic markets (amounts in millions):
−Removed: Year Ended March 31,
−Removed: United States and Canada
−Removed: Europe and Russia
−Removed: Latin America
−Removed: Asia and Australia
−Removed: Middle East and Africa
−Removed: Revenue Revenue for Fiscal 2020 decreased $14.5 million, or 17%, to $68.9 million from $83.4 million for Fiscal 2019.
−Removed: The change in revenue for Fiscal 2020 compared to Fiscal 2019 included decreases in revenue of $14.1 million from the United States and Canadian markets, $0.5 million from the Latin American markets, and $0.5 million from the Asian and Australian markets.
−Removed: These overall decreases in revenue were offset by increases in revenue of $0.4 million from the European and Russian markets and $0.2 million from the Middle East and African markets.
−Removed: The decrease in revenue in the United States and Canadian markets during Fiscal 2020 compared to the same period the previous year was primarily because of decreases in product shipments into the natural resources and energy efficiency vertical markets, as well as lower accessories and parts revenue.
−Removed: These decreases were primarily in the United States and were due to weakness in the oil and gas market as a result of a decline in oil prices, as well as the COVID-19 pandemic, which has affected the timing of customer demand for our products.
−Removed: The decrease in revenue in the Latin American market was primarily because of a decrease in C1000 Signature Series systems shipments into the natural resources market during Fiscal 2020 compared to the same period last year.
−Removed: The decrease in revenue in the Asian and Australian markets was primarily because of decreases in product shipments into the energy efficiency and natural resources vertical markets during Fiscal 2020 compared to the same period last year.
−Removed: The increase in revenue in the European and Russian markets during Fiscal 2020 compared to the same period last year was primarily because the European energy efficiency and natural resources vertical markets continue to improve.
−Removed: The increase in revenue in the Middle East and African markets was primarily because of increases in accessories and parts revenue during Fiscal 2020 compared to the same period last year.
−Removed: The following table summarizes our revenue (revenue amounts in millions):
−Removed: Year Ended March 31,
−Removed: Microturbine Product
−Removed: Accessories and Parts
−Removed: Total Accessories, Parts and Service
−Removed: For Fiscal 2020, revenue from microturbine products decreased $17.6 million, or 34%, to $33.8 million from $51.4 million for Fiscal 2019.
−Removed: The decrease in revenue was primarily the result of weakness in the oil and gas market due to a decline in oil prices, as well as the COVID-19 pandemic, which has affected the timing of customer demand for our products compared to the same period last year.
−Removed: Megawatts shipped during Fiscal 2020 decreased 17.8 megawatts, or 35%, to 33.2 megawatts from 51.0 megawatts during Fiscal 2019.
−Removed: Average revenue per megawatt shipped was approximately $1.0 million in both Fiscal 2020 and 2019.
−Removed: The timing of shipments is subject to change based on several
−Removed: variables (including customer deposits, payments, availability of credit and delivery schedule changes), most of which are not within our control and can affect the timing of our revenue.
−Removed: For Fiscal 2020, revenue from our accessories and parts decreased $0.5 million, or 3%, to $14.4 million from $14.9 million for Fiscal 2019.
−Removed: The decrease in revenue from accessories and parts was primarily because of lower accessories and parts shipments as a result of the COVID-19 shutdowns and movement restrictions in all of our global markets.
−Removed: Service revenue for Fiscal 2020 increased $3.6 million, or 21%, to $20.7 million from $17.1 million for Fiscal 2019.
−Removed: The increase in service revenue was primarily due to increases in revenue from our FPP service agreements and microturbine rental program.
−Removed: FPP service revenue increased primarily because in Fiscal 2019 we did not recognize revenue on certain service contracts because of the reassignment of those service contracts from Capstone’s legacy California distributor to Cal Microturbine (“CAL”), one of our domestic distributors.
−Removed: Earned revenue from our DSS program for Fiscal 2020 and 2019 was $1.7 million in each year and is included under the caption “Service revenue”
−Removed: in the accompanying condensed consolidated statements of operations.
−Removed: Sales to E-Finity, one of our domestic distributors, accounted for 12% and 13% of our revenue for the years ended March 31, 2020 and 2019, respectively.
−Removed: Sales to CAL accounted for 12% of our revenue for the year ended March 31, 2019.
−Removed: Gross Margin Cost of goods sold includes direct material costs, production and service center labor and overhead, inventory charges and provision for estimated product warranty expenses.
−Removed: Gross margin was approximately $9.0 million, or 13% of revenue, for Fiscal 2020, compared to gross margin of $9.5 million, or 11% of revenue, for Fiscal 2019.
−Removed: The decrease in gross margin of $0.5 million during Fiscal 2020 compared to Fiscal 2019 was primarily because of a $4.4 million decrease in our direct material costs margin and higher inventory charges of $0.2 million, offset by decreases in warranty expense of $1.6 million, royalty expense of $0.2 million, and lower production and service center labor and overhead expense of $2.3 million.
−Removed: Management continues to implement initiatives to improve gross margin in Fiscal 2021 by further reducing manufacturing overhead and direct material costs, and improving product performance as we work to achieve profitability.
−Removed: Direct material costs margin, calculated as total revenue less our direct material costs, decreased $4.4 million during Fiscal 2020 compared to Fiscal 2019 primarily because of a $4.4 million decrease in product direct material costs margin due to lower volume and a decrease of approximately $1.1 million in FPP direct material cost margin primarily due to higher than normal levels of unscheduled maintenance activities as a result of a supplier defect identified during the first quarter of Fiscal 2019, which were partially offset by $1.1 million of rental, DSS, parts and accessories direct material costs margin.
−Removed: The decrease in warranty expense of $1.6 million during Fiscal 2020 compared to Fiscal 2019 was primarily because of a lower standard warranty provision as a result of the supplier defect identified during the first quarter of Fiscal 2019, which did not materially impact Fiscal 2020 warranty expense as most affected units were out of the warranty period.
−Removed: Management expects the warranty expense in Fiscal 2021 to be in line with Fiscal 2020.
−Removed: Production and service center labor and overhead expense decreased $2.3 million during Fiscal 2020 compared to Fiscal 2019 primarily because of decreases of approximately $0.7 million in salaries expense, $0.7 million overhead allocated to finished goods inventory, $0.4 million in freight expense, $0.4 million in supplies expense, $0.2 million in consulting expense, and $0.2 million of product certification expense, offset by an increase of $0.3 million of depreciation expense.
−Removed: Royalty expense decreased $0.2 million during Fiscal 2020 compared to Fiscal 2019 primarily because we concluded our royalty obligation with Carrier.
−Removed: Inventory charges increased $0.2 million during Fiscal 2020 compared to Fiscal 2019 primarily as the result of a decrease in the provision for excess and obsolete inventory.
−Removed: The following table summarizes our gross margin (in millions except percentages):
−Removed: Year Ended March 31,
−Removed: As a percentage of product revenue
−Removed: Accessories, parts and service
−Removed: As a percentage of accessories, parts and service revenue
−Removed: Total Gross Margin
−Removed: As a percentage of total revenue
−Removed: The decrease in product gross margin during Fiscal 2020 compared to Fiscal 2019 was primarily because of a decrease in volume of product shipments due to weakness in the oil and gas market from decline in oil prices, as well as the COVID-19 pandemic, which has affected the timing of customer demand for our products compared to the same period last year.
−Removed: Accessories, parts and service gross margin increased during Fiscal 2020 compared to Fiscal 2019 primarily due to an increase in our high margin rental revenue, as well as lower revenue and higher costs in Fiscal 2019 associated with the reassignment of certain service contracts from Capstone’s legacy California distributor to Cal Mircoturbine, partially offset by higher maintenance activities in Fiscal 2020 as a result of a supplier defect identified during the first quarter of Fiscal 2019.
−Removed: Research and Development Expenses (“R&D”) R&D expenses for Fiscal 2020 and 2019 were each $3.6 million.
−Removed: Management expects R&D expenses in Fiscal 2021 to be lower than in Fiscal 2020 as a result of lower costs from our COVID-19 Business Continuity Plan.
−Removed: Selling, General and Administrative (“SG&A”) Expenses SG&A expenses for Fiscal 2020 increased $1.2 million, or 6%, to $22.2 million from $21.0 million for Fiscal 2019.
−Removed: The net increase in SG&A expenses was comprised of increases of approximately $0.5 million in marketing expense, $0.2 million in legal expense and $0.1 million in shareholder costs.
−Removed: In addition, the increase in SG&A expense resulted from higher bad debt expense of $0.8 million during Fiscal 2020 compared to the same period last year.
−Removed: These increases were offset by decreases of $0.1 million in salaries expense and $0.3 million in business travel expense.
−Removed: Management expects SG&A expenses in Fiscal 2021 to be lower than in Fiscal 2020 primarily as a result of lower costs from our COVID-19 Business Continuity Plan.
−Removed: Interest Expense Interest expense increased $3.7 million to $5.2 million during Fiscal 2020 from $1.5 million for Fiscal 2019.
−Removed: Interest expense increased because of higher debt outstanding and a higher interest rate.
−Removed: As of March 31, 2020, we had total debt of $30.0 million outstanding.
−Removed: On February 4, 2019, we entered into a $30.0 million three-year term note with Goldman Sachs to replace the existing $15.0 million revolving credit facility with Bridge Bank.
−Removed: See Liquidity and Capital Resources—
−Removed: Three-year Term Note below for additional discussion on our three-year term note with Goldman Sachs.
−Removed: Income Tax Provision Income tax expense increased $4,000, or 50%, to $12,000 during Fiscal 2020 from $8,000 during Fiscal 2019.
−Removed: Income tax expense incurred was related to state and foreign taxes.
−Removed: The effective income tax rate of -0.1% differs from the federal and state blended statutory rate of approximately 23.5% primarily as a result of maintaining a full valuation allowance against net deferred tax assets.
−Removed: At March 31, 2020, we had federal and state net operating loss carryforwards of approximately $643.7 million and $162.0 million, respectively, which may be utilized to reduce future taxable income, subject to limitations under Section 382 of the Internal Revenue Code of 1986.
−Removed: We provided a valuation allowance for 100% of our net deferred tax asset of $169.8 million at March 31, 2020 because the realization of the benefits of these favorable tax attributes in future income tax returns is not deemed more likely than not.
−Removed: Similarly, at March 31, 2019, the net deferred tax asset was fully reserved.
−Removed: Quarterly Results of Operations
−Removed: The following table presents unaudited quarterly financial information.
−Removed: This information was prepared in accordance with GAAP, and, in the opinion of management, contains all adjustments necessary for a fair presentation of such quarterly information when read in conjunction with the financial statements included elsewhere herein.
−Removed: Our operating results for any prior quarters may not necessarily indicate the results for any future periods.
−Removed: (In thousands, except per share data)
−Removed: Year Ended March 31, 2020
−Removed: Year Ended March 31, 2019
−Removed: Cost of goods sold
−Removed: Operating expenses:
−Removed: Loss from operations
−Removed: Net loss per common share—basic and diluted (1)
−Removed: Loss per-share amounts for all periods has been retroactively adjusted to reflect the Company’s 1-for-10 reverse stock split, which was effective October 21, 2019.
−Removed: During the three months ended December 31, 2018, we received approximately $0.4 million under the Assignment Agreement with TI and it has been recorded as recovery of bad debts and included under SG&A.
−Removed: There was no payment received under the Amended Assignment Agreement with TI during the three months ended March 31, 2019.
−Removed: During the three months ended March 31, 2020 we reserved approximately $0.5 million for certain past due distributors because collections were uncertain given the COVID-19 pandemic business environment.
−Removed: Liquidity and Capital Resources
−Removed: Our cash requirements depend on many factors, including the execution of our plan.
−Removed: We expect to continue to devote substantial capital resources to running our business and implementing the strategic changes summarized herein.
−Removed: Our planned capital expenditures for the year ending March 31, 2021 include approximately $2.5 million for rental units and plant and equipment costs related to manufacturing and operations.
−Removed: We have invested our cash in institutional funds that invest in high quality short‑term money market instruments to provide liquidity for operations and for capital preservation.
−Removed: Our cash, cash equivalents and restricted cash balances decreased $14.6 million during the fiscal year ended March 31, 2020, compared to an increase of $10.3 million during the fiscal year ended March 31, 2019.
−Removed: The decrease in cash, cash equivalents and restricted cash during Fiscal 2020 compared to the increase in cash, cash equivalents and restricted cash during the same period last year was primarily related to the $30.0 million three-year term note with Goldman Sachs entered into during the fourth quarter of Fiscal 2019 to replace the existing $15.0 million revolving credit facility with Bridge Bank as described below.
−Removed: Under the three-year term note with Goldman Sachs we are not permitted to allow our cash and cash equivalents to be less than $12.0 million through the first anniversary date of February 4, 2020, and $9.0 million thereafter.
−Removed: On April 15, 2020, we applied for an unsecured loan in the principal amount of $2,610,200 under the PPP loan (the “PPP Loan”).
−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
−Removed: 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 and the directors voted to take a temporary 25% reduction in base cash retainer.
−Removed: We believe these programs will supplement our current and future available capital resources.
−Removed: Operating Activities During the fiscal year ended March 31, 2020, we used $19.7 million in cash in our operating activities, which consisted of a net loss for the period of $21.9 million and cash used for working capital of $4.0 million, offset by non‑cash adjustments (primarily warranty provision, accounts receivable allowances, depreciation and amortization, stock based compensation and inventory provision) of $6.2 million.
−Removed: During the fiscal year ended March 31, 2019, we used $17.7 million in cash in our operating activities, which consisted of a net loss for the period of $16.7 million and cash used for working capital of $6.1 million, offset by non‑cash adjustments of $5.1 million.
−Removed: The following is a summary of the significant sources (uses) of cash from operating activities (amounts in thousands):
−Removed: Year Ended March 31,
−Removed: Non-cash operating activities(1)
−Removed: Changes in operating assets and liabilities:
−Removed: Accounts receivable
−Removed: Accounts payable and accrued expenses
−Removed: Prepaid expenses, other current assets and other assets
−Removed: Other changes in operating assets and liabilities
−Removed: Net cash used in operating activities
−Removed: Represents warranty provision, change in fair value of warrant liability, depreciation and amortization, stock-based compensation expense, inventory provision and accounts receivable allowances.
−Removed: The change in non-cash operating activities during the fiscal year ended March 31, 2020 compared to the same period the previous fiscal year was primarily because of the provision for warranty expenses during the fiscal year ended March 31, 2019 as a result of a supplier defect identified during the first quarter of Fiscal 2019.
−Removed: Additionally, contributing to the change was the amortization of debt issuance costs from the Goldman Sachs term note payable during the fiscal year ended March 31, 2020.
−Removed: The change in accounts receivable during the fiscal year ended March 31, 2020 was primarily the result of lower revenue in Fiscal 2020 and delayed collection from certain customers, compared to fiscal year ended March 31, 2019.
−Removed: The change in inventory was primarily the result of a decrease in raw materials partially offset by an increase in finished goods during the fiscal year ended March 31, 2020 compared to an increase in raw materials partially offset by a decrease in finished goods during the fiscal year ended March 31, 2019.
−Removed: The change in accounts payable and accrued expenses was primarily the result of the level of inventory receipts and timing of payments made by us during the fiscal year ended March 31, 2020 compared to the same period the previous fiscal year.
−Removed: The change in prepaid expenses, other current assets and other liabilities during the fiscal year ended March 31, 2020 was primarily because of a negotiated royalty settlement to Carrier and a supplier prepayment obligation in Fiscal 2019, each described below, and a marketing demonstration unit accounted for as a deferred marketing cost in Fiscal 2020.
−Removed: The change in other operating assets and liabilities during the fiscal year ended March 31, 2020 compared to fiscal year ended March 31, 2019, was primarily the result of an increase in deferred revenue attributable to FPP contracts.
−Removed: Investing Activities Net cash used in investing activities of $4.2 million and $3.4 million during the fiscal year ended March 31, 2020 and 2019, respectively, relates primarily to the acquisition of fixed assets, rental units and leasehold improvements made to our Van Nuys location.
−Removed: During the fiscal year ended March 31, 2020 and 2019, we deployed approximately $3.2 million and $2.8 million of our C1000 Signature Series systems under our factory rental program, respectively.
−Removed: Financing Activities During the fiscal year ended March 31, 2020, we generated approximately $9.2 million in cash from financing activities compared to cash generated during the fiscal year ended March 31, 2019 of approximately $31.4 million.
−Removed: The funds generated from financing activities during the fiscal year ended March 31, 2020 were primarily the result of proceeds from the September 2019 registered direct offering and proceeds from the at-the-market offering program described below.
−Removed: The funds generated from financing activities during the fiscal year ended March 31, 2019 were primarily the result of net proceeds from our three-year term note with Goldman Sachs and the at-the-market offering program, each described below, offset by repayment of notes payable and capital lease obligations.
−Removed: At-the-market offerings
−Removed: Effective August 28, 2015, we entered into a sales agreement with Cowen and Company, LLC with respect to an at-the-market offering program pursuant to which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $30.0 million.
−Removed: During the fiscal year ended March 31, 2019, we issued 0.3 million shares of our common stock under the at-the-market offering program and the net proceeds to us from the sale of our common stock were approximately $4.0 million after deducting commissions paid of approximately $0.1 million.
−Removed: As of March 31, 2019, 2.6 million shares of the Company’s common stock were cumulatively sold pursuant to the at-the-market offering program and the net proceeds to the Company from the sale of the common stock were approximately $28.6 million after deducting commissions paid of approximately $0.8 million.
−Removed: This at-the-market offering program expired on May 29, 2018.
−Removed: On June 7, 2018, we entered into a sales agreement with H.C.
−Removed: Wainwright & Co., LLC with respect to an at-the-market offering program pursuant to which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $25.0 million.
−Removed: We will set the parameters for sales of the shares, including the number to be sold, the time period during which sales are requested to be made, any limitation on the number that may be sold in one trading day and any minimum price below which sales may not be made.
−Removed: During the fiscal year ended March 31, 2020, we issued 1.7 million shares of our common stock under this at-the-market offering program and the net proceeds to us from the sale of our common stock were approximately $5.3 million after deducting commissions paid of approximately $0.2 million.
−Removed: As of March 31, 2020, approximately $12.2 million remained available for issuance with respect to this at-the-market offering program.
−Removed: On April 13, 2018, a warrant holder exercised its rights under the warrant agreement to exercise on a cashless basis 576,000 Series A warrants at an exercise price of $6.00 per share under the warrant agreement.
−Removed: In accordance with terms of the warrant agreement, after taking into account the shares withheld to satisfy the cashless exercise option, the Company issued 380,625 shares of common stock.
−Removed: As of March 31, 2020, there were 271,875 Series A warrants outstanding and there are no Series B warrants outstanding.
−Removed: Of the total Series A warrants outstanding, 217,875 Series A warrants were issued with an exercise price of $25.50 per share of common stock, and have an expiration date of October 25, 2021, and 54,000 Series A warrants with anti-dilution provisions were issued with an initial exercise price of $13.40 per share of common stock, and have an expiration date of April 22, 2021.
−Removed: As of March 31, 2020, because of the anti-dilution provisions, these warrants had an adjusted exercise price of $1.15 per share of common stock.
−Removed: On February 4, 2019, we sold to Goldman Sachs & Co.
−Removed: LLC (the “Holder”), a Purchase Warrant for Common Shares (the “Warrant”) pursuant to which the Holder may purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Shares”) in an aggregate amount of up 404,634 shares (the “Warrant Shares”).
−Removed: The Warrant was sold to the Holder at a purchase price of $150,000, in a private placement exempt from registration under the Securities Act.
−Removed: The Warrant may be exercised by the Holder at any time after August 4, 2019 at an exercise price equal to $8.86 and will expire on February 4, 2024.
−Removed: The Warrant contains standard adjustment provisions in the event of additional stock issuances below the exercise price of the warrant, stock splits, combinations, rights offerings and similar transactions.
−Removed: The value of the Warrant was $2.3 million upon issuance, and has been classified as an equity instrument in additional paid in capital in our consolidated balance sheets.
−Removed: Our common stock and warrant transactions during Fiscal 2020 triggered certain anti-dilution provisions in the warrants outstanding, resulting in an additional 49,891 warrants issued, which were treated as a deemed dividend in the amount of $87,362.
−Removed: On December 9, 2019, we entered into Amendment No.
−Removed: 1 to the Purchase Warrant for Common shares (the “Amendment No.
−Removed: 1”) with Special Situations Investing Group II, LLC (as successor in interest to Goldman Sachs & Co.
−Removed: LLC) (the “Warrant Holder”) that amends the Warrant.
−Removed: The Amendment No.
−Removed: 1 amends the first paragraph of the Warrant to increase the number of Warrant Shares issuable under the Warrant (on a post-reverse split basis) and to decrease the exercise price from $8.86 per share (on a post-reverse split basis) to $3.80 per share (the “Per Share Warrant Exercise Price”).
−Removed: The Amendment No.
−Removed: 1 also amends Section 2.1 of the Warrant such that the Per Share Anti-Dilution Price is equal to the Per Share Warrant Exercise Price.
−Removed: On September 4, 2019, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional and accredited investors pursuant to which we agreed to issue and sell in a registered direct offering (the “Registered Direct Offering”) an aggregate of 580,000 shares of our common stock, par value $0.001 per share at a negotiated purchase price of $5.00 per share, and pre-funded warrants to purchase up to an aggregate of 440,000 shares of our common stock at a negotiated purchase price of $5.00 per Pre-Funded Warrant, for aggregate gross proceeds of approximately $5.1 million (580,000 shares of our common stock plus 440,000 pre-funded warrants at a $5.00 per share purchase price), before deducting placement agent fees and other offering expenses.
−Removed: Net proceeds from the offering were $4.6 million.
−Removed: The offering closed on September 9, 2019.
−Removed: On October 24, 2019, a warrant holder exercised its rights to the warrant agreement to exercise on a cash basis 440,000 pre-funded warrants at an exercise price of $0.001 per share under the warrant agreement.
−Removed: In a concurrent private placement, we agreed to issue to the purchasers warrants to purchase 765,000 shares of Common Stock, which represent 75% of the number of shares of Common Stock and shares underlying the Pre-Funded Warrants purchased in the Registered Direct Offering, pursuant to the Securities Purchase Agreement.
−Removed: The Common Warrants will be exercisable for shares of Common Stock at an initial exercise price of $6.12 per share for a period of five years, starting on April 2, 2020 and expiring on April 2, 2025.
−Removed: None of these warrants have been exercised as of the date of this report.
−Removed: There were no stock options exercised during the years ended March 31, 2020 and 2019, respectively.
−Removed: Employee stock purchases, net of repurchases of shares of our common stock for employee taxes due on vesting of restricted stock units, resulted in approximately $0.1 million of net cash used during the fiscal year ended March 31, 2020, compared with $0.1 million of net cash used during the fiscal year ended March 31, 2019.
−Removed: Former Credit Facility Upon closing with the Purchaser and Goldman Sachs Specialty Lending Holdings, Inc., our existing credit facilities with Bridge Bank were paid off in full.
−Removed: Three-year Term Note On February 4, 2019 (the “Closing Date”), we entered into a Note Purchase Agreement (the “Note Purchase Agreement”), by and among us, certain subsidiaries of us as guarantors, Goldman Sachs Specialty Lending Holdings, Inc.
−Removed: and any other purchasers party thereto from time to time (collectively, the “Purchaser”) and Goldman Sachs Specialty Lending Holdings, Inc., as collateral agent, in connection with the sale of senior secured notes of us in a private placement exempt from registration under the Securities Act.
−Removed: Under the Note Purchase Agreement, we sold to the Purchaser $30.0 million aggregate principal amount of senior secured notes (the “Notes”), which bear interest at a rate of 13.0% per annum, computed on the basis of a 360-day year composed of twelve 30-day months, and payable quarterly on March 31, June 30, September 30 and December 31 of each year until maturity.
−Removed: The first interest payment on the Notes will be on March 31, 2019.
−Removed: The entire principal amount of the Notes is due and payable on February 4, 2022 (the “Maturity Date”).
−Removed: The Notes do not amortize and the entire principal balance is due in a single payment on the Maturity Date.
−Removed: As of March 31, 2019, $30.0 million in borrowings were outstanding under the three-year term note.
−Removed: Under the three-year term note with Goldman Sachs we are not permitted to allow our cash and cash equivalents to be less than $12.0 million through the first anniversary date of February 4, 2020, and $9.0 million thereafter.
−Removed: On December 9, 2019, we entered into a Second Amendment (the “Second Amendment”) to the Note Purchase Agreement.
−Removed: Under the Second Amendment, Section 6.21 of the Note Purchase Agreement was amended to increase the Section 382 Ownership Shift threshold to not exceed 40.0%.
−Removed: In addition to the Note Purchase Agreement, on February 4, 2019, the Company sold the Warrant pursuant to which the Holder may purchase shares of the Company’s Common Shares.
−Removed: The Warrant was sold to the Holder at a purchase price of $150,000, in a private placement exempt from registration under the Securities Act.
−Removed: The Warrant may be exercised by the Holder at any time after August 4, 2019 at an exercise price equal to $8.86 and will expire on February 4, 2024.
−Removed: The Warrant contains standard adjustment provisions in the event of
−Removed: additional stock issuances below the exercise price of the warrant, stock splits, combinations, rights offerings and similar transactions.
−Removed: The value of the Warrant was $2.3 million, and has been classified as an equity instrument in additional paid in capital in our consolidated balance sheets.
−Removed: Our common stock and warrant transactions during Fiscal 2020 triggered certain anti-dilution provisions in the warrants outstanding, resulting in an additional 49,891 warrants issued, which were treated as a deemed dividend in the amount of $87,362.
−Removed: On December 9, 2019, the Company entered into Amendment No.
−Removed: 1 with the Warrant Holder that amends the Warrant.
−Removed: The Amendment No.
−Removed: 1 amends the first paragraph of the Warrant to increase the number of Warrant Shares issuable under the Warrant (on a post-reverse split basis) and to decrease the exercise price from $8.86 per share (on a post-reverse split basis) to the Per Share Warrant Exercise Price.
−Removed: The Amendment No.
−Removed: 1 also amends Section 2.1 of the Warrant such that the Per Share Anti-Dilution Price is equal to the Per Share Warrant Exercise Price.
−Removed: Working Capital Cash used in working capital was $4.0 million during the fiscal year ended March 31, 2020, a decrease of $2.2 million from the $6.2 million cash used during the fiscal year ended March 31, 2019.
−Removed: We attribute the decrease in our working capital requirements primarily to changes in inventory, as well as the negotiated royalty settlement agreement payment to Carrier and prepayments to one of our single source suppliers during Fiscal 2019 with no such transactions during Fiscal 2020.
−Removed: These decreases in working capital requirements were offset by a decrease in accounts payable due to the timing of payments to our vendors.
−Removed: Evaluation of Ability to Maintain Current Level of Operations In connection with preparing the consolidated financial statements for the fiscal year ended March 31, 2020, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about our ability to meet our obligations as they became due for the next twelve months from the date of issuance of our Fiscal 2020 financial statements.
−Removed: Management assessed that there were such conditions and events, including a history of recurring operating losses, negative cash flows from operating activities, the continued negative impact by the volatility of the global oil and gas markets, a strong U.S.
−Removed: dollar in certain markets making our products more expensive in such markets, the COVID-19 pandemic, and ongoing global geopolitical tensions.
−Removed: We incurred a net loss of $21.9 million and used cash in operating activities of $19.7 million during the fiscal year ended March 31, 2020.
−Removed: Our working capital requirements during the fiscal year ended March 31, 2020 were higher than management’s expectations due to a higher level of finished goods in inventory due to the COVID-19 pandemic, which has affected the timing of customer demand for our products, as well as cash used for accounts payable due to timing of payments.
−Removed: Our net loss expanded during the year ended March 31, 2020 primarily because of a decrease in product volume and higher FPP scheduled and unscheduled maintenance activities primarily as a result of a supplier defect identified during the first quarter of Fiscal 2019.
−Removed: Additionally, operating expenses were higher in Fiscal 2020 compared to Fiscal 2019 primarily due to the recording of a bad debt reserve for certain past due receivables because of uncertain collectability due to the COVID-19 pandemic in Fiscal 2020 and we received approximately $0.4 million under the Assignment Agreement with TI in Fiscal 2019.
−Removed: As of March 31, 2020, we had cash and cash equivalents of $15.1 million, and outstanding debt of $30.0 million.
−Removed: Management evaluated these conditions in relation to our ability to meet our obligations as they become due.
−Removed: Our ability to continue current operations and to execute on management’s plan is dependent on our ability to generate cash flows from operations.
−Removed: Management believes that we will continue to make progress on our path to profitability by continuing to lower our operating costs and to develop our geographical and vertical markets.
−Removed: We may seek to raise funds by selling additional securities (through the at-the-market offering or otherwise) to the public or to selected investors or by obtaining additional debt financing.
−Removed: There is no assurance that we will be able to obtain additional funds on commercially favorable terms or at all.
−Removed: If we raise additional funds by issuing additional equity or convertible debt securities, the fully diluted ownership percentages of existing stockholders will be reduced.
−Removed: In addition, any equity or debt securities that we would issue may have rights, preferences or privileges senior to those of the holders of our common stock.
−Removed: Based on our current operating plan, management anticipates that, given current working capital levels, current financial projections, the term note payable with Goldman Sachs and the funds raised by selling additional securities through the at-the-market offering as of the date of issuance of our Fiscal 2020 financial statements, we will be able to meet our financial obligations as they become due over the next twelve months from the date of issuance of our Fiscal 2020 financial statements.
−Removed: Depending on the timing of our future sales and collection of related receivables, managing inventory costs and the timing of inventory purchases and deliveries required to fulfill the backlog, our future capital requirements may vary materially from those now planned.
−Removed: The amount of capital that we will need in the future will require us to achieve significantly increased sales volume which is dependent on many factors, including:
−Removed: the market acceptance of our products and services;
−Removed: our business, product and capital expenditure plans;
−Removed: capital improvements to new and existing facilities;
−Removed: our competitors’
−Removed: response to our products and services;
−Removed: our relationships with customers, distributors, dealers and project resellers;
−Removed: our customers’
−Removed: ability to afford and/or finance our products.
−Removed: Our accounts receivable balance, net of allowances, was $16.2 million as of March 31, 2020 and 2019, respectively.
−Removed: Days sales outstanding in accounts receivable, (“DSO”), increased to 85 days as of March 31, 2020 compared to 70 days as of March 31, 2019 due to delayed collections in all markets due to the COVID-19 pandemic and the weakening oil and gas markets.
−Removed: We recorded net bad debt expense of approximately $0.4 million and net bad debt recovery of approximately $0.3 million, for the years ended March 31, 2020 and 2019, respectively.
−Removed: No assurances can be given that future bad debt expense will not increase above current operating levels.
−Removed: Increased bad debt expense or delays in collecting accounts receivable could have a material adverse effect on cash flows and results of operations.
−Removed: In addition, our ability to access the capital markets may be severely restricted or made very expensive at a time when we need, or would like, to do so, which could have a material adverse impact on our liquidity and financial resources.
−Removed: Certain industries in which our customers do business and certain geographic areas have been and could continue to be adversely affected by the previously referenced economic and geopolitical considerations.
−Removed: Paycheck Protection Program Loan On April 15, 2020, we applied for an unsecured loan in the principal amount of $2,610,200 under the PPP loan.
−Removed: The PPP was established under the recently congressionally approved CARES Act and is administered by the SBA.
−Removed: On April 24, 2020, we entered into a promissory note with Western Alliance Bank.
−Removed: The Company received the full amount of the Loan on April 24, 2020.
−Removed: In accordance with the requirements of the CARES Act, we intend to use proceeds from the PPP Loan to support fixed costs such as payroll costs, rent and utilities.
−Removed: 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 advance under the Loan bears interest at a rate per annum of 1%.
−Removed: The PPP Loan matures on April 24, 2022.
−Removed: Forgiveness of this loan is only available for principal that is used for the limited purposes that qualify for forgiveness.
−Removed: While we intend to pursue the forgiveness of the PPP Loan received in accordance with the requirements and limitations under the CARES Act, no assurance can be provided that forgiveness of any portion of the PPP Loan will be obtained.
−Removed: Off‑Balance Sheet Arrangements
−Removed: We do not have any material off‑balance sheet arrangements.
−Removed: Inflation did not have a material impact on our results of operations or financial condition for the fiscal years ended March 31, 2020 and 2019.
−Removed: In an effort to offset the adverse impact of inflation on earnings, we have historically raised selling prices on all products, parts, accessories and services.
−Removed: However, any future adverse impact of inflation on our raw materials and energy costs may not be similarly recoverable through our selling price increases.
−Removed: Impact of Recently Issued Accounting Standards
−Removed: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), (“ASU 2016-02”).
−Removed: The purpose of ASU 2016-02 is to provide financial statement users a better understanding of the amount, timing, and uncertainty of cash flows arising from leases.
−Removed: The adoption of ASU 2016-02 will result in the recognition of a right-of-use asset and a lease liability for most operating leases.
−Removed: New disclosure requirements include qualitative and quantitative information about the amounts recorded in the financial statements.
−Removed: In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), which provides additional implementation guidance on the previously issued ASU 2016-02 Leases (Topic 842).
−Removed: ASU 2016-02 requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months.
−Removed: ASU 2016-02 is effective for fiscal years beginning after December 15, 2018.
−Removed: ASU 2016-02 requires a modified retrospective transition by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective with the option to elect certain practical expedients.
−Removed: Early adoption is permitted.
−Removed: We adopted ASU 2016-02 on April 1, 2019.
−Removed: See Note 13—Leases for additional discussion of the impact of the adoption of ASU 2016-02.
−Removed: In June 2018, the FASB issued ASU 2018-07, “Shared-Based Payment Arrangements with Nonemployees”
−Removed: (Topic 505), (“ASU 2018-07”).
−Removed: ASU 2018-07 simplifies the accounting for share-based payments granted to nonemployees for goods and services.
−Removed: Under ASU 2018-07, most of the guidance on such payments to nonemployees will be aligned with the requirements for share-based payments granted to employees.
−Removed: Under the ASU 2018-07, the measurement of equity-classified nonemployee share-based payments will be fixed on the grant date, as defined in ASC 718, and will use the term nonemployee vesting period, rather than requisite service period.
−Removed: The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
−Removed: Early adoption is permitted if financial statements have not yet been issued.
−Removed: We adopted ASU 2018-07 on April 1, 2019 and it did not have a material impact on our condensed consolidated financial statements.
−Removed: On August 17, 2018, the SEC issued Release No.
−Removed: 33-10532, “Disclosure Update and Simplification”, (“Release No.
−Removed: 33-10532”) which amends certain redundant, duplicative, outdated, superseded or overlapping disclosure requirements.
−Removed: The amendments in this rule are intended to facilitate the disclosure of information to investors and to simplify compliance without significantly impacting the mix of information provided to investors.
−Removed: The amendments also expand the disclosure requirements regarding the analysis of stockholders’
−Removed: equity for interim financial statements, in which entities will be required to present a reconciliation for each period for which a statement of comprehensive income is required to be filed.
−Removed: The final rule became effective on November 5, 2018, however the SEC announced that it would not object if a filer’s first presentation of the changes in stockholders’
−Removed: equity were included in its Form 10-Q for the quarter that begins after the effective date of the amendments.
−Removed: We adopted Release No.
−Removed: 33-10532 on April 1, 2019 and it did not have a material impact on our financial disclosures.
−Removed: Not yet adopted
−Removed: Other standards issued but not yet effective, which are not discussed, are not considered material to the Company.
−Removed: Quantitative and Qualitative Disclosure About Market Risk.
−Removed: We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item.
−Removed: Financial Statements and Supplementary Data.
−Removed: Our Consolidated Financial Statements included in this Form 10‑K beginning at page F‑1 are incorporated in this Item 8 by reference.
−Removed: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
+Added: There were no repurchases of shares of common stock made during Fiscal 2021, except for shares of common stock automatically withheld to cover the tax liability resulting from the vesting of restricted stock units.
+Added: During Fiscal 2021, the Company automatically withheld 16,377 shares of common stock to cover the tax liability resulting from the vesting of stock units.
+Added: These withheld shares of common stock are recorded as treasury stock on the Company’s Consolidated Balance Sheets.
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.